1. This is an appeal against the order of the AAC, wherein he has upheld the action of the ITO rejecting the assessee's application made under section 154 of the Income-tax Act, 1961 ("the Act").
2. For the year under appeal, the ITO framed an assessment under section 143(1) of the Act in the following manner :As per P/L account 33,377Add :- Interest to partners 21,168- 1/3 expenses on motor cycle and scooter as in past 1,951- Depreciation to be considered separately 3,829- Out of shop expenses inadmissible, as shown 300 -------Less : Depreciation actually due [loss claimed on motor cyclepurchased and sold during the year and depreciation on motorcycle (new) not claimed in annexure disclosed] 2,282 -------Add : Interest paid to Ramjiwanlal Vishnu Kumar and VishnuKumar Anil Kumar of which Sri Vishnu Kumar partner is thekarta of the HUF 1,766 -------- -------- 3. On receipt of the said order of the ITO, the assessee made an application under section 154 of the Act requesting the ITO to rectify his order in respect of certain items. In order to better appreciate the rival submissions of the parties, we reproduce below, the relevant extract from the said application of the assessee : 1. That the applicant returned an income of Rs. 55,600 and assessment was completed on total income of Rs. 60,110 under section 143(1) making additions and curtailing deduction as follows :Rs. 486-00 : Disallowance of expenses on motor cycle and scooter for self used to the extent of 1/3 of the total expenses in place of 1/4 claim.Rs. 1,132-00 : Terminal allowance claimed under section 32(1)(iii) disallowed.Rs. 1,047-00 : Depreciation on new motor cycle No. UTZ 1213 was disallowed.Rs. 76-00 : Less depreciation allowed on motor cycle and scooter.Rs. 1,766-00 : Under section 40(b) (interest paid to Ramjiwanlal Vishnu] Kumar and Vishnu Kumar Anil Kumar as Vishnu Kumar partner 2. That none of the above disallowances can possibly be made under section 143(1).
3. That the above disallowances are clearly and apparently against the provisions of section 143(1) and section 32 and such mistake of law.
It is, therefore, humbly prayed that the mistake may kindly be rectified, assessment be revised and demand of Rs. 620 may kindly be cancelled.
4. The ITO, however, rejected the assessee's application in the following manner : "Assessment for this year has been completed under section 143(1) at an income of Rs. 60,110 against returned income of Rs. 55,600 after making adjustment of inadmissible deductions claimed by the assessee. Aggrieved with this order the assessee has filed application under section 154 on 10-4-1980. On going through this application, it has been noticed that the assessee wants to bypass the provisions of section 143(2A) by making this application under section 154, but there is nothing on records to show that there has been any mistake which could be rectified under section 154. The assessee's application is, accordingly, rejected." 5. In appeal before the AAC the assessee vehemently argued that the ITO ought to have rectified the mistakes which were pointed out by the assessee in his application made under section 154 as those mistakes were apparent from the record. The AAC, however, confirmed the action of the ITO in the following manner : "3. I have given due thought to the submissions made by the learned counsel for the appellant. I do not agree with the learned counsel for the appellant that the mistakes as pointed out by him in the summary assessment order passed by the ITO were patent and obvious mistakes that could be possibly rectified under section 154. The disallowance of terminal allowance as claimed by the appellant, excessive disallowance of expenditure on motor cycle and scooter on account of personal use, etc., were the issues, decision in regard to which depended upon the exercise of discretion by the ITO. Improper and injudicious exercise of discretion of can at best be attributed to the error of the judgment on the part of the ITO and the ITO does not have powers or jurisdiction under section 154 to rectify the mistakes involving error of judgment. In the circumstances, I am of the view that the mistakes as pointed out by the learned counsel for the appellant were not the mistakes apparent from the records and as such the ITO had rightly rejected the application moved by the appellant on 9-4-1980. Accordingly, the order under section 154 passed by the ITO is hereby confirmed." 6. Being aggrieved by the order of the AAC, the assessee has come up in appeal before us. The learned counsel for the assessee reiterated the submission which were made before the income-tax authorities and contended that the ITO ought to have accepted the application made by the assessee under section 154 and ought to have amended the assessment accordingly. According to the learned counsel for the assessee, the assessee had potion either to raise objections before the ITO as contemplated under section 143(2) (a) within one month from the date of the service of the notice of demand in consequence of an assessment framed under section 143(1) or to make an application under section 154 bringing out mistakes, which were apparent from the record. In other words, he wanted to impress upon us that the assessee cannot be prevented from filing the application under section 154 merely on the ground that he had not filed an application under section 143(2) (a) objecting to the assessment framed by the ITO under section 143(1). In support of his submissions, the learned counsel for the assessee relied on the decision of the Punjab and Haryana High Court in the case of Indian Woollen Textile Mills (P.) Ltd. [1978] 111 ITR 205 and of the Patna High Court in the case of Hindustan Malleable & Forgings Ltd. [1978] 112 ITR 389. Therefore, the learned counsel for the assessee invited our attention to the assessee's application made under section 154 of the Act and highlighted the fact that each of the mistakes pointed out in the said letter were apparent from the face of the record and could have been rectified without any debate or discussion.
He, therefore, urged that the ITO should be directed to entertain the application made under section 154 of the Act and pass suitable order thereon.
7. The learned representative for the department, on the other hand, strongly relied on the order of the income-tax authorities and justified their action. According to the learned representative for the departm ent, the only course open to the assessee on receipt of the assessment order framed under section 143(1) was to made an application under section 143(2) (a), objecting to the manner in which the assessment was framed by the ITO. Since the assessee had failed to do so, it was urged on behalf of the revenue that the time limitation prescribed under section 143(2) (a) cannot be extended by invoking the provisions of section 154. Thereafter, he also invited our attention to the application under section 154 made by the assessee and highlighted the fact that none of the items mentioned therein could be rectified under section 154, as in deciding each of them, long-drawn process or arguments/reasonings were required. As regards the terminal allowance, claimed under section 32(1) (iii), the learned representative for the department submitted that since the motor cycle in question was purchased and sold in the previous year relevant to the assessment year under appeal itself, the assessee was not entitled to such terminal allowance. As regards the amount of disallowance out of the expenses on motor cycle/scooter, it is very apparent that the same could not be decided without discussion and arguments. Similarly, whether the interest paid to Shri Vishnu Kumar could be disallowed under section 40(b) was proper or not, could also not be decided without long-drawn process of arguments. In other words, the learned representative of the department wanted to impress upon us that even if for the sake of argument, the application under section 154 was maintainable, the ITO would be fully justified in rejecting the same on the ground that the mistakes pointed out in the said application could not be decided without long-drawn process of arguments. In support of his submission, the learned representative for the department relied on the decision of the Hon'ble Supreme Court in the case of T. S. Balaram, ITO v. Volkart Bros. [1972] 82 ITR 50.
8. We have considered the rival submission of the parties and we do not find any merit in the appeal preferred by the assessee. We entirely agree with the submissions made on behalf of the revenue that if the assessee had any objections against the assessment framed under section 143(1), he should have made an application, as contemplated under 143(2) (a), instead of making an application under section 154. When certain specific remedies are provided in section 143, we fail to appreciate how the assessee could make an application under section 154. Apart from this legal position, we are in full agreement with the submissions made on behalf of the revenue that even assuring for the sake of argument that, the application made under section 154 was a valid one, the ITO could not have passed an order under the section with a view to rectify the mistakes pointed out in the application of the assessee as none of them could have been rectified without long-drawn process of arguments and reasonings. In this view of the matter, we are of the opinion that in view of now celebrated decision of the Hon'ble Supreme Court in the case Volkart Bros. (supra), no order under section 154 could have been passed by the ITO with a view to rectify the purported mistakes apparent from the record. The decision relied on on behalf of the assessee again would not be of any help as we find from the said decision that the mistakes pointed out in the orders in those two cases were apparent and glaring which could be rectified under section 154. However, as pointed out earlier, such is not the case in the instant appeal. We would, therefore, uphold the order of the AAC under appeal.