2007 (1) TMI 103 - HC - Income Tax

AO in his original assessment allowed Rs.25,77,404 being the amount of loss to be carried forward but later he sought to withdraw the benefit by trying to rectify the mistake u/s 154 debatable issue conflicting view of court tribunal decided in favour of assessee on basis of decision of SC sec. 154 clearly shows that only error which is apparent can be rectified sec 154 isn t helpful when issue is debatable no reason to interfere with order of tribunal revenue appeal dismissed

Summary

Issues:
Challenge to order of Tribunal on rectification plea based on subsequent Supreme Court decision in Karnataka Small Scale Industries Development Corporation Ltd. v. CIT, regarding assessment year 1989-90.

Analysis:
1. The appeal by the revenue challenged the order of the Tribunal rejecting the plea on the question of rectification based on a subsequent Supreme Court decision. The assessing authority had issued a notice under Section 154 of the Income Tax Act to rectify the error in the assessment of the correct loss carried forward. The first appellate authority upheld the assessing authority's view, which was based on Section 115J(2) of the Act.

2. The Tribunal noted that the assessing officer had initially allowed a certain amount of loss to be carried forward, but later sought to withdraw this benefit during the Section 154 proceedings. The Tribunal considered the issue debatable as the Supreme Court judgment in Karnataka Small Scale Industries Development Corporation Ltd. v. CIT was delivered only in 2002, after the proceedings had commenced. The Tribunal rejected the revenue's stand on jurisdiction and upheld the claim of the assessee.

3. The High Court observed that the rectification proceedings were initiated in 1993, at a time when there was no uniformity in the views of the courts on the issue. The Court emphasized that Section 154 allows correction of apparent mistakes and not debatable issues. Since the issue was settled only later in 2002, the Court held that the assumption of jurisdiction for rectification was not justified.

4. Section 154 of the Income Tax Act empowers the authorities to correct errors that are apparent and not to address debatable issues. Given the circumstances and the settled nature of the issue post the Supreme Court judgment, the High Court found no grounds to interfere with the Tribunal's order. Consequently, the appeal by the revenue was dismissed with no costs incurred.