2019 (5) TMI 19 - AT - Income Tax

Rectification u/s 154 - disallowance made u/s 14A - debatable issue - whether order of CIT (A) is erroneous and is not tenable on facts and in law deleting the addition of disallowance made u/s 14A to the book profit - HELD THAT - CIT (A) has deleted the addition by following the decision rendered by Hon ble Supreme Court in the case of Volkart Brothers 1971 (8) TMI 3 - SUPREME COURT and CIT vs. RTCL Ltd. 2012 (4) TMI 287 - DELHI HIGH COURT on the ground that when the issue is debatable section 154 cannot be invoked. Since the ld. CIT (A) has deleted the addition by following the settled principle of law that when issue is debatable one section 154 cannot be invoked to make further addition, we find no illegality or perversity in the impudent order passed by the ld. CIT (A), hence appeal filed by the Revenue is dismissed.

Summary

Issues:
1. Disallowance made under section 14A to the book profit under section 154 of the Income Tax Act, 1961.
2. Invocation of section 154 on debatable issues.

Analysis:
1. The Appellant, DCIT, sought to set aside the order passed by the CIT (Appeals) regarding the disallowance made under section 14A to the book profit for the assessment year 2007-08. The Assessing Officer noted the assessee's dividend income claimed as exempt under section 10(34) and made a disallowance under section 14A read with Rule 8D of the Income-tax Rules.

2. The assessee appealed to the CIT (A), who partially allowed the appeal. The Revenue then appealed to the Tribunal. Despite the assessee's absence, the Tribunal proceeded with the case based on available documents and the CIT DR's assistance.

3. The main issue for determination was whether section 154 of the Act could be invoked on debatable issues. The original assessment added an amount under section 14A, which was reduced by the CIT (A) and sent back to the AO for fresh consideration. The AO rectified the order under section 154, increasing the book profit.

4. The CIT (A) deleted the addition, citing legal precedents that section 154 cannot be invoked on debatable issues. Relying on established legal principles, the Tribunal found no error in the CIT (A)'s decision and dismissed the Revenue's appeal.

5. The Tribunal's decision was based on the principle that section 154 cannot be used to make further additions on debatable issues, as established by legal precedents. The appeal was dismissed, upholding the CIT (A)'s order.

6. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT (A)'s decision to delete the addition made under section 14A to the book profit, based on the settled legal principle that section 154 cannot be invoked on debatable issues.