The Income Tax Appellate Tribunal ( ITAT ), Cochin bench has held that a debatable issue cannot be treated as a mistake apparent on the face of the record for rectification under Section 154 of the Income Tax Act, 1961.
The Tribunal vide its order dated 5.3.2004 directed to tax receipts from non-members and TMBT’s of the assessee club on the basis of separate sets of books of account maintained by them. Accordingly, effect for the said order was given on 14.03.2007 treating the entire amount of income determined as exempt from tax. Then, finding that no separate sets of books of account to distinguish the receipts from members and non-members had been maintained for the years prior to AY 1998-99 and in those assessments, the Assessing Officer treated only 50% of the receipts as exempt from tax, rectification order for the year under consideration has since been passed on 03.06.2008 withdrawing 50% of the excess income which was wrongly allowed in the appeal effect given order dt.14.03.2007 as exempt, due to the reason that no separate sets of books of account so as to distinguish the receipts from members and non-members had been maintained for the year under consideration.
On appeal, the CIT(A) observed that the Assessing Officer, by virtue of section 154 of the Act, can rectify any mistake apparent from the record.
The assessee approached the Tribunal against the order of the first appellate authority.
Before the Tribunal, the department contended that in the assessment years prior to the assessment year 1997-98, the Club did not maintain separate accounts for the receipts from members/non members and in those assessments, 50% of the receipts were treated as exempt, as the receipts from non members were not discernible. Therefore, the treatment of exempted 50% of taxable receipts was a mistake. Since the order dated 14/03/2007 was an order giving effect to the Tribunal order dated 05/03/2004, the mistake is also apparent from record.
Allowing relief to the assessee, the Tribunal said that this contention of the Ld. DR cannot be accepted as it is a debatable issue.
“Under section 154 of the I.T. Act, the Assessing Officer can rectify the mistake if it is a mistake apparent from record. In other words, it must be an obvious patent mistake and not something which can be established by a long process of reasoning on points on which there may be conceivable two different opinions and hence, it is a debatable issue. It was not a mistake apparent from record. Hence, rectification is not possible since in this case, the issue was taken up by the Assessing Officer in the proceedings u/s. 154 of the Act dated 03/06/2008 which is a debatable issue. Thus, the Assessing Officer is not justified in rectifying the mistake vide the impugned order. Accordingly, we quash the rectification order passed u/s. 154 dated 03/06/2008,” the Tribunal said.
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