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M/s. Y.V.R. & Co. Visakhapatnam Versus Addl. CIT, Circle-5 (1) , Visakhpatnam

2016 (6) TMI 79 - ITAT VISAKHAPATNAM

Rectification of mistake - adhoc disallowance of 20% labour expenditure - Held that:- Section 154 of the Act provides for rectification of mistake apparent from the records. As per the said section, mistake not confined to mere clerical or arithmetical mistake. The only point is that the mistake must be obvious and patent and not involving a debatable point. Similarly, the word record has not been defined u/s 154 of the Act or in the definition section. Therefore, the said word will have to be g .....

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, the said mistake is a mistake apparent from the records which needs to be rectified u/s 154 of the Act. The assessee’s contention is that records means only an assessment order is not acceptable for the reason that record means not only the assessment order, but also includes any records available with the A.O. at the time of passing assessment order. Therefore, we are of the opinion that the A.O. has rightly rectified the assessment order u/s 154 of the Act. Hence, we inclined to uphold the o .....

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ar 2008-09. 2. The brief facts of the case are that the assessment of the assessee case has been completed u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as 'the Act') on 22.12.2010. At the time of completion of assessment u/s 143(3) of the Act, the A.O. made an addition of ₹ 17,76,410/- towards disallowance of labour expenses. Thereafter, the A.O. issued a notice u/s 154 of the Act and proposed to rectify the order. The A.O. issued the notice with the observation that .....

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17,76,410/- was made. Therefore, opined that there was a mistake apparent from the records in disallowance of labour expenditure which needs to be rectified u/s 154 of the Act. After considering the relevant explanations of the assessee, the A.O. has passed order u/s 154 of the Act and determined total income of ₹ 70,15,907/- by adding difference labour charges of ₹ 21,56,567/-. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT( .....

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and patent. The proposed disallowance of labour charges is not a mistake which is apparent from the assessment order, therefore, the A.O. was not correct in invoking the provisions of section 154 of the Act to rectify the assessment order. The CIT(A) after considering the submissions of the assessee held that the A.O. has rightly rectify the assessment order. The CIT(A) observed that on perusal of the assessment records, it was observed that the assessee has agreed for a disallowance of 20% of l .....

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e us. 4. The Ld. A.R. submitted that the CIT(A) was not justified in coming to the conclusion that the assessing authority is justified in making rectification by adding the difference amount of ₹ 21,56,567/-. The A.R. further submitted that the A.O. has rightly quantified that disallowance of ₹ 17,76,410/- after verified bills & vouchers with reference to the books of accounts of the assessee. Though there was a discussion at the time of assessment proceedings to disallow 20% la .....

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from the assessment order, but from the assessment records. Any mistakes which can be rectified u/s 154 of the Act should be from the face of the assessment order. Therefore, the A.O. was not correct in rectifying the assessment order by referring to the order sheet entry. 5. On the other hand, the Ld. D.R. strongly supported the order of the CIT(A). The Ld. D.R. further submitted that there is a mistake in the assessment order which requires rectification u/s 154 of the Act. The A.O. at the tim .....

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of section 154 of the Act. The A.O. was of the opinion that there is a mistake in the assessment order passed u/s 143(3) of the Act which needs to be rectified u/s 154 of the Act. The A.O. observed that at the time of completion of assessment u/s 143(3) of the Act, the disallowance of labour charges was wrongly added. It was further observed that the assessee has agreed for disallowance of 20% labour charges, which was recorded in the order sheet for which the authorized representative of the as .....

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nd patent. Any mistakes which is highly debatable and which involves complicated process of discussion cannot be rectified u/s 154 of the Act. The assessee further contended that the A.O. while completing the assessment u/s 143(3) of the Act has quantified the disallowance of labour expenses after verified the books of accounts with reference to bills & vouchers and arrived at disallowance of ₹ 17,76,410/-. Mere discussion for adhoc disallowance of 20% labour expenditure cannot be the .....

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