2016 (11) TMI 361 - AT - Income Tax

Rectification of mistake - Held that - There is a contradiction on basic facts. Where the Assessing Officer in the order passed u/s 143(3) and the order u/s 154 holds that the return declaring an income of ₹ 96,540/- was filed by the assessee. The CIT(A) holds that the NIL return had been filed. Accordingly in order to address the legal position it is first necessary to address the correct facts. As far as the legal issue as laid down in CIT vs Punjab National Bank (2001 (2) TMI 126 - DELHI High Court ) relied upon is concerned, law is clear that once proceedings u/s 143(2) have been initiated, rectification of intimation u/s 143(1) is not permissible. If any Rectification was to be effected in the intimation it can be done u/s 143(3) and not by exercising power u/s 154. Accordingly the issue is restored back to the CIT(A) with the direction to first address the correct facts as the facts noticed by the CIT(A) in the impugned order do not reconcile with the consistent findings of the AO in the 143(3) order and the 154 order. After addressing the correct factual position, the CIT(A) is directed to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard.

Summary

Issues:
1. Correctness of rejecting application filed by assessee under section 154 without basis.
2. Correctness of not allowing brought forward losses and depreciation by AO.
3. Adequacy of opportunity of hearing and confronting adverse material.
4. Rectifiability of intimation under section 143(1) after initiation of proceedings under section 143(2).

Detailed Analysis:
Issue 1:
The appeal challenged the correctness of the CIT(A)'s order confirming the AO's rejection of the application filed by the assessee under section 154 without any basis, material, or evidence. The AR argued that the assessee had actually e-filed its return declaring NIL income, contrary to the AO's assertion. The CIT(A) noted the assessee's claim of NIL income and brought forward losses but found discrepancies in the processing under section 143(1), leading to the dismissal of the appeal.

Issue 2:
The AR contended that the AO erred in not allowing the set off of brought forward losses, leading to the petition under section 154. The Sr.DR supported the impugned order, emphasizing that the assessment under section 143(3) was based on thorough consideration of the material, including TDS refund. The AO justified the rejection of the section 154 petition based on the returned income of ?96,540 and the genuineness of the claim.

Issue 3:
The AR further argued that the subsequent assessment proceedings initiated by the AO were correct legally, citing a Delhi High Court decision. However, the Tribunal identified a contradiction in the facts presented by the AO, CIT(A), and the order under section 154. The Tribunal emphasized the need to address the correct factual position before making a legal determination, directing the CIT(A) to pass a speaking order after reconciling the inconsistencies and providing the assessee with a fair hearing.

Issue 4:
The Tribunal clarified the legal position regarding the rectifiability of intimation under section 143(1) after the initiation of proceedings under section 143(2), citing the Punjab National Bank case. It highlighted that rectification of intimation under section 143(1) is not permissible once section 143(2) proceedings have commenced, emphasizing the need for rectification under section 143(3) instead of section 154. Consequently, the appeal was allowed for statistical purposes, and the matter was remanded to the CIT(A) for a revised decision based on accurate facts and legal principles.