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4.1 It was argued by the learned Authorised Representative that by not considering the alternative claims made by the assessee in its return of income, there arose a mistake in the order of the AO passed under Section 143(1). As the mistake was apparent from the record he should have rectified the same on the application made by the assessee under Section 154. Since the AO did not judiciously rectify the mistake, the CIT(A) had correctly exercised his powers under Section 154 and directed the AO for allowing statutory claims of the assessee which were undisputedly put forth by the assessee in the original return of income. As per learned Authorized Representative mere giving footnote of the legitimate claims for which the assessee is legally entitled to, does not empower the AO to disregard or ignore such claims, rather he is dutybound to take cognizance of such legal claims and allow the same while processing the return under Section 143(1) and if he forgets to allow such claim, the order of the AO under Section 143(1) will be subject to rectification under Section 154. Reliance was placed by learned Authorised Representative on the decision of Gujarat High Court in the case of S.R. Koshti v. CIT , wherein it was held that the authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is overassessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. Held, that even if for the sake of argument, it were accepted that an intimation was also forwarded along with the refund order, it was admittedly issued only on 13th May, 2002. In the circumstances, there being no order of assessment as envisaged under the provisions of the Act, a revised return under Section 139(5) could have been submitted by the petitioner on or before 31st March, 2003, and, in fact, was so submitted by the petitioner on or before 24th Sept., 2002. The revised return was filed within the period of limitation and was hence valid. The AO was not only right in law, but was fully justified in passing the order under Section 154 of the Act after entertaining the revised return which was filed within the time-limit statutorily prescribed. Therefore, also the respondent could not have assumed jurisdiction under Section 263. The CIT had not stated that the petitioner was not entitled to the relief under Section 10(10C). In fact, the said position was undisputed. The AO himself had passed an order under Section 154 of the Act granting such relief. In such circumstances, the order under Section 264 could not be sustained. The orders under Sections 263 and 264 had to be quashed and the order under Section 154 would prevail.

4.8 In the rejoinder, learned Departmental Representative submitted that the judgment of S.R. Koshti v. CIT (supra), as relied on by learned Authorised Representative is not applicable to the assessee's case insofar as facts are different. In the case of S.R. Koshti (supra), the assessee had not claimed exemption out of VRS compensation because the same was not treated as exempt in Form No. 16 also by the employer by mistake. The return for asst. yr. 2001-02 was filed on 31st July, 2001 showing income of Rs. 9,98,182 (including VRS compensation of Rs. 7,50,000). The refund of Rs. 12,219 was claimed. The return was processed under Section 143(1)(a) on 28th March, 2002 and the refund was granted on 13th May, 2002. Later on the assessee came to know of his mistake that sum of Rs. 5,00,000 out of VRS compensation was exempt under Section 10(10C) of the IT Act, which was not claimed in the return. He accordingly filed a revised return on 24th Sept., 2002 in which the said exemption was claimed. The assessee accordingly requested the AO to issue further refund after giving exemption entitled to him. The AO after examination of certain details passed an order under Section 154 on 27th March, 2003 and granted the exemption. The said order under Section 154 was set aside by the CIT under Section 263. The assessee also preferred an application under Section 264 (with request to condone delay in filing) requesting the CIT to revise the intimation issued by the AO and grant relief to him on the basis of revised return filed on 24th Sept., 2002. The CIT rejected the request under Section 264 by order dt. 29th March, 2004 holding it to be beyond period available for filing Section 264 petition. He also held a revised return filed by the assessee on 24th Sept., 2002 as invalid being filed out of time. In the background of above facts, the Hon'ble Gujarat High Court observed that the revised return filed by the assessee on 24th Sept., 2002 was valid. In Section 139(5) two time-limits were given one prior to date of assessment and second within one year from the date of assessment and earlier of the two is to be adhered to. In that case the first one i.e., prior to date of assessment was not applicable because no assessment was made at all. The intimation under Section 143(1)(a) cannot be treated as an assessment order. The assessee accordingly could have filed revised return upto 31st March, 2003, i.e., before the end of one year from end of assessment year. Having held revised return as valid, the Hon'ble High Court upheld the rectification order under Section 154 as correct and justified while quashing the orders under Sections 263 and 264 as invalid. As per learned Departmental Representative in the instant case, the returned income was accepted by AO under Section 143(1), in which the assessee had made a claim under Section 80HHC, therefore, no fault can be traced in his order.

9. The proposition laid down with respect of scope of powers of CIT under Section 263/264 with reference to order passed by the AO under Section 154, in the case laws relied on by the learned Authorised Representative in the case of S.R. Koshti (supra), is not applicable to the facts and circumstances of the present case, because in this case the basis of rectification was the claim made by the assessee in revised return, which was legally valid and the same was held to be valid by the Hon'ble High Court. Whereas in the instant case, in the same return of income the assessee has put forth alternative claims in addition to main claim of deduction under Section 80HHC. The AO had accepted the returned income as it is in which claim under Section 80HHC was put forth. The other case laws relied on by the learned Authorised Representative pertain to entertaining additional claim at the appellate or Tribunal or High Court level, which the assessee failed to raise before the lower authorities, but the relevant materials of which are already on the record. Other case laws referred by the learned Authorised Representative pertain to the power of rectification with reference to scope of Section 143(1) prior to its amendment by the Finance Act, 1999. Thus, these case laws are not pertinent for deciding the scope of power under Section 154/143(1) for the relevant asst. yr. 2002-03, under consideration. Furthermore, in view of the detailed arguments placed by the learned Authorised Representative with regard to eligibility of assessee's claim under Section 10B/80-IB, there remains no doubt that issue was debatable and allowability or denial of such claim requires long process of reasoning which does not come within the purview of Section 154. As per our considered view, mistake apparent from the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. In the instant case, it was not open to the AO to go into the eligibility of assessee's claim under provisions of Section 10B/80-IB, while disposing the petition filed under Section 154/143(1). Thus, the power of rectification can be exercised only when the mistake sought to be rectified is apparent from the record. In the instant case, the power under Section 154 is to be read with power of AO while processing the return under Section 143(1) and what cannot be done under Section 143(1), the same could not be done indirectly by recourse to Section 154.