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2017 (6) TMI 539 - AT - Income TaxMAT application - scope of rectification of mistake - Held that - The assessee explained before the AO that there is dispute with regard to the explanation sought from the assessee in the rectification notice and actual calculation made by the assessee as per law. Therefore, the AO, on long drawn process of reasoning should not have passed the order under section 154. The issue raised by the AO in proceeding under section 154 is highly debatable and requires the issue to be reconsidered by the AO about applicability of provision of section 115JB which was not raised by the AO in the original assessment proceeding. Therefore AO has no power to review his entire assessment order and to make certain additions in the order under section 154. The assessee has declared all particulars regarding computation and assessment to be framed under section 115JB. When the AO has consciously taken the view to frame regular assessment and made certain additions, AO is not empower to take contrary view to review entire assessment order already framed. It is against the spirit of provision of section 154 of the Act. The AO cannot be allowed to pass impugned order under section 154 on debatable issue. No justification for the AO to pass rectification order under section 154 of the Act to disturb the calculation under section 115JB of the Act, already considered. Appeal of the assessee is allowed.
Issues Involved:
1. Contravention of Section 250(6) of the Income Tax Act, 1961. 2. Computation of Book Profit under Section 115JB. 3. Scope of rectification under Section 154 of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Contravention of Section 250(6) of the Income Tax Act, 1961: The appellant contended that the CIT(A) erred in passing the order in contravention of Section 250(6) of the Income Tax Act, 1961. This section mandates that the appellate order must state the points for determination, the decision thereon, and the reasons for the decision. The appellant argued that the CIT(A)'s order lacked these elements, thereby violating the statutory requirement. 2. Computation of Book Profit under Section 115JB: The primary issue revolved around the computation of book profit under Section 115JB. The assessee computed the book profit by reducing brought forward loss or depreciation as per the books of accounts, while the AO computed it as per the figures under the Income Tax Act. The AO noted a discrepancy in the figures used by the assessee and issued a rectification notice under Section 154. The AO held that the lower of the brought forward business loss or unabsorbed depreciation should be reduced from the book profit as per the Income Tax Act figures, not the books of accounts, leading to an enhanced book profit and a resultant tax liability. 3. Scope of Rectification under Section 154 of the Income Tax Act: The appellant argued that the issue of computation under Section 115JB is highly debatable and should not have been subject to rectification under Section 154, which is meant for correcting "mistakes apparent from the record." The appellant cited various judicial precedents, including the Hon'ble Supreme Court's decision in ITO Vs. Volkart Brothers and others, which held that a mistake apparent on record must be an obvious and patent mistake, not one that requires a long-drawn reasoning process. The ITAT agreed with this view, stating that the AO had wrongly exercised jurisdiction under Section 154 as the issue was debatable and not a clear mistake apparent from the record. Conclusion: The ITAT concluded that the AO had no power to review the entire assessment order under Section 154 on a debatable issue. The calculation under Section 115JB was available on record, and the AO had scrutinized the books of accounts during the original assessment. The AO's attempt to rectify the order under Section 154 was deemed unjustified as it involved a long-drawn process of reasoning. Consequently, the ITAT set aside the orders of the lower authorities and quashed the rectification order under Section 154, allowing the appeal of the assessee.
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