Rectification orders under Section 154 of the Income Tax Act cannot be based on audit opinions or debatable issues, as they do not constitute a mistake apparent on the record.

JUDGMENT

Manmeet Pritam Singh Arora, J.:

1. The present writ petition has been filed by the Petitioner, Assessee, seeking quashing of the rectification order dated 15th February, 2021, passed by the Respondent during the consideration of the Assessee's application for settlement of disputed tax under the Direct Tax Vivad Se Vishwas Act, 2020 (`Act of 2020').

2. The Assessee is also seeking a direction to the Respondent No. 1 to reconsider its application for settlement of disputed tax under the Act of 2020, for the Assessment Year (`AY') 2017-18.

3. The Assessee filed its Return of Income (`ROI') on 2nd November, 2017, and thereafter, filed its revised return on 14th May, 2018, both times declaring an income of NIL, as there was business loss in the AY 2017-18.

4. The Assessing Officer (`AO') initiated scrutiny assessment proceedings under Section 143(3) of the Income Tax Act, 1961 (`the Act of 1961') for the said assessment year and passed assessment order dated 21st December, 2019. The AO disallowed the write off of the `bad debt' and made an addition to income of Rs.30,00,152/-. The AO computed and raised a demand of Rs.5,53,839/-.

5. The Assessee filed an appeal against the aforesaid assessment order dated 21st December, 2019, which is pending before the Commissioner of Income Tax (Appeals).

6. In the meantime, the Act of 2020 was notified, which provided for resolution of disputed tax. The applications eligible for settlement under the Act of 2020 were the proceedings which were pending and filed upto 31st January, 2020. The benefit of the Direct Tax Vivad Se Vishwas Scheme (`DTVSV Scheme') could be availed by Assessee upon payment of tax amount and the Assessee would be benefitted by the waiver of interest and penalty. Further, the DTVSV Scheme offered the Assessee immunity from further proceeding qua the relevant disputed tax and was intended to put a quietus to the said disputes.

7. The Petitioner herein opted for the said scheme and on 28th December 2020 filed relevant forms and declarations stipulated under Section 4 of the Act of 2020. Thereafter, on 4th January, 2021, the Assessee received an e-mail from the Respondent No. 1 stating that upon verification of Form-1 and Form-2, filed under the DTVSV Scheme, it was noticed that there was a computation mistake and therefore, the addition of Rs.30,00,152/-on account of `bad debt written off', has been inadvertently taken as income chargeable to tax at special rates in lieu of business income and due to the alleged mistake, there was a short fall of Rs. 4,09,386/-approximately. It was further stated in the e-mail that the application of the Assessee under the DTVSV Scheme could not be entertained in the absence of correct tax liability.

8. The Assessee replied to the aforesaid email on 6th January, 2021, raising its objection that the enhanced demand now sought to be raised in the e-mail is not a mistake apparent on the record, but is a debatable issue and any rectification on the basis of a debatable issue is impermissible as it would amount to a case of change of opinion by the AO.

It was also stated that it is Assessee's right to set-off loss inter-head without any particular sequence since no guidelines have been given in the Act of 1961, for sequence of set-off of losses. It was stated that the AO's stance of changing sequence of set-off of business loss from one head to another head is nothing but change of opinion.

9. The Respondent No. 1, sent an email to the Assessee on 9th January, 2021, rejecting the objections raised by the Assessee and reiterated t