2021 (2) TMI 1153 - HC - Income Tax

Rectification u/s 254 - Tribunal had erred in disallowing the depreciation claimed by assessee in the revised return of income and therefore rectification of the error was required - HELD THAT - There was no issue of depreciation involved in the Misc. Petition filed by the assessee and the Tribunal has stated that assessee has not claimed depreciation which is nobody's case. The above Order prima facie establishes that there is improper application of judicial mind in respect of the matters in issue and therefore, needs to be set aside and matter requires to be remanded to the Tribunal for fresh consideration in accordance with law. Appeal is allowed.

Issues:
1. Denial of bad debts allowance
2. Consideration of latest return for bad debts deduction
3. Validity of assessment order under section 153C
4. Failure to file return of income under section 153C
5. Jurisdiction under section 148 of the Income Tax Act
6. Disallowance of Miscellaneous Petition under section 254(2)
7. Adjudication of interest under section 234A, 234B, and 234C

1. Denial of Bad Debts Allowance:
The appellant, a partnership firm in real estate, filed a revised return claiming bad debts of ?2,00,00,000 receivable from a party. The Assessing Officer disallowed the claim under Section 143(3) read with Section 153C of the Income Tax Act. After appeals and remand, the Commissioner of Income Tax partly allowed the appeal regarding bad debts. However, the Tribunal, in a subsequent order, allowed the Revenue's appeal and dismissed the appellant's appeal and cross objections. The appellant filed a Misc. Petition under Section 254(2) seeking a review, which was dismissed by the Tribunal. The Court noted errors in the Tribunal's decision, especially regarding depreciation, and set aside the order, remanding the matter back to the Tribunal for fresh consideration.

2. Consideration of Latest Return for Bad Debts Deduction:
The appellant contended that the Tribunal erred in not considering the latest return of income along with financial statements, where the bad debt was written off. The Tribunal's decision was deemed perverse on this matter, as all conditions for bad debts allowance were met. This issue is intertwined with the denial of bad debts allowance and will be reconsidered upon the remand to the Tribunal.

3. Validity of Assessment Order under Section 153C:
The Tribunal's decision on the validity of the assessment order under Section 153C was a crucial point of contention. The Tribunal held that the assessment order passed without serving notice and not complying with mandatory conditions was only academic. The Court found this decision to be perverse and requiring fresh consideration by the Tribunal.

4. Failure to File Return of Income under Section 153C:
The Tribunal's failure to appreciate that the appellant had not filed any return of income pursuant to the notice issued under section 153C was a significant issue. This failure was deemed to render all proceedings perverse and bad in law, necessitating a fresh review by the Tribunal.

5. Jurisdiction under Section 148 of the Income Tax Act:
The Tribunal's decision on the existence of mandatory conditions to assume jurisdiction under section 148 was challenged. The Court found that the Tribunal erred in not holding that these conditions did not exist, leading to subsequent proceedings being vitiated and bad in law. This issue will be re-examined upon remand.

6. Disallowance of Miscellaneous Petition under Section 254(2):
The Tribunal's disallowance of the appellant's Miscellaneous Petition under section 254(2) was another key issue. The Tribunal's decision to pass an order on depreciation, which was not the subject of the petition, was considered perverse. The Court set aside this decision and directed a fresh consideration by the Tribunal.

7. Adjudication of Interest under Section 234A, 234B, and 234C:
The Tribunal's failure to adjudicate on the issue of levy of interest under section 234A, 234B, and 234C of the Income Tax Act was highlighted. This omission was considered a crucial error, and the Court directed the Tribunal to address this issue upon reconsideration.

In conclusion, the High Court set aside the Tribunal's order and remanded the matter back for fresh consideration, emphasizing the need for a thorough review of all issues raised by the appellant in accordance with the law.

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