The Income Tax Appellate Tribunal (ITAT), Mumbai bench has recently held that a decision based on a debatable point of view cannot be treated as a mistake apparent from the record, against which, the power of rectification under section 154 of the Income Tax Act, 1961.
The Assessing Officer, while completing the assessment proceedings against the assessee, observed that they had sold a fixed asset on which a profit of Rs.11,97,269/- had arisen on account of sale of the showroom; as per IT Act, the block of asset of the office premises had not ceased to exist and accordingly the provisions of section 50 were not applicable in terms of the tax liability on short term capital gains (STCG). With regard to the addition, the assessee filed an application under section 154 of the Act claiming that there is a mistake apparent from the record, which can be rectified. However, the officer rejected the application.
On second appeal, the Tribunal noted that the power of rectification u/s 154 of the Act can be exercised only if there is a mistake apparent from the record of the assessment of the assessee.
“In other words, in order to attract the power to rectify u/s 154, it is not sufficient, if there is merely a mistake in the order sought to be rectified. The mistake could be rectified must be one apparent from the record. The plain meaning of the word “apparent” is that it must be something that appears to be so ex facie and is incapable of argument or debate. It, therefore, follows that a decision on a debatable point of law or fact or failure to apply the law to a set of facts, which remain to be investigated, cannot be corrected by way of rectification,” the Tribunal observed.
The bench relied on the decision of the Apex Court in the case of T.S. Balaram v. Volkart Bros. wherein it was held that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions; a decision on a debatable point of law is not a mistake apparent from the record.
“In the instant case, the mistake as pointed out by the Ld. counsel is not apparent on the record; not obvious and patent mistake. In the instant case, the mistakes can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. In the instant case, the mistakes pointed out by the Ld counsel are rather debatable. Thus the ratio laid down by the Hon’ble Supreme Court in Volkart Bros (supra) is squarely applicable here,” the Tribunal said.
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