Section 154

Rectification of mistake

Law subsequently interpreted by Supreme Court - A mistake arising as a result of subsequent interpretation of law by the Supreme Court would constitute ‘a mistake apparent from the records’ and rectificatory action under section 154 would be in order. Therefore, where an assessee moves an application under section 154 pointing out that in the light of a later decision of the Supreme Court pronouncing the correct legal position, a mistake has occurred in any of the completed assessments in his case, the application shall be acted upon, provided the same has been filed within time and is otherwise in order.—Circular : No. 68 [F.No. 245/17/71-A & PAC], dated 17-11-1971.

Action by Assessing Officers - Income-tax Officers are authorised to take action under section 154, or to admit or dispose of on merits applications under section 154 filed by assessees seeking relief, for cancelling such protective assessments as have become redundant by waiving, if necessary, the time limit fixed under sub-section (7) of section 154.—Circular : No. 71 [F. No. 246/25/71-A & PAC], dated 20-12-1971.

In all the cases where a valid application under clause (b) of sub-section (2) of section 154 had been filed by the assessee within the statutory time limit but was not disposed of by the authority concerned within the time specified under sub-section (7) of section 154, it may be disposed of by that authority even after the expiry of the statutory time limit, on merits and in accordance with law.—Circular : No. 73 [F.No. 245/13/71-A & PAC], dated 7-1-1972.

Action on penalty order after assessment is cancelled or annulled - Sometimes the income-tax assessment, on the basis of which an order of penalty has been passed, is itself either cancelled or annulled and yet the order of penalty survives. Where such a penalty order has not been made subject of appeal or where it has been confirmed on appeal by the AAC or on revision petition by the Commissioner/Additional Commissioner, there will be justification for cancellation of the penalty order by the income-tax authority concerned under section 154. ITOs/AACs/IACs/Addl. CITs/CITs are authorised to take action under section 154 suo motu or to admit applications under section 154 filed by the assessees seeking cancellation of penalty orders of the type mentioned above, waiving for this purpose, as may be necessary, the time limit prescribed under section 154(7). —Circular : No. 87 [F.No. 245/25/71-A & PAC], dated 19-6-1972 in supersession of Circular No. 81 [F.No. 245/25/71-A & PAC], dated 26-3-1972.

Allowance of deductions disallowed earlier - Furnishing of evidence of payment of any sum by way of tax, duty, etc., along with the return is a necessary requirement for allowance of deduction of that sum under section 43B. The sums disallowed as prima facie inadmissible under section 143(1)(a), in the absence of requisite evidence of the payment, cannot be subsequently allowed under section 154. This is because the scope of the powers to make prima facie adjustments under section 143(1)(a)* is somewhat coterminous with the power to rectify a mistake apparent from the record under section 154. Similarly, filing of evidence in support of an exemption/deduction at the time of furnishing the return of income has been prescribed as a necessary condition in certain other sections of the Income-tax Act, such as sections 32AB(5), 33AB(2), 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 35D(4), 35E(6), 80HHB(3), 80HHC(4), 80HHD(6), 80-I(7), etc. In such cases also where the exemption/deduction claimed is disallowed as prima facie inadmissible for want of evidence in support thereof under section 143(1)(a), it cannot be subsequently allowed by a ‘rectification’ order under section 154 if the assessee later on furnishes evidence in support thereof.—Circular: No. 581, dated 28-9-1990.

Where the sums referred to in the first proviso under section 43B had in fact been paid on or before the due dates mentioned therein, but the evidence therefor had been omitted to be furnished along with the return, the Assessing Officers can entertain applications under section 154 for rectification of the intimations under section 143(1)(a) (as it stood at the relevant time) or orders under section 143(3), as the case may be, and decide the same on merits.—Circular No. 581, dated 28-9-1990 stands modified to the above extent.—Circular : No. 669, dated 25-10-1993.

Notifications issued after completion of assessments - Where notifications under section 10(23C) or section 35(1) are issued much after the completion of the assessments of the assessment years to which such notification apply, there is a mistake apparent from the record which can be rectified under section 154. However, while disposing of the rectification applications, the Assessing Officer must ensure that the conditions prescribed in the notifications are satisfied.—Circular : No. 725, dated 16-10-1995.