2015 (2) TMI 854 - HC - Income Tax

Rectification of mistake - disallowing the claim for interest paid by the petitioner to the sister concern, in connection with the borrowal of money in the course of transactions when the sister concern of the petitioner has already satisfied the entire tax and there is absolutely no rhyme or reason to have proceeded against the petitioner - Held that - The remedy available to the petitioner, if at all aggrieved, is by way of section 260A of the Income-tax Act. It is open for the petitioner to pursue such remedy in accordance with law and subject to available or valid and sustainable grounds. So as to enable the petitioner to pursue such exercise, coercive proceedings against the petitioner shall be kept in abeyance for a period of two weeks , on condition that the petitioner satisfies one-third of the balance liability to be cleared in both the cases, which shall be effected within one week .

Summary

Issues:
- Direction to consider and pass orders on petition filed under section 254(2) of the Income-tax Act.
- Alleged error apparent on the face of the record in assessment finalization.
- Filing of appeals and dismissal of interference.
- Application for rectification under section 254(2) of the Income-tax Act.
- Invocation of the second proviso to section 40(a)(ia) and its impact on the assessment.
- Reference to decisions by different High Courts and Tribunal.
- Interpretation of the amendment effect from April 1, 2013.
- Availability of remedy through section 260A of the Income-tax Act.
- Request for breathing time to pursue further proceedings.
- Conditions imposed on keeping coercive proceedings in abeyance.

Analysis:

The petitioners sought a direction for the second respondent to consider and pass orders on a petition filed under section 254(2) of the Income-tax Act, alleging that a vital contention in the written submissions had not been considered, indicating an error apparent on the face of the record. The petitioner's assessment for different years was finalized, leading to the filing of appeals which were dismissed. Subsequently, an application for rectification under section 254(2) was made, challenging the proceedings against the petitioner. The petitioner argued that the rigour of the provision regarding non-deduction of tax payable had been diluted by an amendment, emphasizing the satisfaction of tax liability by the sister concern. The petitioner also highlighted the reliance on decisions by different High Courts and Tribunals, advocating for a favorable interpretation in line with precedents.

The respondents contended that all points raised by the assessee had been considered, citing a Division Bench decision that the amendment from April 1, 2013, could not retroactively benefit the assessee for previous assessments. They argued against entertaining the petition, stating there was no error apparent on the face of the record and pointing out the availability of an appeal remedy under section 260A of the Income-tax Act for substantial legal questions. The court acknowledged the remedy available through section 260A and granted a temporary stay on coercive proceedings, subject to the petitioner satisfying a portion of the balance liability within a specified timeframe, allowing time for pursuing further legal actions.

In conclusion, the court directed the petitioner to pursue the available remedy under section 260A of the Income-tax Act while temporarily halting coercive actions, emphasizing the need to address the outstanding liability within the stipulated timeframe. The judgment balanced the interests of both parties by providing a window for legal recourse while maintaining financial obligations.