2013 (10) TMI 320 - HC - Income Tax

Correctness of orders u/s 264 and u/s 154 of the Income Tax Act Held that - From perusal of record, it is evident that the assessee did not produce any evidence for the payment of interest on loan to lenders - Assessee himself revised his claim of deduction of interest on borrowed capital to Rs. 31,000/- as against Rs. 1,96,231/- claimed by the assessee, on the basis of the revised computation of income filed by the assessee. The difference of the amount has been added by the authority which cannot be said to be a mistake on the face of record. The Commissioner of Income Tax has rightly passed orders under section 264 as well as under section 154 of the Act as the assessee did not produce any evidence in support of his claim. The Commissioner has rightly observed that merely submitting details of income of borrowers would not entitle the assessee to claim interest paid on borrowed capital. The law requires that assessee has to furnish necessary proof of actual payments of interest to the borrowers Decided against the Assessee.

Summary

Issues:
1. Assailing orders under sections 154 and 264 of the Income Tax Act, 1961.
2. Rectification of mistakes in assessment orders.
3. Evidence requirement for claiming deductions.
4. Power of authorities under section 154 of the Act.

Detailed Analysis:
1. The writ petition challenged the orders dated 09.02.2007 and 27.11.2006 passed by the Commissioner of Income Tax-II, Lucknow under sections 154 and 264 of the Income Tax Act, 1961. The petitioner contended that the Commissioner failed to exercise his power properly by relying solely on 'suo-motto voluntary withdrawal' without rectifying any mistake in the assessment order.

2. The case involved the issue of rectification of mistakes in the assessment order under section 154 of the Act. The petitioner moved an application under section 154 on the grounds of subsequent evidence, which was rejected by the Commissioner. The court noted that section 154 allows rectification of mistakes in the order, but in this case, the petitioner failed to point out any mistake in the record. The Commissioner's orders under sections 154 and 264 were upheld as no apparent error was found in the assessment order.

3. The factual matrix revealed that the assessee did not provide evidence for the payment of interest on loans to lenders. The authority added the difference in the claimed deduction of interest on borrowed capital as the assessee revised the claim without supporting evidence. The court emphasized that the law requires the assessee to furnish proof of actual payments of interest to claim deductions, and merely submitting details of income of borrowers is insufficient.

4. The judgment concluded that the impugned orders did not suffer from any illegality or infirmity. The court found that the Commissioner acted appropriately as the assessee failed to produce evidence to support the claim for deductions. Ultimately, the writ petition was dismissed for lacking merit, and no costs were awarded. The decision highlighted the importance of providing necessary proof to substantiate claims for deductions under the Income Tax Act.