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Krishnaping Alloys Ltd. Vs ACIT (ITAT Mumbai)
Rectification for Return-Filing Mistake Revived; Mere Dispatch Entry Not Proof of 143(1) Service
The assessee’s return for AY 2006-07 correctly showed profit before tax of about ₹22 lakh, but due to an accountant’s error the gross sales figure of about ₹5.05 crore was mistakenly entered in the “income from business” column in the computation, inflating the total income to about ₹5.08 crore. The return was processed under section 143(1) on the basis of this erroneous figure, creating a huge demand of about ₹2 crore.
The assessee claimed that it never received the 143(1) intimation and therefore remained unaware of this demand for years. Even subsequent recovery notices issued in 2013 and 2016 did not mention any demand for this assessment year. The issue surfaced only when the assessee later checked the tax portal and then filed a rectification application under section 154 to correct the apparent mistake. The AO rejected the rectification and the CIT(A) confirmed the rejection.
The Tribunal noted two key aspects:
1. The error was apparent from the return record itself, since the profit and loss figures and schedules showed the correct profit while only the computation column carried the wrong figure.
2. The Revenue relied merely on a dispatch register entry to claim service of the 143(1) intimation. Following the Orissa High Court decision in Alok Kumar Mahapatra, the Tribunal held that a dispatch entry alone is not conclusive proof of actual service so as to deny rectification on limitation grounds.
Since the AO had rejected the rectification without examining on merits whether there was a “mistake apparent from record”, the Tribunal set aside both the AO and CIT(A) orders. The matter was restored to the AO for fresh adjudication of the section 154 application after verifying the return, computation and records and after giving proper opportunity of hearing to the assessee.
The appeal was allowed for statistical purposes with a direction for de novo consideration of the rectification claim.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity ‘the ld. CIT(A)], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for assessment year 2006-07, date of order 03.07.2024. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income Tax C.C.-2(1)(1) Mumbai (for brevity the ld. Ld. AO) order passed under section 154 of the Act, date of order 21.01.2020.
2. The brief facts of the case are that the assessee filed the return on 26.11.2006 declaring total income 5,08,20,471/- and paid the advance tax Rs.5,00,000/- and self assessment tax Rs.2,00,000/-. The return was processed under section 143(1) and tax was payable by computing total income Rs.2,00,67,256/-. The assessee contended that during the computation of income the accountant erroneously filled the gross receipt that is Rs.5,04,90,432/- in net profit column instead of net profit Rs.20,03,877/-. During process of return u/sec. 143(1) the demand was raised amount to Rs.2,00,93,090/-. The assessee claimed that the intimation u/sec. 143(1) never served to the assessee. The assessee raised the allegation that the notice of recovery of the demand on 06.05.2013 & 16/11/2016 had never been mentioned about the demand for AY 2006-07. The assessee suo-moto verified the Income tax portal & found the huge demand against this impugned assessment year. Accordingly, the assessee filed a rectification petition before the Ld. AO on 01.12.2020 which was received on 08.12.2020. The assessee requested for rectification of intimation u/sec. 143(1) of the Act by stating that the apparent mistake is occurred in return of income as the sales was wrongly posted in the net profit column. But in profit and loss and in other columns of the return were correctly filled by the assessee. The Ld. AO rejected the petition of the assessee filed u/sec. 154 of the Act. Being aggrieved the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the observations taken by the Ld. AO. Being aggrieved assessee filed an appeal before us.
3. The Ld. AR filed a paper book containing pages 1 to 100, which has been taken on record. The Ld. AR drew our attention to page 36 of the Assessee’s Paper Book (APB), wherein the assessee had correctly computed the “profit before tax” in the return of income at Rs.22,03,877/-. However, during the computation of total income, the assessee’s accountant erroneously reflected an amount of Rs.5,04,90,432/- under the head “Income from Business or Profession,” resulting in the gross total income being computed at Rs.5,08,20,471/-. The Ld. AR further contended that the assessee had never received any intimation issued under section 143(1) of the Act from the revenue authorities. Attention was also invited to the notices for recovery of arrear demand dated 06.05.2013 and 16.11.2016, annexed at pages 74 and 75 of the APB, wherein no reference whatsoever was made to any demand pertaining to the impugned assessment year. It was therefore submitted that the assessee remained completely unaware of the alleged demand.
4. The Ld. AR further submitted that the assessee, thereafter, sought information under the Right to Information Act, 2005. In response, vide an order passed under section 7(1) of the said Act, the Ld. AO stated that the return was processed under section 143(1) of the Act on 30.08.2007 and that the date of service of the said intimation was recorded as 04.09.2007. The Ld. AR contended that, in the absence of actual service of the intimation under section 143(1), the assessee remained unaware of the demand raised. In support of the above contention, reliance was placed on the judgment of the Hon’ble Orissa High Court at Cuttack in the case of Alok Kumar Mahapatra vs. ITO [WP(C) No. 4470 of 2023, order dated 06.11.2024], wherein it was held as under:
“4. Entry made in the dispatch register is not primary evidence for the revenue to rely upon and deny the petitioner the remedy of rectification on account of limitation. As such, the petitioner is entitled to relief. The communication dated 27th March 2019 stating that the petitioner’s rectification application could not be acted upon, and the subsequent demand dated 1st February 2023, are set aside and quashed. The concerned authority shall consider and deal with the rectification application in accordance with law.”
5. Per contra, the Ld. DR submitted that the Ld. AO had categorically stated in the reply furnished under section 7(1) of the Right to Information Act, 2005, that the intimation under section 143(1) was passed on 30.08.2007 and that the date of service was recorded as 04.09.2007. It was further submitted that a copy of the computation made under section 143(1) was duly annexed with the said communication. The Ld. DR further argued that the error in computation was admittedly committed by the assessee, and no suo motu rectification was sought by the assessee after filing the return of income. Since the assessee itself declared the total income at Rs.5,08,20,471/- in the return, the return was processed correctly by the department. The Ld. DR, therefore, prayed for confirmation of the orders passed by the revenue authorities.
6. We have carefully considered the rival submissions and perused the material available on record. It is undisputed that the assessee had correctly reflected the “profit before tax” at Rs.22,03,877/- in the return of income, and the error occurred only at the stage of computation, where the gross receipts were inadvertently mentioned in the column meant for “Income from Business or Profession,” resulting in an inflated total income. It is also evident from the record that the assessee has consistently contended non-service of the intimation issued under section 143(1) of the Act and that the subsequent recovery notices dated 06.05.2013 and 16.11.2016 did not make any reference to the demand for the impugned assessment year, thereby lending credence to the assessee’s plea of lack of knowledge of the demand. Further, the assessee sought information under the Right to Information Act, 2005, and the reliance placed on the judgment of the Hon’ble Orissa High Court in Alok Kumar Mahapatra vs. ITO (supra) supports the proposition that a mere entry in the dispatch register cannot, by itself, be treated as conclusive proof of service so as to deny the assessee the remedy of rectification. At the same time, it is also a matter of record that the rectification application filed under section 154 of the Act was rejected by the Ld. AO without examining the issue on merits, namely whether the error in the return constituted a mistake apparent from the record. Considering the totality of facts and in the interest of substantial justice, we deem it appropriate to restore the matter to the file of the Ld. Jurisdictional Assessing Officer for fresh adjudication. The Ld. JAO is directed to verify the return of income, the computation statement, and the accompanying records, and thereafter decide the rectification application afresh in accordance with law, after affording due opportunity of being heard to the assessee. The assessee is also directed to cooperate in the proceedings and furnish all relevant details as may be required.
Accordingly, the impugned orders of the Ld. CIT(A) and the Ld. AO are set aside, and the matter is restored to the file of the Ld. AO for de novo consideration.
7. In the result, the appeal of the assessee bearing ITA No.4142/Mum/2024 is allowed for statistical purpose.
Order pronounced in the open court on 29th day of January 2026.
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