2022 (3) TMI 890 - AT - Income Tax

Rectification of mistake u/s 154 - Exemption u/s 11 - HELD THAT - In this stage it is not possible for verification of the payments, made by the assessee. The matter is returned back to the Assessing Officer to take cognizance of the two payments and rectify the order under perview of Section 11. Accordingly, AO is directed to rectify the order u/s 154 of the Act considering the genunity of transactions as discussed above. Apart from above, the assessee submitted that the AO did not allowed 15% deduction u/s.11(1)(a) of the Act while passing rectification order even though same was allowed while passing giving effect. Therefore, we direct the Ld. AO to allow 15% as per section 11(1)(a) of the Act and compute income. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues involved:
1. Rectification of order by Assessing Officer under Section 154 of the Income Tax Act.
2. Consideration of specific transactions related to trust payments and weighing machine purchase.
3. Dispute regarding application of income versus taxable income.
4. Rejection of rectification petition by Assessing Officer.
5. Appeal filed before the Commissioner of Income Tax (Appeals) and subsequent appeal before the Appellate Tribunal.

Issue 1: The case involved a dispute regarding the rectification of an order by the Assessing Officer under Section 154 of the Income Tax Act. The Assessing Officer initially rectified the order but did not consider certain transactions related to trust payments and a weighing machine purchase as application of income. The appellant subsequently filed a rectification petition explaining the nature of these transactions, which the Assessing Officer rejected, stating that the matters raised were not borne out from the records and were beyond the scope of rectification under Section 154.

Issue 2: One of the key issues was the consideration of specific transactions, including trust payments and a weighing machine purchase, totaling a significant amount. The Assessing Officer treated these amounts as taxable income rather than application of income to the trust, as they were deemed to have no relation to the trust's activities. The appellant contended that the payments were for purposes such as loan repayment and correcting wrongly credited amounts, which needed to be recognized as genuine transactions.

Issue 3: The dispute also revolved around the classification of the aforementioned transactions as application of income or taxable income. The Assessing Officer's refusal to acknowledge these transactions as legitimate applications of income led to a disagreement between the parties regarding the proper treatment of these amounts in the trust's financial records.

Issue 4: The Assessing Officer's rejection of the rectification petition prompted the appellant to appeal before the Commissioner of Income Tax (Appeals). The Commissioner upheld the Assessing Officer's decision, stating that the claims made by the appellant required fresh determination of facts and statutory interpretation, which was not permissible under Section 154. Subsequently, the appellant appealed to the Appellate Tribunal seeking a review of the decision.

Issue 5: The Appellate Tribunal, after considering the submissions and evidence presented by the appellant, directed the Assessing Officer to rectify the order under Section 154 of the Act. The Tribunal instructed the Assessing Officer to verify the genuineness of the transactions in question and to allow a specific deduction under Section 11(1)(a) of the Act, which had not been considered in the rectification order. Ultimately, the appeal filed by the assessee was allowed for statistical purposes by the Appellate Tribunal.