2012 (6) TMI 374 - HC - Income Tax

Whether Tribunal was right in holding that the rectification under section 154 is not allowable on the issue of carry forward of allowances while completing the assessment under section 115J as the issue is debatable - Commissioner of Income-tax (Appeals) dismissed the appeal on the ground that the issue of carry forward allowance in computing the assessment was based on the provisions of section 115J of the Act and could be rectified under section 154 of the Act having regard to the facts that the mistake of fact was an apparent one Held that - rectification contemplated under section 154 must be a rectifiable mistake. A decision on a debatable point of law could not be taken as a mistake apparent from record, no ground to interfere with the order of the Tribunal, Tax Case (Appeals) stand dismissed

Summary

Issues:
Appeal against order of Income-tax Appellate Tribunal regarding rectification under section 154 and carry forward of losses and allowances.

Analysis:
The Revenue appealed against the order of the Income-tax Appellate Tribunal, Madras "B" Bench, concerning the rectification under section 154 and the carry forward of losses and allowances for the assessment years 1991-92 and 1992-93. The Tribunal held that the rectification under section 154 was not allowable as the issue of carry forward of allowances was debatable. The assessee claimed unabsorbed investment allowance to be set off under section 115J of the Income-tax Act, 1961. The Assessing Officer invoked jurisdiction under section 154, which led to an appeal before the Commissioner of Income-tax (Appeals), who dismissed the appeal. The Tribunal agreed with the assessee that brought forward allowance could not be set off against the income computed under section 115J, citing the decision in CIT v. Fab Exports P. Ltd. The Tribunal noted a divergence of opinion on the issue, considering it highly debatable, and ruled that the rectification could not be sustained. The Revenue challenged this decision before the High Court.

The High Court referred to the apex court decision in Mepco Industries Ltd. v. CIT, which emphasized that rectification under section 154 was not permissible on debatable issues. Section 154 allows amending orders to rectify apparent mistakes, while section 147 deals with escaped income assessment. The apex court clarified that decisions on debatable points of law could not be considered mistakes apparent from the record. In light of this, the High Court found no ground to interfere with the Tribunal's order, dismissing the Tax Case (Appeals) and ruling against the Revenue on the substantial questions of law. No costs were awarded in this judgment.