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The Law not applied a

mistake apparent from
the record
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Rectification of mistake.
154. [(1) With a view to rectifying any mistake apparent from the record an income-tax
authority referred to in section 116 may,
(a) amend any order passed by it under the provisions of this Act ;
[(b) amend any intimation or deemed intimation under sub-section (1) of section 143;]]
[(c) amend any intimation under sub-section (1) of section 200A;]
[(d) amend any intimation under sub-section (1) of section 206CB. ]
1. The purpose of this study is to examine the scope of the usage "rectifying any mistake
apparent from the record", as appearing in section 154. The pre-condition for the rectification of
any mistake is that it should be an apparent mistake, obvious from the record. Interestingly, the
terms mistake, apparent, &the record have not been defined in the Act, hence are subject to
judicial interpretation.
2. The judiciary has time and again come to the rescue of the beleaguered assessees in
according a just and fair interpretation to the terms mistake & apparent, so that the assessee is
not exposed to post-assessment consequences, in the nature of appeal, which could not only be
harsh and uncertain, but also costly, time consuming and unwarranted, specially when the
assessee does not have a natural right of appeal. The fact remains uncontested that the tax
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3.However, the term"the record"has not been subject to intensive judicial examination
leaving the said term wide open to interpretation. The significance of the said term"the
record"is analysed by attempting answers to the following questions :
3.1Whether the AO should rectify the order/ intimation, in case the assessee does not produce
a favourable judgment at the assessment stage, but after the assessment, relying on a
favourable judgment, applies for rectification of mistake apparent from "the record" u/s 154?
3.2Whether the judgments already pronounced by the courts or tribunals (whether
jurisdictional or otherwise), whether pre or post passing of the order or intimation by the AO,
would fall within the meaning of "the record", for the purpose of S 154, irrespective of whether
the assessee relies on them or not at the assessment stage?
3.3Whether the AO should be permitted to argue that only suchlaw, as is placed before him by
the assessee, constitutes "the record", to the utter oblivion of thelawthat holds good, though
not brought to the notice of the AO by the assessee?
3.4Whether the AO would be correct in arguing that thelawas enunciated by the courts or
tribunals, would constitute "the record" for the purpose of S 154,only whenit is brought to his
notice by the assessee in the assessment proceedings& that not bringing such law to his notice,
makes it extraneous to "the record", lacking application?
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4. Judicial pronouncements
The following judicial pronouncements, need careful consideration:
4.1 S 263revision orders
4.1.1S 263 can be invoked by the Commissioner of Income Tax (CIT) in case the order passed
by the AO iserroneousand is prejudicial to the interests of the revenue. Explanation 2(d) to
sub clause 1 of section 263, requires the AO to apply the decisionsprejudicial to the
assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the
assessee or any other person, failing which the CIT is empowered to invoke S 263 revision of
such an order.
4.1.2It is submitted that such prejudicial orders to the assessee, obviously may not be
brought on the record by the assessee in the course of assessment proceedings, though the
AO is expected to be in the knowledge of such prejudicial orders, and also to apply them in the
assessment.
4.1.3An order by the judicial authorities is the law as expounded &articulated by them, which
essentially is the purpose of the constitution and existence of such judicial authorities. Such
expounding and articulation owes its allegiance, essentially to the provisions of the statute
under which such orders are pronounced. Such law takes effect not from the date of
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4.1.4There can be no denying that law (read the Income Tax Act 1961) as expounded &
articulated by the judicial authorities forms a part ofthe recordof the AO, which he is duty
bound to enforce. It is therefore submitted that such orders even if not brought on record by the
assessee, ought to be applied by the AO, as a part of the law, on the record, which he is obliged
to enforce.
4.1.5It is submitted that the law (read the Income Tax Act 1961) is part of the record of the AO.
A conscious effort is made by the legislation to apply to the assessee, from the record of the
AO, the orders prejudicial to the assessee, in the course of assessment, as the law as
expounded & articulated by the judicial authorities is the law of the land.
4.1.6It requires a particular mention that such law (read orders prejudicial to the assessee) if
not applied by the AO, renders the ordererroneous in law, liable for revision u/s 263, provided
it is prejudicial to the revenue.
4.1.7In view of the above, it is submitted that there can be no denying that even the
law(read orders prejudicial to the revenue) as expounded and articulated by the judicial
authorities, are a part of the law (read Income Tax Act 1961), onthe recordof the AO, which
he is obliged to enforce.The purpose of an assessment is to apply the law by the AO,
and not to only extricate &apply from the record of the AO, such orders as are
prejudicial to the assessee. The purpose of an assessment is also not, to only pass
such orders,
as91-11are prejudicial to the assessee.
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4.1.9The AO by not considering thelawat assessment stage, commits a mistake in
application of law rather ignorantly & not consciously, which mistake resulting from
ignorance of law needs rectification when notified to him.
4.1.10It is submitted that no duty is cast on the assessee, by the legislation, to submit
the orders prejudicial to the revenue (read orders favourable to the assessee) to the AO
in the course of the assessment proceedings, obviously for the reason that
thelaw,required to be enforced by the AO is already a part ofthe record,of the AO,
which and which only he is expected to owe allegiance to and enforce, irrespective of
whether it is placed on record by the assessee or not. Further, there is nothing in s 154
which supports the interpretation that existing case laws, whether favourable or
otherwise to the assessee, if not brought to the notice of the AO vide submissions by the
assessee, are not a part ofthe recordof the AO. There is again, nothing in the Section
154, which states that only the orders prejudicial to the assessee constitutes the record
of the AO.
4.1.11In view of the above it is submitted that such orders, favourable to the assessee,
which is a part ofthe record,of the AO, if not applied by the AO for want of its
submission by the assessee, in the course of assessment proceedings, isa mistake
apparent from the record,liable for rectification u/s 154 proceedings when initiated
by the assessee.
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