2018 (12) TMI 909 - AT - Income Tax

Rectification of mistake - Addition towards service tax liability by invoking the provisions of section 43B - scope of rectification of mistake order - Held that - No material has been brought on record to show that ₹ 9,60,672/- as service tax expenditure was claimed by the assessee. Thus, disallowance u/s.43B can be made only of an amount which was a sum payable. The relevant law under the service tax was payable on cash basis. No material is available to show that the liability of ₹ 9,60,672/- as service tax was incurred before the end of the relevant previous year under the service tax law. Thus addition by invoking the provisions of section 43B in a proceeding u/s.154 of the Act is impermissible. TDS u/s 194C - Addition on account of job work charges by invoking the provisions of section 40(a)(ia) of the Act in a proceedings which was initiated u/s.154 - Held that - A perusal of provisions of section 194C shows that a person is liable to deduct ITDS when a contract for work is of an amount more than ₹ 30,000/- or where payment for work is made to a person more than ₹ 75,000/- during the financial year. The Assessing Officer has brought no material on record to show that either of the above condition was satisfied in the instant case. Therefore, it is not open to AO in a proceedings u/s.154 to hold that the assesse was obliged to deduct ITDS on job work and consequently, the disallowance made u/s.40(a)(ia) of the Act it outside the jurisdiction of section 154 of the Act - Decided in favour of assessee.

Summary

Issues: Appeal against CIT(A) order for assessment year 2011-12 - Validity of ex-parte order - Consideration of merits - Service tax addition under section 43B - Job work charges addition under section 40(a)(ia) - Jurisdiction of section 154 of the Act.

Ex-parte Order & Merits Consideration:
The appeal was filed challenging an ex-parte order by CIT(A) without a proper hearing. The assesse contended that the order was unjustified and illegal as the merits of the case were not considered. Additionally, it was argued that the order under section 154 was incorrect as no valid reasons were provided for the additions made. The AO's failure to serve the order under section 154 was highlighted, questioning the validity of the additions made.

Service Tax Addition under Section 43B:
The Assessing Officer made an addition for service tax under section 43B, alleging non-payment within the prescribed time limit. However, it was argued that the service tax liability was not claimed as an expenditure by the assesse. The Tribunal ruled that disallowance under section 43B can only be made for claimed deductions, and since no evidence was presented to show the liability was incurred before the relevant previous year, the addition was impermissible.

Job Work Charges Addition under Section 40(a)(ia):
Another addition was made for job work charges under section 40(a)(ia) based on the non-deduction of ITDS under section 194C. The Tribunal found that the AO failed to provide evidence that the conditions for ITDS deduction were met. As a result, it was concluded that the disallowance made under section 40(a)(ia) was outside the jurisdiction of section 154 of the Act, leading to the deletion of both additions.

Jurisdiction of Section 154 of the Act:
The Tribunal emphasized that section 154 allows rectification of mistakes apparent from the record, excluding issues requiring further investigation or those open to multiple interpretations. In this case, the additions made by the AO were deemed beyond the scope of section 154. The Tribunal referenced the decision in T. S. Balaram v. Volkart Brothers to support the argument that debatable issues fall outside section 154's jurisdiction.

Conclusion:
Ultimately, the Tribunal allowed the assesse's appeal, ruling in favor of deleting both additions made by the Assessing Officer. The judgment highlighted the importance of considering the jurisdiction of section 154 in rectifying mistakes apparent from the record, emphasizing the need for clear evidence and compliance with relevant provisions before making additions to the assesse's income.