2023 (7) TMI 803 - AT - Income Tax

Rectification u/s 154 - disallowance of Interest claimed - debatable and arguable issue - HELD THAT - We keep in mind this settled legal proposition and advert to facts of the instant case wherein, the issue of sec. 154 rectification pertaining to the alleged prior period expenditure is highly debatable one only since the same involves crystallization issue in the earlier assessment year; on mercantile basis and in the year of payment is liable to be paid, after crystallization. This is indeed coupled with the various judicial pronouncements i.e., PCIT vs. Adani Enterprises 2016 (7) TMI 1250 - GUJARAT HIGH COURT holding that such a claim is indeed a tax neutral case in case the concerned assessee is assessed at uniform rate throughout. We hold these peculiar facts and circumstances that both the learned lower authorities have erred in law and on facts in initiating sec. 154 rectification proceedings against the assessee.

Summary

Issues Involved:
The issues involved in the judgment are the disallowance of interest by the Assessing Officer, confirmation of disallowance by the Commissioner (Appeals), and the levy of interest under Section 234B.

Disallowance of Interest:
The appellant contended that the order confirming additions made by the Assessing Officer in rectification order under Section 154 was against the law and facts of the case. The appellant argued that the disallowance of interest claimed in the assessment year 2014-2015 was debatable and arguable, falling outside the jurisdiction of Section 154. The Commissioner (Appeals) failed to consider that the interest claimed had not been revised for the previous assessment year, leading to double taxation. The Tribunal held that the issue of disallowance of interest was highly debatable, involving a prior period expenditure, and that both lower authorities erred in initiating rectification proceedings. The appeal on this issue was allowed.

Interest Levied Under Section 234B:
The appellant challenged the levy of interest under Section 234B, amounting to Rs. 2,15,760. The appellant argued that the delay of 5 years in completing the assessment was not attributable to them, and therefore, the interest charged should be deleted. The Commissioner (Appeals) confirmed the levy of interest under Section 234B. However, the Tribunal held that the delay in assessment was not the appellant's fault and ordered the deletion of the interest charged. The appeal on this issue was allowed.

Conclusion:
In conclusion, the Appellate Tribunal ITAT PANAJI allowed the appellant's appeal on the grounds of disallowance of interest by the Assessing Officer and the levy of interest under Section 234B. The Tribunal found that the issues were debatable and outside the scope of Section 154 rectification. The judgment highlighted the importance of not making roving inquiries under Section 154 but only correcting apparent mistakes from the records. The appeal was allowed, and the order was pronounced in the Open Court on 18.07.2023.