2006 (11) TMI 177 - HC - Income Tax

Summary

Issues involved: Interpretation of deduction under section 143(1)(a) of the Income-tax Act, 1961.

Summary:
The High Court of Gujarat considered whether the Assessing Officer was justified in disallowing a deduction claimed by way of adjustment under section 143(1)(a) of the Income-tax Act, 1961, in a case where the issue was debatable. The court noted that the Assessing Officer cannot make adjustments in an order under section 143(1)(a) when the issue of deduction or disallowance is debatable.

In a previous judgment, the court had observed that the Assessing Officer's powers under section 154 of the Act could be exercised to rectify any mistake apparent from the records. It was emphasized that a decision on a debatable point of law is not a mistake apparent from the record, as stated by the apex court in the case of T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50.

The court held that when the issue of deduction or disallowance of deductions is debatable, the Assessing Officer cannot proceed under section 143(1)(a) of the Act. Therefore, the court found no infirmity in the Tribunal's order and answered the question referred in favor of the assessee and against the Revenue.

The reference was disposed of accordingly.