Investment Source once accepted by AO cannot be Rectified using S.154: ITAT sets aside Income Tax Assessment Order [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) set aside the Income Tax Assessment Order, emphasizing that an Investment Source, once accepted by the Assessing Officer ( AO ), cannot be rectified under Section 154 of the Income Tax Act, 1961.

The assessee SMT. Kanta  had made an investment of Rs. 68,63,000/-, expenses on registration of Rs. 15,000/- and stamp duty of Rs. 2,05,900/- totaling Rs. 70,83,900/- on 19.02.2010 for the year under consideration. It was noticed by the AO that though the assessee had made investment of Rs. 70,83,900/- for the year under consideration but the assessee failed to file her return of income under Section 139(1) of the Income Tax Act. Subsequently, a notice under Section 148 of the Income Tax Act was issued on 27.03.2017 and served upon the assessee.

The assessee filed a copy of return of income on 08.08.2017 declaring total income NIL. The assessee at the time of assessment proceeding, intimated that the amount of Rs. 70,83,900/- was generated by her late husband Sh. Arjun Singh has advanced money taken by him from his relatives at the time of sale of agricultural land.

Ms. Rano Jain representing the assessee submitted that in an order under section 143(3), which was reopened for the purpose of investment of Rs. 70, 83,900/- in a property in the year consideration. She further submitted that the AO in his order dated 03.10.2017, after considering all the documentary evidence and personal appearances on behalf of the assessee preferred not to draw any adverse inference against the assessee. She further submitted that after conclusion of assessment, AO issued a notice under section 154 of the Income Tax Act to the assessee stating that since the investment in the property was not properly explained by the assessee during the year under consideration, there was a mistake apparent from record reviewable under Section 154 of the Income Tax Act.

It was the further contended that from the records it transpired that the source of the investment which was accepted by AO in his original assessment order cannot be revised in an order under section 154 of the Act as it cannot be said to be a mistake apparent from record. It is a clear case of review of the order by AO which is not permitted under the law. On the same set of facts and evidence AO wants to change his view in the guise of rectification of mistakes under section 154 of the Income Tax Act.

 The bench found that AO wants to change his view in the garb of rectification of mistakes under Section 154 of the Income Tax Act, which was not permissible under the law. Further find that the impugned order of the AO was passed under Section 154 of the Income Tax Act and Section 154 of the IT Act mandates rectification of mistakes apparent from record. The Apex Court in the case of ITO vs. Volkart Brothers and others have held that “a mistake apparent on 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 was not a mistake apparent from the record.

Thus, respectfully following the aforesaid binding principle rendered in ITO vs. Volkart Brothers (Supra), The two member bench of the tribunal comprising Yogesh Kumar US (Judicial member) and Shamim Yahya (Accountant member) held that the impugned order passed under Section 154 of the Income Tax Act dated 14.07.2021 of the Assessing Officer was invalid and liable to be quashed, in view of the aforesaid facts and circumstances of the case. Accordingly, ITAT set aside the orders of the authorities below and quashed the impugned assessment order dated 14.7.2021. The appeal of the assessee was allowed.

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