RECTIFICATION OF MISTAKE SECTION 12
The tax authority can also rectify its order, if there is any mistake apparent from record in such order. Such rectification can be made when the mistake is identified by the tax authority itself or when such mistake is brought to its notice by assessee or the Assessing Officer. This provision is quite similar to Section 154 of the Income-Tax Act, wherein powers are given to income-tax authority to rectify a mistake apparent from record. The provisions relating to rectification are discussed as under :-
RECTIFICATION OF MISTAKE APPARENT FROM RECORD – SECTION 12(1)
The Tax authority may amend an order passed by it to rectify any “mistake apparent from the record”. Certain examples of “mistake apparent from record” are given hereunder : –
- Misreading a clear provision of law : –
In such cases, the tax authority may interpret an obvious provision in a different manner. For example, if the tax authorities, while computing the value of an undisclosed foreign assets, does not reduce the value of income which was already assessed to tax and which was used to acquire foreign asset, it would be a case of misreading a clear provision of law.
- Application of wrong provision or erroneous application of same :-
Where the tax authority has applied wrong provision in respect of assesse, it would be considered as mistake apparent from record. Suppose the tax authority has imposed 300% penalty wherein assessee is liable to 100% penalty under different provision.
- Applying an inapplicable provision :-
Where the tax authority applies an inapplicable provision (say tax is imposed on undisclosed foreign income as undisclosed domestic income) .
- Overlooking a non-discretionary but mandatory provision :-
Overlooking of mandatory provision, would also be considered as a mistake apparent from the record, like in computing value of a foreign bank account, if deposits made from withdrawal from same account are not excluded.
TIME PERIOD FOR RECTIFICATION – SECTION 12(2)
Rectification shall be made within a period of 4 years from the end of the financial year in which the order sought to be amended was passed.
For example, if the tax authority has passed order with an apparent mistake on December, 2017, such order can be rectified till March 31, 2022.
OPPORTUNITY OF BEING HEARD – SECTION 12(3)
The Tax authority cannot make an amendment, which has the effect of enhancing the undisclosed foreign income and undisclosed foreign asset , or reducing a refund or otherwise increasing the liability of the assesse, without providing an opportunity of being heard to the assessee .
RECTIFICATION APPLICATION – SECTION 12(4)
Rectification order shall be passed only when a mistake apparent from record is identified by the tax authority, either itself or it may be brought to its notice by the taxpayer or the Assessing Officer.
The tax authority may make an amendment : –
- On its own motion :- Where mistake is discovered by the tax authority itself , then it can amend an order by itself
- On an application made by assessee :- The tax authority may rectify an order when mistake apparent from record is brought to its notice by assessee.
- On an application made by Assessing Officer :- The tax authority may rectify an order when mistake apparent from record is brought to its notice by Assessing Officer.
TIME-LIMIT FOR DECIDING RECTIFICATION APPLICATION – SECTION 12(5)
Where a tax authority receives an application from the assessee or the Assessing Officer for amendment of an order for a mistake apparent from record, such application shall be decided within a period of 6 months from the end of the month in which the application is received by tax authority .
Summary of provisions relating to rectification of mistake apparent from record are summarized as under : –
RECTIFICATION OF AN ORDER THAT IS A SUBJECT MATTER OF APPEAL OR REVISION – SECTION 12(6)
Tax authorities can amend only those matters in the order, which have not been decided in appeal or revision.
NOTICE OF DEMAND – SECTION 13
When any order is passed by a tax authority under the Black Money Act, and any sum is found payable from the assessee, the tax authority shall serve a notice of demand to the assessee. Such notice of demand shall be served in Form 1, to demand tax, interest or penalty.
DIRECT ASSESSMENT OR RECOVERY NOT BARRED – [SECTION 14]
In certain cases, the legal owner of the undisclosed foreign income or undisclosed foreign assets may be different from the beneficial owners. In such a case, Section 14 provides, that nothing contained in the Black Money Act shall prevent direct assessment on the beneficial owner of undisclosed foreign income or undisclosed foreign assets, even if income on such income is receivable by any other person, or foreign asset is held by any other person. Similarly, the recovery of tax, penalty, interest, etc. can be made directly on the beneficial owner, in respect of such foreign income or foreign asset.
Let us understand this situation with the help of an illustration.
Suppose, Mr. Y is a resident in India and he has a property situated outside India. However, Mr. Y , a foreign citizen, is the legal owner of such property, and Mr. Z is only the beneficial owner of such foreign asset and receives income from such property as a legal owner. In such a case , direct assessment an also be made on Mr. Z in respect of such foreign property.
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