2024 (5) TMI 100 - AT - Income Tax

Validity of order passed u/s 154 - computation of commission income - Scope of rectification - modifying the assessment order passed u/s 143(3) whereby AO had wrongly computed the commission at 8% instead of 2% - contention of the ld. AR that the assessee has been regularly showing commission income at 2% in all the previous and subsequent assessment years. HELD THAT - In the present case, CIT(A) has noted that no reply has been furnished by the assessee and that the assessee not even responded to the notice served upon him. Since the assessee has willingness to produce all the records, therefore, in our opinion, it would be appropriate if the matter is remanded back to the file of CIT(A). The order of CIT(A) clearly shows that the rectification order was passed by the Assessing Officer on the basis of internal audit party report whereby the audit party was of the opinion that instead of 2%, 8% commission rate should have been applied. Prima facie, the above said basis for rectifying the order passed by the Assessing Officer is not permissible in law. However, considering the rival contentions and willingness of the assessee to produce all the records, the assessee may be given one chance to explain the case before the ld.CIT(A). Matter is remanded back to the file of ld.CIT(A) with the following directions as CIT(A) should examine whether the Assessing Officer can rectify the assessment order dt. 12.12.2017 on the objections raised by the internal audit party or not thereby increasing the commission rate @ 8%. CIT(A) shall decide the issue in accordance with law and thereafter pass a detailed speaking order dealing with the contentions of the assessee.

Summary

Issues involved:
The appeal arises from the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi u/s 154 of the Income Tax Act, 1961.

Delay Condonation:
The appeal filed by the assessee was barred by limitation by 257 days, but the delay was condoned after considering the reasons given in the petition.

Assessment and Rectification u/s 154:
The Assessing Officer rectified the assessment u/s 143(3) by increasing the rate of profit from 2% to 8% for commission income from jaggery business. The ld.CIT(A) confirmed the rectification order u/s 154, which led to the dismissal of the assessee's appeal.

Contentions:
The assessee contended that the assessment order was erroneously modified u/s 154, as the commission income had been consistently shown at 2% in previous years. The ld. AR argued that the assessee should be given a chance to explain the discrepancy.

Decision and Remand:
The Tribunal noted that the assessee had not responded to notices served during the proceedings. However, considering the willingness of the assessee to produce records, the matter was remanded back to the ld.CIT(A) for further examination. The Tribunal found that the basis for rectification by the Assessing Officer was not permissible in law and directed the ld.CIT(A) to decide the issue in accordance with law.

Conclusion:
The appeal of the assessee was allowed for statistical purposes, and the matter was remanded back to the ld.CIT(A) for fresh adjudication in light of the directions provided by the Tribunal.