Income Tax Appellate Tribunal - Delhi
R.T. Paper Board Ltd.,, New Delhi vs Department Of Income Tax on 10 April, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'F' NEW DELHI
BEFORE SHRI I.C. SUDHIR, HON'BLE JUDICIAL MEMBER AND
SHRI T.S.KAPOOR, ACCOUNTANT MEMBER
I.T.A .NO. 2946/Del/2011
Assessment Year: 2004-05
Asstt. CIT, M/s R.T. Paper Board
Ltd., Circle-15(1) 407-408,
C.R.Bldg., Vs. Deepali, 92, Nehru Place,
I.P. Estate, New Delhi New Delhi.
PAN AABCR9393R
(APPELLANT) (RESPONDENT)
Appellant by: Shri S.K.Upadhyaya, Sr. DR
Respondent by: Shri Ashwani Taneja, FCA
ORDER
PER I.C.SUDHIR, JM:
The revenue has questioned first appellate order on the ground that the Ld, CIT (A) has erred in deleting the addition of Rs.1,94,51222/- made by the A.O. under Section 43 B of the IT Act, 1961 as the assessee had not paid interest but the amount was waived off in terms of restructuring proposal sanctioned by CDR Cell."
2. The relevant facts are that the return of income filed on 1.11.2004 declaring a loss of Rs.8,42,64,680/- was processed under Section 143 (1) of 2 ITA No.2946/Del/2011 the Act on 23.2.2005. Thereafter, assessment under Section 143 (3) was framed on 29.12.2006, assessing the loss at Rs.4,91,41,878/- after allowing not business loss and unabsorbed depreciation. The A.O. noted that the assessee had claimed deduction of Rs.1,94,51,222/- as allowance of Section 43 B of earlier years in the 3CD report, the amount was shown as interest paid being the amount waived off, in terms of restructuring proposal sanctioned by CDR Cell.
He accordingly issued notice under Section 154 of the Act, and in absence of response from the assessee he disallowed the amount of Rs.1,94,51,222/- and reduced the assessed loss at Rs.2,96,90,656/- The Ld, CIT (A) has deleted the disallowance on the basis that without pointing out the mistake apparent from record in the assessment order, the A.O. was not justified in invoking the provisions of Section 154 of the Act, to rectify the alleged mistake in the assessment order on the issue framed under Section 143 (3) of the Act.
3. In support of the ground, Ld, DR has basically placed reliance on the order passed under Section 154 of the Act. He submitted that the A.O. in para No. 2 of the order passed under Section 154 of the Act has mentioned the reason for which he has invoked the provisions of Section 154 of the 3 ITA No.2946/Del/2011 Act. He accordingly issued show cause notice under Section 154 to that effect but the assessee did not bother to appear before the A.O. nor any reply was filed by it. Under the circumstances the A.O. was having no option but to pass order under Section 154 rectifying the mistake apparent. The Ld, DR pointed out further that the amount in interest was actually not paid.
4. The Ld, AR on the other hand tried to justify the first appellate order and reiterated the submissions made before the authorities below. He also referred the case laws cited before the Ld, CIT (A). He submitted that while, framing the assessment under Section 143 (3) of the Act, the A.O. had already examined books of accounts as it is evident from the assessment order a copy whereof, has been made available at page No. 53 of the paper book. He submitted that the interest amount remained an artificial income only and referred page No. 5 of the paper book i.e. the profit & loss account for the year ended 31st March, 2004, wherein the interest amount has been shown in minus. Thus there is no mistake apparent from record in the assessment order which has been wrongly interfered by the A.O. under Section 154 of the Act. He submitted that the issue raised was debatable, hence without recording the reason as to what mistake was these apparent on record in the assessment order, the A.O. was not justified in invoking the 4 ITA No.2946/Del/2011 provisions of Section 154 of the Act. The Ld, AR submitted that even on merits there was no mistake in the assessment order and referred page No. 2 of the paper book i.e. computation of taxable income for the year showing that a sum of Rs.1,94,51,222/- was claimed by the assessee in the computation sheet on the basis of reports and records given by the tax auditor by way of Annexure VIII of the tax audit report. He referred page No. 43 of the paper book i.e. Annexure forming part of form 3CD showing that the amount of interest and sales tax was claimed in the impugned year as part of liability pre-existing on first date of the previous year. He submitted that in the earlier years these liabilities / expenses were disallowed. In this year since these expenses / liabilities have been settled therefore, deduction for these has been claimed in the concerned year. He submitted that in the assessment proceedings detailed examination was done by the A.O. of past years record as well as impugned year records and therefore, a decision was taken that according to the law and facts, this deduction is allowable to the assessee and accordingly it was granted.
5. Considering the above submissions we find substance in the contention of the Ld, AR that before invoking the provisions of Section 154 of the Act, the A.O. ought to have pointed out specifically that there is mistake apparent from record in the assessment order which the A.O. 5 ITA No.2946/Del/2011 proposed to rectify and has rectified the same. In our view after framing an assessment the A.O. can acquire jurisdiction to interfere with the said assessment order only after recording that there is mistake apparent from record in the assessment order which require rectification under Section 154 of the Act. Since provision laid down under Section 154 of the Act is restricted to be invoked only in case of rectification of mistake apparent from the record in an order already passed, the A.O. is required to confine the rectification only in case of any mistake which is apparent from the record in the order passed. An assessment order framed u/S 143(3) of the Act reaches its finality subject to rectification u/S 154, revision u/S 263, reopening u/S 147 or appeal, etc., if any preferred within the prescribed conditions and time limit. The object of the legislature is to settle an issue at the earliest and preferably within the prescribed time limit and thus interference with such settled position has been allowed with several restrictions and conditions, compliance of which is thus required to be strictly adhered to. The Hon'ble jurisdictional Delhi High Court in the case of CIT Vs. Food Specialities Ltd. (1985) 156 ITR- 790 (Delhi) has been pleased to hold that mistake apparent from record for the purpose of Section 154 means mistake which is patent and obvious and not something which can be established by a long process of reasoning. The Hon'ble Bombay 6 ITA No.2946/Del/2011 High Court, in the case of Parle Products (P) Ltd. Vs. CIT (1991) 191 ITR 510 (Bombay), has been pleased to hold that a mistake which is not glaring and obvious from the records cannot be rectified under Section 154 of the Act. In this case scope and validity of the provisions under Section 154 have been discussed. In the case of Bata India Ltd. Vs. IAC & others (2001) 249 ITR 491 (Calcutta), notice under Section 154 was issued on the ground that the deduction of payment made to workman sickness benefit society was wrongly allowed. It was held by the Hon'ble Calcutta High Court that notice issued under Section 154 was not valid as Section 154 can be invoked only for the purpose of rectifying any mistake apparent from record. It was held that notice nowhere mentions what was the apparent and patent mistake in the assessment order. The A.O. cannot sit upon the judgment of assessment order in the garb of rectification of mistake. Similar are the facts in the present case before us. Neither in the notice issued under Section 154 nor in the order passed under Section 154 the A.O. it has been pointed out as to what is the mistake apparent from record in the assessment order / which he proposed to rectify invoking the provisions of Section 154 of the Act.
6. For appreciation of the fact order passed under Section 154 is being reproduced hereunder:
"The return of income was filed on 01.11.2004, declaring a loss of Rs.8,42,64,680/- which was processed under Section 7 ITA No.2946/Del/2011 143 (1) of the IT Act, 1961 on 23.02.2005. Assessment under Section 143 (3) was completed on 29.12.2006 assessing the Rs.4,91,41,878/- after allowing net business loss and unabsorbed depreciation.
Notice under Section 154 of the IT Act, 1961 was issued on 18.3.2008 fixing the case for 25.3.2008 on the issue "The assessee had claimed deduction of Rs.1,94,51,222/- as allowance of 43B of earlier years in the 3CD report, the amount was shown as interest paid being the amount waived off in terms of restructuring proposal sanctioned by CDR Cell."
On 25.3.2008 neither anybody attended nor was reply filed by the assessee. However a letter dated 10.4.2008, received seeking adjournment for twenty days but till date none complied with in light of the same, it is presumed that assessee has nothing to say on the matter.
In view of the above Rs.1,94,51,222/- is disallowed and added back and loss is assessed at Rs.2,96,90,656/-."
7. Thus we concur with the finding of the Ld, CIT(A) that the A.O. was not justified in invoking provisions of Section 154 of the Act in the present case without pointing out the mistake apparent from record in the assessment order. The Ld, CIT(A) has also recorded in his finding in para No. 5.6 that order under Section 154 has been passed in a casual manner after a long lapse of time without providing adequate opportunity of being heard to the assessee. For a ready reference para No. 5.6 of the first appellate order is being reproduced here under:
"On careful consideration of the matter, I find that the AO has passed the rectification order u/S 154 in a casual manner after a long lapse of time without providing adequate opportunity of being heard to the appellant. The AO has also not discussed the issue in the said order and has made the disallowance in a very perfunctory manner. The perusal of the assessment 8 ITA No.2946/Del/2011 record as discussed above also shows that the AO has not responded to the adjournment application field by the appellant's AR seeking the short adjournment and has proceeded to pass the order u/s 154 after four months without affording the appellant an opportunity of being heard. Further, as per settled law, the power of the AO u/s 154 is a limited power to rectify "any mistake apparent from the record" which can only mean any obvious or patent mistake. The said power of rectification cannot be exercised to decide any issue where a long process of reasoning is required or an issue where two opinions are possible. The case laws cited by the ld. AR in this regard, are also very clear on this issue. Considering the above, I find that the legality of the impugned order u/s 154 cannot be sustain. Accordingly, the impugned disallowance of Rs.1,94,51,222/- u/s 43B made by the AO cannot stand. The same is, therefore, deleted."
8. The first appellate order, as discussed above, is reasoned one, hence we are not inclined to interfere therewith. The same is upheld. The ground is accordingly rejected.
9. Consequently appeal is dismissed.
Order pronounced in the open Court on this 08th day of June, 2012.
Sd/- Sd/-
( T.S.KAPOOR ) ( I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 08/06/2012
*AK VERMA*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
9 ITA No.2946/Del/2011