Income Tax Appellate Tribunal - Ahmedabad
Vxl India Ltd. vs Income-Tax Officer on 29 October, 1991
Equivalent citations: [1992]40ITD585(AHD)
ORDER
R.M. Mehta, Accountant Member
1. This appeal is directed against the order passed by the CIT(A) confirming the action of the ITO in withdrawing under Section 154 the deduction of Rs. 27,21,762 allowed at the time of the original assessment in respect of commission paid during assessment year 1982-83 but pertaining to assessment year 1981-82.
2. The reasons for initiating proceedings under Section 154 are quite clear from the order of the ITO passed under Section 154 as follows:
In this case, assessment was completed under Section 143(3) on total income of Rs. 1,89,10,318 on 18-3-1985. In the said order, commission of Rs. 27,21,762 pertaining to assessment year 1981 -82 paid during the year was allowed on the ground that it has been disallowed in the assessment year 1981-82 being claimed against agreement with the dealers. Subsequently, the assessment order for assessment year 1981-82 is annulled by 1TAT, Ahmedabad vide their order No. ITA No. 1975/ Ahd./85A.Y. 1981-82 dated 15-1-1987. Since the order of assessment year 1981-82 has been annulled by Tribunal, commission which was allowed in assessment year 1982-83 on actual payment basis required to be withdrawn. This commission in assessment year 1982-83 was allowed only on the ground that it has been disallowed in the assessment year 1981-82 on the ground that commission has not been paid actually to the selling agents during the year, but paid in assessment year 1982-83. To avoid double disallowance the said commission on actual payment basis was allowed in assessment year 1982-83.
3. In response to the show-cause notice the assessee replied that there was no mistake apparent from record since the deduction had been allowed on merits and after application of mind. According to it the proposed action was outside the scope of Section 154. These arguments were rejected by the ITO who opined that the issue constituted "a mistake apparent from record" specially when the deduction had been allowed by the ITO in the course of the assessment proceedings to avoid double disallowance one in assessment year 1981 -82 and the other in assessment year 1982-83 and since the assessment for the preceding assessment year, viz., assessment year 1981-82 had been annulled, there was no question of allowing the deduction in assessment year 1982-83 on actual payment basis. He accordingly added back the sum of Rs. 27,21,762 to the already assessed income. The order passed by the ITO under Section 154 was upheld by the CIT (Appeals).
4. The learned counsel for the assessee at the outset stated that there was no mistake apparent from record which was required to be rectified by the ITO inasmuch as the claim in assessment year 1982-83 had been allowed independent of what had happened in assessment year 1981 -82 and on merits. He also referred to the fact that the question of commission had been the subject matter of 144 A proceedings before the I AC and even otherwise the rectification proceedings were not warranted in law. He accordingly made an impassioned plea for the setting aside of the order passed by the ITO and confirmed by the CIT(A). The learned DR on the other hand strongly supported the orders passed by the tax authorities.
5. We have examined the rival submissions and have also perused the orders of the tax authorities. It is apparent that the ITO by means of the order passed under Section 154 on 27-3-1987 withdrew the deduction of Rs. 27,21,762 in respect of the commission which although pertaining to assessment year 1981-82 was allowed on actual payment basis in assessment year 1982-83. It is also a fact that the Tribunal annulled the assessment for assessment year 1981-82 vide order dated 15-1-1987 and it is this order of the Tribunal which motivated the ITO to lake action under Section 154. According to us the action of the ITO in resorting to rectification proceedings was fully justified on the facts and circumstances of the case inasmuch as the failure to do so would have led to a double deduction in assessment year 1982-83 as would be apparent from the subsequent fact that we in our order passed on 30-9-1991 in ITA Nos. 187 and 307/Ahd./88 pertaining to the quantum appeal for assessment year 1982-83 have allowed the claim of the assessee in full. If we were to strike down the order passed by the ITO under Section 154 then what would be allowed to the assessee as commission in assessment year 1982-83 in view of our order (supra) would be a sum of Rs. 48,32,722 + Rs. 27,21,762 = Rs. 75,54,484 which apparently would be wrong since the latter amount, viz., Rs. 27,21,762 pertains to assessment year 1981-82 and has been claimed by the assessee in accordance with the consistent system followed all along in the past and which we have accepted in assessment year 1982-83 as well. As the sum of Rs. 27,21,762 pertaining to assessment year 1981 -82 has been allowed by the ITO in assessment year 1982-83 only to avoid a double disallowance and since the assessment for assessment year 1981 -82 has been annulled there is no question of allowing any "set offs" between the two years. As per the arguments of the assessee's counsel an annulled assessment is a case of no assessment and this proposition we have accepted in the quantum appeal (supra).
6. In the final analysis we uphold the order passed by the ITO under Section 154.
7. The appeal is dismissed.