CIT(A) can consider fresh claims arising from typographical errors under Section 154 to tax real income.

ORDER

Nikhil Choudhary, Accountant Member.- This is an appeal filed by the assessee against the orders of the ld. CIT(A), NFAC dated 23.08.2024, wherein the ld. CIT(A) has dismissed the appeal of the assessee against the order of the ld. Assessing Officer passed under section 154 for the A.Y. 2021-22 on 30.05.2024. The grounds of appeal are as under:-

“1. BECAUSE the Id. “CIT(A)” has erred in law and on facts in holding that there was no mistake in the order u/s 154 as there was no mistake apparent from record and on that basis in upholding the order u/s 154 of the Act passed by the Assessing Officer.

2. BECAUSE while upholding the rectification order on the ground that there was no mistake apparent from record in terms of section 154 of the Act, the Id. “CIT(A)” failed to appreciate that due to typographical error in the return of income the assessee had wrongly offered long term capital gain at Rs. 25,66,288/- instead of correct amount of Rs. 11,97,893/- and that the said error constituted “mistake apparent from record” in terms of section 154 of the “Act” which mistake was rectifiable u/s 154 of the “Act”.

3. BECAUSE order passed by the authorities below are unjust and contrary to Circular no. 014(XL-35)/1955 dated 11.04.1955, wherein CBDT has long back laid down that the Officers of the Department must not take advantage of ignorance of the assessee as to his rights and it is the duty of officers of the Department to assist to assessee in the matter of claiming and securing relief as per law.

4. BECAUSE the Id. “CIT(A)” has grossly erred in not considering the case authorities relied upon by the assessee in support of his claim of rectification and on a due consideration of the decision rendered in the said authorities, the appellant’s claim of rectification of typographical error in the return of income deserved to be allowed.

5. BECAUSE while upholding the rectification order, the ld. “CIT(A)” has failed to consider the judgement of the superior courts wherein it has been held that the rectification order u/s 154(1) is allowable for correcting: (i) an error of fact, (ii) an arithmetical mistake, (iii) a small clerical error and (iv) an error due to over looking the compulsory provision of law.

6. BECAUSE in any case on a due consideration of the fact that the order u/s 154 of the Act dated 30.05.2014 passed by the Assessing Officer was time barred in terms of provisions of sub-section (8) of Section 154 of the Act, the Id. “CIT(A)” should have held that the rectification order passed by the Assessing Officer was bad in law and consequently the ld. “CIT(A)” ought to have directed the Assessing Officer to allow the rectification application and to rectify the intimation order dated 30.03.2024 as per the claim made in the rectification application.

7. BECAUSE the order appealed against is contrary to facts, law and principles of natural justice.

8. BECAUSE each ground taken in appeal is mutually exclusive and without prejudice to each other.

9. The appellant craves leave to add, delete or modify any of the grounds before or at the time of hearing of appeal.”

2. The facts of the case are that the assessee filed an ITR for the assessment year 2021-22 online on 14.03.2022 including on total income of Rs. 31,06,120/-, including the income from capital gain of Rs. 25,66,288/-. The return was processed by the CPC under section 143(1) of the Act and no demand of refund was found due. Subsequently, the assessee filed a rectification application under section 9.11.2023 as he discovered that the computer operator had inadvertently declared Long Term Capital Gain of Rs. 25,66,288/- in, “Schedule CG” capital gains under “B Long Term Capital Gain” at Sr. No. 11 (b), instead of the correct amount of Rs. 11,97,893/-. It was submitted that the excess income of Rs. 13,68,395/- was a typographical error and was in fact, never earned by the assessee during the current year and ought never to have been declared in his return filed for the year under consideration. The revised computation of income for the said assessment year was filed alongwith sale / purchase deed and various case laws in support of his claim. The ld. Assessing Officer considered the submission of the assessee and did not find the same tenable. He held that the account on e-filing portal was within the individual reach of the assessee only and it was the assessee who had entered the particulars of income while filing the ITR. The ld. Assessing Officer submitted that the assessee had sufficient time to file a revised return under section 139(5) of the Income Tax Act to make any corrections to the particulars of income. He found the case laws submitted by the assessee to be distinguishable from the facts of the case and he held that the matter does not fall under the purview of section 154 of the Act as the mistake was not apparent on the record. Accordingly, he rejected the submissions made by the assessee.

3. Aggrieved with the said rejection of his rectification request, the assessee filed an appeal before the ld. CIT(A), NFAC. Before the ld. CIT(A), NFAC it was submitted that first of all the ld. Assessing Officer did not pass the order within six months of filing of rectification application as per the provisions of section 154(8) and therefore, the order passed by the assessee was time barred, bad in law and void ab initio. Without prejudice to this, it was submitted that a rectification request under section 154(1) was allowed for correcting;

In the case of the assessee, an inadvertent typographical error had been committed and therefore, it fell within the purview of section 154. Besides that, there was a cardinal rule on taxability of income that the Department could only collect tax on the actual and genuine income earned by the assessee and in the assessee’s case, the excess income of Rs. 13,68,395/- that had been entered in its return of income, was in fact never earned by the assessee during the course of the assessment year. The assessee placed reliance on Circular No.014(XL-35)/1955 wherein ld. Assessing Officers were advised not to take advantage of the ignorance of the assessee but to assess the assessee in the correct determination of its tax liabilities. It was further submitted that merely because there was no option left to the assessee to file a revised return under section 139(5) did not mean that the amount which was not liable to be taxed should be brought to tax in his hands only because of a typographical error. It was submitted that section 154 enjoined the ld. Assessing Officer to correct mistakes apparent from the record and the ld. Assessing Officer had deliberately omitted to take cognizance of available records, which he had himself sought from the assessee. Furthermore, the assessee placed reliance on various case laws as under: –

to argue that even mistakes committed by the assessee in the filing of the return could be rectified under section 154 and he prayed that relief may kindly be allowed to him as per the rectification petition. However, the ld. CIT(A) observed that the assessee had himself filed the return for the assessment year 2021-22 declaring capital gains of Rs. 25,66,288/- which had already been processed under section 143(1) and therefore the rectification application did not fall within the purview of section 154 as the mistake was not apparent from the record. Accordingly, the plea of the assessee was rejected.

4. The assessee is aggrieved at such dismissal of his appeal and has accordingly come before us. Sh. P.K. Kapoor, C.A. (hereinafter referred to as the ld. AR) submitted that, by mistake, the assessee had declared the entire capital gains on the sale of a property, while the entire property did not belong to him but also belonged to his cousin Shyama Keshwani. His cousin also declared the entire capital gain in her returns. Subsequently, she had filed a rectification application under section 154 claiming only 50% share. Copies of her computation of income, intimation order, application under section 154, revised computation and the various orders passed by the ld. Assessing Officer and the ld. CIT(A) (wherein these rectification requests have been rejected) were filed in support of the contention. It was submitted that a genuine and bonafide mistake had been committed by the assessee in the filing of his return but the Department could not take advantage of that and bring more tax into the hands of the assessee than was due from the assessee. The law was quite clear that the State could not enrich itself and collect taxes except as per the provisions of law. Since the assessee was only owner of half of the property, the entire capital gains could not be assessed in his hands or in his cousin’s hands as that would amount to double taxation in the hands of both assessee’s and excessive taxation and beyond the rates prescribed. It was prayed that in the cases of Poorvanchal Vikas Foundation (supra), Smt. Chandrikaben Thakarshibhai Lanqhnoia (supra)and Dinumantiben Damjibhai Shilu(supra), the Tribunal had repeatedly considered such questions and held that the ld. Assessing Officer was bound to rectify such mistakes after verification of records and accordingly he prayed that the said relief may kindly be granted to the assessee.

5. On the other hand, Smt. Pratibha Singh, Addl CIT DR (hereinafter referred to as the ld. DR) pointed out that this was not a case of an appeal being filed against the processing under section 143(1) but a case of an appeal being filed against the rejection of a petition under section 154. The ld. Addl CIT DR pointed out that it was the assessee who had filed a wrong return and it was only the assessee who could revise that return. If the time for revising the return had run out, then the only recourse to the assessee was to file a condonation petition before the Board under section 119(2)(b) but not a petition under section 154. As there was no mistake in the order of the ld. Assessing Officer, who had essentially accepted the return filed by the assessee, the provisions of section 154 could not be used to introduce new facts or make new claims. Accordingly, it was prayed that since there was no mistake in the order passed by the ld. Assessing Officer, the ld. CIT(A) had rightfully rejected the appeal of the assessee and she prayed that the Tribunal should follow suit.

6. We have duly considered the facts and circumstances of the case and the arguments advanced by both the parties. We observed that the assessee and his cousin had both accidentally disclosed the entire amount of capital gains in their own hands while they were only obliged to disclose half share of the capital gains in their hands, as they were co-owners of the property with equal shares. The ld. Assessing Officer had assessed the income on the basis of the returns filed by the assessee. Furthermore, as per the judgment of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. CIT  284 ITR 323 (SC), he was prohibited from entertaining new claims. The ld. CIT(A) has held that since there was no mistake in the order of the ld. Assessing Officer, there was nothing that could be rectified under section 154. However, we note that in the case of Dinumantiben Damjibhai Shilu(supra), the ITAT Rajkot Bench had held that where there were apparent and obvious mistakes in the returns filed by the assessee which were brought to the notice of the ld. Assessing Officer after receiving intimation and which mistake, on merits, the ld. Assessing Officer admitted too also, the assessee’s claim of rectification under section 154 could not be rejected. Further, the ITAT Rajkot Bench in the case of Smt. Chandrikaben Thakarshibhai Lanqhnoia (supra) has pointed out that in a case where a typographical error was committed in filing of the e-Return, that the assessee had not made any new claim or deduction which required it to file a revised return but rather there was a typographical error which was a clear cut of mistake apparent from the record and the same was curable/rectifiable under section 154 of the Act. In the case of Poorvanchal Vikas Foundation (supra), the Tribunal has held that where the assessee, due to some typographical or technical mistake offered the income ten times more to the actual income while filing the return of income, the ld. Assessing Officer was expected to verify the correctness of the total income of the assessee and if the return could not be revised, it did not mean that income which had been offered to tax by mistake should be assessed in the hands of the assessee because the ld. Assessing Officer could not rectify the said mistakes. The Tribunal further noted that even otherwise the appellate authority had the jurisdiction to rectify such mistake particularly to avoid the assessment of income, which is not the real income of the assessee. In consideration of these judgments as also the judgment of the Hon’ble Bombay High Court in the case of CIT v. Pruthvi Brokers & Shareholders  349 ITR 336 (Bombay), we hold that the ld. CIT(A) was entitled to consider fresh claims by the assessee in an appeal against an order under section 154, if the same amounted to a variation in the amount of income offered under a particular head, due to a typographical mistake committed by the assessee while filing of the return of income. Accordingly, since only real income can be brought to tax in the hands of the assessee and since tax cannot be levied upon the assessee except in accordance with law, as per the provisions of article 265 of the Constittution, we deem it appropriate to restore this matter back to the file of the ld. CIT(A) so that ld. CIT(A) may verify the contention of the assessee that he was only liable to offer 50% of the amount actually offered as capital gains on account of being the co-owner of the property. The ld. CIT(A) may thereafter, pass a fresh order in accordance with law and his appreciation of the facts of the case. Accordingly, the matter stands restored to the file of the ld. CIT(A).

7. In the result, the appeal of the assessee is held to be allowed for statistical purposes.