2022 (6) TMI 267 - AT - Income Tax

Rectification of mistake u/s 154 - denial of exemption u/s 11 - Taxability of corpus donations when exemption u/s.11 is denied is a debatable issue which cannot be entertained u/s. 154 - whether corpus donation has to be taxed or totally exempt at the stage of rectification under section 154 after attaining finality before the final facts finding authority? - HELD THAT - We find that the rectification petition filed by the assessee under section 154 of the Act is a debatable issue and therefore, it cannot be considered at this stage. That apart, the ld. Counsel for the assessee has submitted that the issue is pending before the Hon ble High Court. Under the above facts and circumstances, we find no infirmity in the order passed by the ld. CIT(A) and accordingly, the appeal filed by the assessee is dismissed.

Summary

Issues involved:
- Denial of exemption under section 11 of the Income Tax Act
- Treatment of corpus donation as income of the assessee
- Validity of rectification under section 154 of the Act
- Interpretation of legal precedents regarding rectification

Analysis:

Issue 1: Denial of exemption under section 11 of the Income Tax Act
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) concerning the denial of exemption under section 11 of the Act. The Assessing Officer treated the corpus donation received as income of the assessee, leading to a dispute over the applicability of the exemption. The ld. CIT(A) initially allowed the appeal, but the Tribunal later set aside this decision, reinstating the assessment order.

Issue 2: Treatment of corpus donation as income of the assessee
The Assessing Officer considered the corpus donation as part of the total income, leading to a petition under section 154 of the Act by the assessee for its exclusion. The Assessing Officer dismissed the petition citing reasons such as the debatable nature of the issue and the absence of contestation by the appellant in previous proceedings. The ld. CIT(A) dismissed the appeal after considering relevant legal precedents and the debatable nature of the issue.

Issue 3: Validity of rectification under section 154 of the Act
The assessee contended that the corpus donation should be excluded from the income of the trust based on statutory provisions. However, the Tribunal found the rectification petition to be a debatable issue, citing legal precedents emphasizing that rectification is only applicable for glaring mistakes of fact or law, not debatable points. The Tribunal upheld the decision of the ld. CIT(A) in dismissing the appeal.

Issue 4: Interpretation of legal precedents regarding rectification
The Tribunal referred to decisions of the Hon'ble Supreme Court to support its findings on the rectification issue. The Tribunal highlighted that rectification under section 154 can only be made for obvious and patent mistakes, not debatable points of law. The Tribunal concluded that the rectification petition filed by the assessee was debatable and involved fresh determination of facts and statutory interpretation, leading to the dismissal of the appeal.

In conclusion, the Tribunal upheld the decision of the ld. CIT(A) and dismissed the appeal filed by the assessee, emphasizing the debatable nature of the rectification issue and the absence of glaring mistakes of fact or law warranting rectification under section 154 of the Act.