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2019 (5) TMI 26 - AT - Income TaxRectification u/s 154 - CIT(A) deciding appeal for AY 2005-06 make observation that addition of ₹ 26.44 lakhs should be made in the year of receipt i.e. Asstt.Year 2004- 05 - AO while giving effect of order order of CIT(A) added the same in Asstt.Year 2004- 05 - assessee filed rectification application against above order - ex parte order - scope of debatable issue - HELD THAT - When the assessee came to know about this order, he filed an application for rectification. His application cannot be thrown out like this, and the CIT(A) failed to note this aspect while confirming the view point of the AO. AO has observed in the impugned order dated 14.8.2015 that he has given effect to the order of the CIT(A) passed in the Asstt.Year 2004-05 also, though, it was passed in the Asstt.Year 2005-06. Had the AO entertained his rectification application and proceeded to dispose of in accordance with law, then, he would have vacated his order dated 9.3.2015 passed in the Asstt.Year 2004-05. There is no debatable issue in that, rather his order dated 9.3.2015 was patently illegal. AO ought to have entertained the application of the assessee, and ought to have rectified his order dated 9.3.2015. Therefore, we allow this appeal and set aside both the impugned orders i.e. order dated 1.9.2016 passed by the CIT(A) and dated 14.8.2015 passed by the AO. We allow the application of the assessee and direct the AO to rectify his order dated 9.3.2015 by deleting the amount of ₹ 26.44 lakhs from the taxable income of the assessee in the Asstt.Year 2004-05. Appeal of the assessee is partly allowed.
Issues:
1. Rectification of order under section 154 of the Income Tax Act for the Asstt.Year 2004-05. Detailed Analysis: The appeal before the Tribunal was against the order of the ld.CIT(A)-2, Ahmedabad for the Asstt.Year 2004-05. The sole grievance of the assessee was the dismissal of its appeal and the confirmation of the order of the AO dated 14.8.2015 under section 154 of the Income Tax Act. The dispute arose from an addition made to the total income of the assessee on account of unexplained loans and advances received. The ld.CIT(A) had observed that a certain amount received in the Financial Year 2003-04 should not have been added during the Asstt.Year 2005-06. The AO then passed an order giving effect to this decision, resulting in a revised total income for the Asstt.Year 2004-05. The assessee filed an application for rectification which was rejected by the AO, leading to an appeal before the ld.CIT(A). The ld.CIT(A) dismissed the appeal, stating that the order passed by the AO could not be rectified under section 154 as it was a debatable issue and should have been challenged through an appeal. However, the Tribunal found the order dated 9.3.2015 to be illegal as it did not provide any direction for the Asstt.Year 2004-05. The Tribunal noted that the AO should have taken necessary remedial action under the law rather than straight away giving effect to an order not meant for that year. The Tribunal further emphasized that the AO should have entertained the rectification application of the assessee and rectified the illegal order dated 9.3.2015. Therefore, the appeal was allowed, setting aside both the orders of the ld.CIT(A) and the AO. The Tribunal directed the AO to rectify the order by deleting the disputed amount from the taxable income of the assessee for the Asstt.Year 2004-05. As a result, the appeal of the assessee was partly allowed, with the decision pronounced in the Open Court on 29th April, 2019.
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