Whether rectification under section 154 of the Income Tax Act, 1961 can be filed even if the appeal is filed before CIT (A) under section 250?

 

One of the most common question of the taxpayer is whether rectification under section 154 of the Income Tax Act, 1961 can be filed even if the appeal is filed before CIT (A) under section 250? In many such cases, part of the issues involved are prima facie mistakes apparent from the record and are rectifiable under Section 154, requiring no elaborate legal discussion. At the same time, there may be other contentious issues that require detailed deliberation, making them appealable under Section 250 of the Income Tax Act, 1961.

In such circumstances, the assessee may be constrained to adopt a dual remedy:

1) File an appeal under Section 250 before the Commissioner (Appeals), and
2) File a rectification application under Section 154 for mistakes apparent from the record.
However, it has been observed that the learned Assessing Officers often reject rectification applications under Section 154 outright, stating that the matter is now subjudiced due to the pending appeal, and therefore, rectification is not permissible.

This approach appears contrary to the provisions of Section 154(1A) and judicial precedents.

The embargo placed by Section 154(1A) is only in respect of matters which have been ‘considered and decided’ in an appeal or revision. It does not bar rectification merely because an appeal is pending. The Hon’ble Bombay High Court in the case of Piramal Investment Opportunities Fund vs. ACIT [267 Taxman 297] has clearly interpreted this provision. The Court held:

“The legislature has used the phrase ‘considered and decided’ in the past tense. The phrase ‘considered and decided’ cannot be read as ‘pending consideration in appeal or revision’. In view of the plain language of Section 154, there is no embargo on the power of amendment if an appeal or revision is merely pending.”

The decision reinforces the principle that pending appeals do not bar the Assessing Officer from exercising power under Section 154, provided the issue sought to be rectified has not already been adjudicated in the appeal.

The copy of the order is as under:

WRIT PETITION NO. 2237 OF 2019