Facts of the Case

The petitioner, Dhansamridhi Finance Pvt. Ltd., filed a writ petition challenging the rectification order dated 26.12.2024 passed under Section 154 of the Income-tax Act, 1961 and the consequential demand notice dated 26.12.2024 issued under Section 156 of the Act.

The rectification order sought to amend the reassessment order dated 11.12.2018 for Assessment Year 2011–12 by levying interest under Section 234A for a period of four months on the ground that the return filed in response to notice under Section 148 was delayed. Although there was no change in the assessed income, the Assessing Officer raised an additional demand of ₹29,75,729 towards interest under Section 234A.

The reassessment order dated 11.12.2018 expressly stated that interest under Sections 234A, 234B, 234C and 234D, if any, had been charged, and the accompanying computation in Form ITNS-150 showed the interest under Section 234A as “Nil”.

Issues Involved

Whether the Assessing Officer could invoke Section 154 to levy interest under Section 234A by amending Form ITNS-150 after expiry of four years from the date of the reassessment order, whether such amendment was barred by limitation under Section 154(7), and whether the alleged omission constituted a clerical mistake apparent from the record.

 

 

Petitioner’s Arguments

The petitioner contended that the rectification proceedings initiated by show cause notice dated 12.12.2024 were barred by limitation under Section 154(7), as the reassessment order sought to be amended was passed on 11.12.2018. It was argued that Form ITNS-150 forms part of the assessment order and any amendment thereto squarely falls within Section 154.

It was further contended that the levy of interest under Section 234A was not a clerical or arithmetical error, but a debatable issue, particularly where the return filed pursuant to notice under Section 148 was a reiteration of the original return.

Respondent’s Arguments

The Revenue argued that there was no amendment to the assessment order determining income and that only the computation of demand in Form ITNS-150 was corrected, which was a ministerial exercise. It was contended that such correction could be made at any stage and was akin to correction of a decree to bring it in conformity with a judgment. Reliance was placed on decisions of the Supreme Court to submit that clerical or ministerial errors can be corrected by inherent powers.

Court Order / Findings

The Delhi High Court held that the rectification proceedings were expressly initiated and concluded under Section 154 and could not be defended on the basis of any inherent or ministerial power. The Court held that Form ITNS-150, which determines the tax payable, is an order in writing forming part of the assessment order, relying on the authoritative judgment of the Supreme Court in Kalyankumar Ray.

The Court observed that the show cause notice dated 12.12.2024 and the rectification order dated 26.12.2024 were issued beyond the period of four years prescribed under Section 154(7) from the end of the financial year in which the reassessment order was passed, and were therefore barred by limitation.

The Court further held that the omission to levy interest under Section 234A was not a clerical error, as the Assessing Officer had consciously signed both the reassessment order and Form ITNS-150 showing interest under Section 234A as Nil. The issue was thus not amenable to rectification under Section 154.

Important Clarification

The Court clarified that Form ITNS-150 is an integral part of the assessment order and any amendment thereto is governed by Section 154. Rectification under Section 154 cannot be used to revisit debatable issues or to levy additional interest after expiry of the statutory limitation period.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the rectification order dated 26.12.2024 passed under Section 154 and the consequential demand notice issued under Section 156, holding that the rectification proceedings were barred by limitation and unsustainable in law. Pending applications were also disposed of.

Link to download order - https://www.mytaxexpert.co.in/uploads/1769686129_DHANSAMRIDHIFINANCEPVTLTDVsDEPUTYCOMMISSIONEROFINCOMETAXCIRCLE71DELHI.pdf

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