2019 (10) TMI 629 - AT - Income Tax

Rectification u/s 154 - disallowance u/s. 40 (a) (ia) for non-deduction of tax from lorry hire charges - HELD THAT- In the instant case passed the assessment order on 18.12.2007 u/s. 143 (3) determining the total income of the assessee at ₹ 10,71,080/- as against the returned income of ₹ 9,78,805/- wherein he disallowed certain expenses on estimate basis and made addition u/s. 43B. There is absolutely no discussion on the issue of disallowance u/s. 40 (a) (ia) for non-deduction of tax from lorry hire charges. We find the AO passed the order u/s. 154 on 29.03.2010 wherein he made addition u/s. 40 (a) (ia) CIT(A) quashed the rectification order passed u/s. 154 on the ground that assessee was not given any opportunity of being heard while enhancing the income u/s. 154 and further the issue is not a mistake apparent from record and is debatable issue and dependent on elaborate arguments and has to be established by a long drawn process of reasoning. No infirmity in the order of the CIT(A) quashing the reassessment proceedings. Admittedly there is no discussion on the issue of disallowance u/s. 40 (a) (ia) on account of non deduction of tax from lorry hire charges. Therefore, only course of action available was order u/s. 263 and the AO could not have assumed jurisdiction u/s. 154. We find the CIT(A) while quashing the rectification order passed by the AO has followed the decision of Hon ble Kolkata High Court in the case of Oil India 1989 (6) TMI 24 - CALCUTTA HIGH COURT wherein the issue of rectification u/s. 154 vis-a-vis the disallowance u/s. 40 (a) (v) has been dealt with in detail. We are of the considered opinion that the CIT(A) was fully justified in quashing the rectification proceedings on the ground that the issue is not a mistake apparent from record and is a debatable issue and dependent on elaborate arguments and has to be established by a long drawn process of reasoning. The grounds raised by the revenue are accordingly dismissed.

Summary

Issues:
1. Rectification order passed by AO u/s. 154 of the IT Act.
2. Validity of the order passed u/s. 154 without giving an opportunity to the assessee.
3. Whether the issue of non-deduction of tax from lorry hire charges is a mistake apparent from record.
4. Jurisdiction of AO u/s. 154 versus section 263 of the IT Act.

Analysis:

1. The appeal filed by the revenue challenges the order of the CIT(A) quashing the order passed by the AO u/s. 154 of the IT Act. The AO made additions to the total income of the assessee for non-deduction of TDS on lorry hire charges, leading to the appeal.

2. The CIT(A) observed that the AO's order u/s. 154 was passed without giving the assessee an opportunity to be heard, violating the provisions of section 154(3) of the IT Act. The CIT(A) held that the rectification was a debatable issue requiring elaborate arguments, not a mistake apparent from the record.

3. The revenue argued that non-deduction of TDS on lorry hire charges was a mistake apparent from the record, citing a CBDT circular. However, the assessee contended that the issue required a detailed process to establish and should have been addressed under section 263 instead of section 154.

4. The Tribunal upheld the CIT(A)'s decision, citing the Hon'ble Kolkata High Court's judgment in a similar case. The Tribunal found that the AO should have used section 263 instead of section 154 for the issue at hand. The decision emphasized that rectification under section 154 should not involve debatable issues requiring extensive reasoning.

5. Ultimately, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to quash the rectification proceedings. The judgment highlighted the need for rectification under section 154 to address mistakes apparent from the record, not debatable issues.

This detailed analysis of the legal judgment showcases the intricacies of the issues involved and the reasoning behind the decisions made by the authorities and the Tribunal.