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2022 (2) TMI 80 - AT - Income TaxRectification of mistake u/s 154 - Disallowance of provision for ex-gratia - increased the income under the head income from Other Sources by the same amount - CIT deleted the addition - HELD THAT - We noticed that CIT(A) has provided an opportunity to the assessing officer to examine the mistake committed by the DCIT, CPC Bangalore (Assessing Officer), hence there is no violation of provisions of Rule 46A of the Income Tax Rules. Besides, it should also be noted that powers of the CIT(A) are coterminous with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Hence, we do not agree with ld DR to the effect that there is violation of provisions of Rule 46A of the Income Tax Rules. The second contention raised by the ld DR is that such type of typographical error can be rectified under section 154 of the Act. We note that clause (a) of section 246(1) provides that assessee can file appeal against the order passed by assessing officer under section 143(1) of the Act before CIT(A). The assessee can object the arithmetical adjustments made by the assessing officer under section 143(1) of the Act by filing an appeal before ld CIT(A). Based on this factual position, as narrated above, we do not find any infirmity in the order of ld. CIT(A). - Decided against revenue.
Issues:
- Disallowance of provision for ex-gratia payments - Compliance with Rule 46A of the Income Tax Rules - Opportunity provided to the assessing officer - Rectification under section 154 of the Income Tax Act Disallowance of provision for ex-gratia payments: The appeal by the Revenue pertains to the Assessment Year 2016-17 against the order of the CIT(A) deleting the disallowance of provision for ex-gratia payments of ?4,50,00,000 added back by the DCIT, CPC, Bangalore. The Revenue contended that the CIT(A) erred in not properly verifying the disallowance from the audited Balance Sheet and without concrete evidence. The CIT(A) observed that the provision for ex-gratia payments was voluntarily added back by the assessee in the return of income filed online, resulting in double deduction. The CIT(A) examined records and cross-checked the audit report, concluding that the disallowance was incorrect and directed its deletion. Compliance with Rule 46A of the Income Tax Rules: The Revenue argued that the CIT(A) did not follow Rule 46A of the Income Tax Rules as he did not provide an opportunity to verify the total amount added back. However, the CIT(A) defended his actions by stating that he directed the assessing officer to examine the issue, ensuring compliance with Rule 46A. The Tribunal noted that the CIT(A) had the powers coterminous with the Assessing Officer and could rectify arithmetical adjustments made under section 143(1) of the Act. Therefore, there was no violation of Rule 46A. Opportunity provided to the assessing officer: The Tribunal found that the CIT(A) had indeed provided an opportunity to the assessing officer to examine the mistake made by the DCIT, CPC Bangalore. This action ensured procedural fairness and compliance with the rules. The Tribunal emphasized that the CIT(A) had the authority to act in a manner similar to the Assessing Officer, thereby justifying the course of action taken. Rectification under section 154 of the Income Tax Act: The Revenue suggested that typographical errors could be rectified under section 154 of the Act, implying that the matter did not require an appeal to the CIT(A). However, the Tribunal clarified that the assessee could file an appeal against the arithmetical adjustments made by the assessing officer under section 143(1) before the CIT(A). The Tribunal upheld the CIT(A)'s order, dismissing the appeal by the Revenue. In conclusion, the Tribunal found no infirmity in the CIT(A)'s order regarding the disallowance of provision for ex-gratia payments, compliance with Rule 46A, providing an opportunity to the assessing officer, and the applicability of rectification under section 154. The appeal filed by the Revenue was dismissed, upholding the decision of the CIT(A) for the Assessment Year 2016-17.
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