2019 (5) TMI 433 - AT - Income Tax

Rectification u/s 154 - addition of prior period expenses and late payments of employees/employer s contribution towards PF in rectification order - HELD THAT - Having failed to raise issue challenging quashing of rectification order u/s 154, we have no option to proceed further in dismissing the appeal for failure to raise ground questioning the order of CIT(A) involving the root of the case. Therefore, the appeal of the Revenue is dismissed. Addition on account of miscellaneous expenditure - miscellaneous expenses including the preliminary expenses and pre-operative expenses, deferred revenue expenses and portal website development expenses. These expenses relate to earlier years which have been written off in accordance with statutory provisions - HELD THAT - CIT(A) after examining the matter and the reply of the AO, find that the Assessing Officer has drawn certain adverse inferences where there was, according to the AO non-compliance / non-satisfactory compliance to his show-cause letter. As carefully considered the submissions of the A.R. Find that the AO has made the disallowance without recording any specific finding, and therefore the basis for such disallowance is not supported. In so far as the claim for writing off deferred expenditure on portal development, agree with the contention that this practice is being followed on a regular basis from year to year, and has also been accepted. Notice issued beyond the prescribed time limit as required u/s 143(2) - HELD THAT - Without bringing on record the relevant evidence to show that was issued beyond time limit, we cannot give any finding on such bald submissions but however in the interest of justice, we deem it proper to remand the matter to the file of CIT(A) for his fresh consideration and pass order by giving reasons thereon. Therefore, ground raised under Rule 27 of the Income Tax (Appellate Tribunal) Rule 1963 by the assessee is allowed for statistical purposes and in view of the decision taken by us in ground raised by the assessee under Rule 27, grounds raised by the Revenue in the main appeal becomes academic and requires no adjudication at this point of time - Appeals of the Revenue are partly allowed for statistical purposes.

Summary

Issues:
1. Rectification order u/s 154 - Whether Assessing Officer could add certain amounts to total income of assessee.
2. Miscellaneous expenditure - Justification of deletion by CIT(A).
3. Notice u/s 143(2) - Timely service requirement for reassessment order.

Issue 1: Rectification order u/s 154
In the case for Assessment Year 2002-03, the Assessing Officer rectified the original assessment order by adding prior period expenses and late payments to the total income of the assessee. The CIT(A) quashed this rectification order, stating that the proceedings u/s 154 can only rectify apparent mistakes on record. The Revenue, without challenging the quashing of the rectification order, raised an issue on merits. However, since the Revenue failed to challenge the quashing of the rectification order, the appeal was dismissed for not questioning the root of the case, as per the ITAT Kolkata.

Issue 2: Miscellaneous expenditure
Regarding Assessment Year 2003-04, the only issue was whether the CIT(A) was justified in deleting the additions made by the Assessing Officer on account of miscellaneous expenditure. The CIT(A) deleted the additions related to preliminary expenses, portal website development expenses, and deferred revenue expenditure, stating that these expenses were written off in accordance with statutory provisions and were part of regular practice by the assessee. The ITAT Kolkata found no infirmity in the CIT(A)'s order and upheld the deletion of these additions.

Issue 3: Notice u/s 143(2)
In the case for Assessment Year 2004-05, the assessee raised a ground under Rule 27 of the Income Tax (Appellate Tribunal) Rule 1963, arguing that the notice u/s 143(2) was not served within the prescribed time, rendering the reassessment order without jurisdiction. The CIT(A) dismissed this ground without providing reasons. The ITAT Kolkata noted that the issue was raised before the CIT(A) but remanded the matter back to the CIT(A) for fresh consideration, as no evidence was presented to show that the notice was issued beyond the time limit. The ITAT Kolkata allowed the ground raised by the assessee under Rule 27 for statistical purposes, and the Revenue's appeal was partly allowed for the same purpose.

This detailed analysis of the legal judgment from the Appellate Tribunal ITAT Kolkata covers the issues related to rectification orders u/s 154, miscellaneous expenditure, and the timely service requirement for notices u/s 143(2) in reassessment orders.