2017 (10) TMI 1407 - AT - Income Tax

Rectification of mistake u/s 154 - erroneous remand report of the Assessing Officer during the course of appellate proceedings of availability of bank branches in the villages Nandambakkam, Ramapuram and Puduvayal - Held that - CIT(A) considered the issue, in fact, it was the actual fact that because of similar village names, the Assessing Officer got confused in his remand report since similar villages exist inside the city of Chennai and went in wrong assumption that banking facilities exist in the villages. However, during the course of rectification proceedings, by considering the village map and verification of document copies to indicate survey numbers and village numbers, certificate of Village Administrative Officer, etc., which are located in other districts of Tamil Nadu, where the assessee has originally made the purchases and payments made in cash, since there was no banking facility at that time, the ld. CIT(A) was of the opinion that there is mistake crept in the appellate order dated 12.06.2015 and accordingly, he rectified the mistake. With regard to the admission of petition under section 154 it is not the case of the Department that the ld. CIT(A) has not conferred upon the powers to rectify any mistake apparent on record and was done so, which requires interference of the Tribunal. The rectification order passed by the ld. CIT(A) is within the time limit provided under relevant provisions of section and not barred by limitation. Thus, the case law relied on by the Department has no application and warranted. In view of the above, we find no reason to interfere with the rectification order passed by the ld. CIT(A). Hence, the ground raised by the Revenue is dismissed for all the assessment years. Disallowance on inflation in purchases not claimed in the assessee s petition for rectification - Held that - In the rectification order CIT(A) has mentioned that 25% disallowance in the original appellate order for inflation of purchases in respect of villages where banks are not available is to be retained . This direction was given on the context that even if bank is not available disallowance cannot be made, but, the ld. CIT(A) was of the opinion that the assessee has inflated the purchase cost of the land in its books of account, as there was no banking facilities exist and therefore, the percentage of inflation as arrived at by the ld. CIT(A) based on the analysis made in Table A of appellate order dated 12.06.2015 at page 20 was 25%, which was again directed to be retained. The Department has not brought any material on record to consider the percentage of inflation of purchase cost either 25% or 32.58%. Otherwise also, the above said ground has no legs to stand before the Tribunal since the above issue has already been adjudicated by the Tribunal against the order of the ld. CIT(A) under section 143(3) r.w.s. 153A of the Act dated 12.06.2015 much before filing of the above appeals by the Revenue on 04.03.2016. Hence, the ground raised by the Revenue is dismissed for all the assessment years. Addition made by AO protectively - Held that - ₹.6,33,66,379/- has been assessed substantively in the hands of the assessee in the assessment year 2007-08 as well as protectively in the assessment year 2008-09. Once the undisclosed income of the assessee is assessed to tax substantively in the assessment year 2007-08, the same amount cannot be again assessed in the hands of the assessee for the assessment year 2008-09 and corresponding set off should be granted in the assessment year 2008-09 so that the said income is not assessed twice. The ld. DR has not given any valid reason for deleting the protective assessment once again made in the assessment year 2008-09 by the ld. CIT(A) - decided against revenue

Summary

Issues Involved:
1. Legality of the rectification order passed by the Commissioner of Income Tax (Appeals) [CIT(A)].
2. Adjudication of disallowance on inflated purchases not claimed in the rectification petition.
3. Deletion of addition made protectively by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Legality of the Rectification Order Passed by CIT(A):
The primary issue was whether the rectification order passed by the CIT(A) was legally valid. The Department argued that the CIT(A) had no jurisdiction to review the appellate order dated 12.06.2015, as it was beyond the scope of Section 154 of the Income Tax Act. The CIT(A) had directed the Assessing Officer to verify the availability of banking facilities in certain villages, which the Department claimed was already done. The CIT(A) was also accused of not conducting inquiries or remanding the issue to the Assessing Officer, making the rectification order legally invalid.

The Tribunal, however, found that the CIT(A) was fully empowered under Section 154 to rectify any mistake apparent on record. The Tribunal noted that the CIT(A) could decide whether to call for a remand report, make further inquiries, or consider corroborative materials. The rectification was justified as the CIT(A) identified a mistake in the original order regarding the availability of banking facilities in certain villages. The Tribunal upheld the rectification order, dismissing the Department's ground for all assessment years.

2. Adjudication of Disallowance on Inflated Purchases Not Claimed in the Rectification Petition:
The Department contended that the CIT(A) erred in adjudicating the issue of disallowance on inflated purchases, which was not claimed in the rectification petition. The CIT(A) had retained a 25% disallowance for inflation of purchases in villages without banking facilities. The Department argued that the correct percentage of inflation was 32.58% and not 25%.

The Tribunal found that the issue of disallowance on inflated purchases had already been adjudicated by the Tribunal in its order dated 19.02.2016. The Tribunal noted that the CIT(A) had correctly retained the 25% disallowance based on the analysis made in the original appellate order. The Department failed to provide any material to support a different percentage. Thus, the Tribunal dismissed the Department's ground for all assessment years.

3. Deletion of Addition Made Protectively by the Assessing Officer:
For the assessment year 2008-09, the Department challenged the CIT(A)'s deletion of an addition of ?6,36,66,379 made protectively by the Assessing Officer. The Tribunal observed that the same amount had already been assessed substantively in the assessment year 2007-08. Once the income was assessed substantively in one year, it could not be assessed again in another year. The Tribunal upheld the CIT(A)'s decision to delete the protective assessment for the assessment year 2008-09, dismissing the Department's ground.

Conclusion:
The Tribunal dismissed all the appeals filed by the Revenue, upholding the rectification order passed by the CIT(A) and confirming the decisions on the issues of inflated purchases and protective assessments. The Tribunal found no reason to interfere with the CIT(A)'s orders, which were deemed legally valid and justified based on the facts and provisions of the Income Tax Act.