2017 (6) TMI 497 - AT - Income Tax

Rectification of mistake u/s 154 - tax payable u/s 115JB is higher than the tax liability under normal provisions - Held that - No doubt the AO has applied the provisions of section 115JB treating the assessee as company as per section 2(17)(iii) of the Act. Whereas the assessee is a banking company as per the Banking Regulation Act, as the issue was debatable prior to amendment in Finance Act, 2012. The provisions of section 115JB, during that period before amendment, is applicable to those companies which prepares its P&L A/c in accordance with the provisions of Part - II of Schedule - VI of the Companies Act, 1956. It is a fact that assessee has never followed Part - II of Schedule - VI to the Companies Act, 1956 and also its financial statements are not placed before Annual General Meetings. Accordingly, provisions of section 115JB are not applicable to the assessee. The same view was confirmed by various judicial pronouncements and also in assessee s own case for AY 2007-08 by the coordinate bench of this Tribunal. Rectification is possible when other parties agrees that it has no two possible views. Hence, rectification order passed by the AO is wrong considering the fact that the issue involved is disputed one as various Tribunals has given finding that provisions of section 115JB are not applicable to a banking company prior to amendment in finance Act, 2012. Prior to amendment of Finance Act, the issue was settled in favour of the assessee, even though, the issue was raised by the AO in the original assessment order. As issue involved in the rectification order is a debatable issue, accordingly, rectification order passed by the AO is not proper. - Decided against revenue

Summary

Issues:
- Applicability of MAT provisions to a banking company
- Invocation of section 154 for rectification of mistake in the assessment order

Analysis:
1. The case involved an appeal by the Revenue against the order of the Commissioner of Income-tax(A) regarding the applicability of MAT provisions to the assessee for AY 2006-07.
2. The Assessing Officer (AO) determined the income under normal provisions as the tax payable was more than under section 115JB, applicable to companies falling under the definition of "company" as per section 2(17) of the Act.
3. The CIT(A) held that the assessee was a company as defined under section 2(17)(iii), making section 115JB applicable.
4. The ITAT did not entertain the appeal on the issue of section 115JB as the assessee did not have approval from the Chief Commissioner of Income Tax (COD).
5. The AO later passed a rectification order under section 154, noticing a mistake where tax payable under section 115JB was higher than under normal provisions.
6. The CIT(A) allowed the appeal of the assessee, considering the issue debatable and not suitable for rectification under section 154.
7. The Revenue challenged the CIT(A)'s decision, arguing that the rectification was valid as the issue was part of the original assessment order.
8. The ITAT analyzed the applicability of section 115JB to banking companies, noting that prior to the Finance Act, 2012 amendment, MAT provisions were not applicable to banking companies.
9. The ITAT upheld the CIT(A)'s decision, stating that the issue was debatable, and rectification under section 154 was not appropriate as various judicial pronouncements favored the assessee's position.
10. The ITAT dismissed the Revenue's appeal, affirming the CIT(A)'s decision in line with the previous rulings and the debatable nature of the issue.

This comprehensive analysis highlights the key legal points, arguments, and decisions made in the judgment regarding the applicability of MAT provisions to a banking company and the invocation of section 154 for rectification of a mistake in the assessment order.