2012 (7) TMI 73 - HC - Income Tax

Maintainability of application for rectification u/s 154, when the matter has been considered and decided in any proceeding by way of appeal or revision - availability of deduction u/s 35D - matter had been considered and dropped in proceedings initiated u/s 263 - reassessment order u/s 147, dis-allowing deduction had been invalidated on ground of change in opinion - Held that - Issue of availability of deduction u/s 35D(2)(iv) in the facts of the present case is a matter of opinion depending upon the exact nature of the issue, which had been subject matter of appeal and the same has been considered and decided by the Appellate Authorities. Consequently, no rectification proceeding would lie in such a case in view of Sub Section 1(A) to Section 154. Also, it becomes debatable even on questions of fact and therefore outside the purview of Section 154 as it is not a mistake apparent from the record.

Summary

Issues:
- Appeal filed by Revenue under Section 260A of the Income Tax Act, 1961 from a common order of the Income Tax Appellate Tribunal dated 21.05.2010 for assessment years 2000-2001 and 2001-2002.
- Questions raised for consideration:
a) Justification of upholding CIT(A) order in not rectifying under Section 154 and deleting addition made by Assessing Officer.
b) Tribunal's error in considering expenses for private placement of equity shares not entitled for deduction under Section 35D as debatable issue.
c) Tribunal's inference on debatability of issue regarding deduction under Section 35D for public subscription of shares versus private placement.

Analysis:

Issue a)
The Revenue challenged the Tribunal's decision upholding the CIT(A) order. The Respondent's income was initially enhanced by the Assessing Officer, which was revised later. The Commissioner of Income Tax initiated proceedings under Section 263 for deduction under Section 35D related to private placement of equity shares. Despite dropping the Section 263 proceedings, a notice under Section 148 was issued, leading to disallowance of the deduction. The CIT(A) held the reopening of assessment was not sustainable, but the Assessing Officer disallowed the deduction under Section 35D. The CIT(A) later deleted the addition, which the Tribunal upheld, stating the issue was debatable and not a clear mistake under Section 154.

Issue b)
The Revenue contended that the deduction under Section 35D is only applicable to public issues, not private placements. The Respondent argued that the matter had been subject to appellate and revisional proceedings, making rectification under Section 154 barred. The nature of the issue, whether public or private, was deemed debatable, thus not a clear mistake for rectification.

Conclusion:
The Court noted that as the issue had been considered and decided in previous proceedings, rectification under Section 154 was not permissible. The matter had been examined in appeal and revision, making it debatable and outside the scope of rectification. Consequently, no substantial question of law was found, leading to the dismissal of the appeal.