Income tax law is complex, and at times, disputes arise between taxpayers and the authorities. A recent case before the Income Tax Appellate Tribunal (ITAT) in Delhi, titled Hirdey Ram vs. DCIT, ITA NO. 319/Del/2022 sheds light on issues related to the rectification of errors in tax assessments under Section 154 of the Income Tax Act. Let’s discuss into the details and understand the implications of the decision.
Case Overview
The Assessee, Mr. Hirdey Ram, filed an appeal before the Income Tax Appellate Tribunal challenging the decision of the CIT(A), which upheld the rejection of his rectification request by the Assessing Officer (AO). The core issue in this case was the claim for the deduction of interest on a loan used for constructing a warehouse, which the Assessee had failed to claim in his original return. The interest payment amounted to Rs. 31,17,879, and the Assessee sought to rectify the mistake and claim this amount under Section 24(b) of the Income Tax Act.
However, the AO and CIT(A) both rejected the Assessee’s claim on the grounds that the mistake was not apparent from the records, and the necessary details were not provided in the original return of income.
Key Points from the Tribunal’s Decision
- Rectification Under Section 154: The Assessee sought to correct the oversight of not claiming the interest deduction by filing a rectification application under Section 154 of the Income Tax Act. This section allows for the correction of mistakes apparent from the records. The key issue in this case was whether the failure to claim the interest was an “apparent mistake” that could be rectified.
- No Evidence in the Original Return: The Tribunal, agreeing with the findings of the lower authorities, emphasized that the original income tax return did not include any reference to the interest payment. Since there was no mention of the claim in the return, the AO was not obligated to consider it during the processing of the return under Section 143(1). Furthermore, as the Assessee submitted the evidence only during the rectification proceedings, it could not be considered an apparent error from the records.
- Legal Precedents: The Tribunal referred to important legal precedents, such as the case of the Hon’ble Supreme Court in the case Keshri Metal (P) Ltd. (237 ITR 165).
In the instant case, there was no information/details available in the original return filed which suggested that the appellant has made Interest payment of Rs. 31,17,879/- on the loan received from Union Bank of India for construction of warehouse on which he received lease rental income. There is no denying that the appellant furnished the necessary evidence in support of the said interest payment in course of the rectification proceedings before the AO. However, the fact remains that when the return was processed by the AO, no details/evidence in respect of said interest payment were available from the return filed. The Hon’ble Supreme Court in the case of Anchor Pressings (P) Ltd. (161 ITR 159) has held that if clear data is not available, it is not obligatory on the part of the AO to pass rectification order u/s. 154. Therefore, the action of the AO of rejecting the request of the appellant for rectification, cannot be faulted…”
4. Failure to Raise the Ground: Another point raised by the Assessee’s representative was whether the Tribunal could entertain a ground not raised before the lower authorities. The Tribunal, however, clarified that the failure to raise the claim in the return was not an error apparent from the records, and thus, Section 154 could not be invoked.
Why This Case Matters
This decision reaffirms the importance of submitting accurate and complete information in the original income tax return. It highlights the limitations of Section 154, which only allows for the correction of clear and obvious errors from the record, rather than the introduction of new claims or evidence that was not included initially.
For taxpayers, this case serves as a reminder that failure to properly claim deductions or other benefits in the income tax return may lead to complications in later rectification requests. It is crucial to carefully review all claims and supporting documents before submitting the return to avoid unnecessary delays and denials.
If you’re in a similar situation, it’s always wise to consult with a tax professional like the chartered accountant to ensure that your income tax return is properly filed, and all claims are made in accordance with the law.
Citation: HIRDEY RAM, vs DCIT, CIRCLE-2(1), GURGAON ITA NO. 319/Del/2022 ASSESSEMENT YEAR : 2014-15
