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2013 (8) TMI 410 - AT - Income TaxMistake apparent from record for invocation of section 154 of Income Tax Act,1961 - Minimum Alternate Tax (MAT) - Adjustment to book profit u/s 115JB - Adjustment of loss to sick industrial company - Held that - The Auditor of the assessee in Annexure-A also reduced the loss of sick industrial company from the profit. Therefore, assessee has disclosed all the particulars regarding income to be computed under Section 115JB while filing return of income. The certificate regarding assessee is sick industrial company issued by BIFR was also filed at the assessment stage - There was no scope for the A.O. to have resorted to the provision of Section 154 of the Act for the purpose of enhancing the income of the assessee. The ld. CIT(A) gave specific finding of fact that the assessee is sick industrial company during the year under consideration. A.O. on long drawn process of reasoning should not have passed the order under Section 154 of the Act - Assessee also correctly demonstrated from the provision of Section 115JB(2) of the Act that whatever amount was reduced from the profit of business on account of loss to sick industrial company were in accordance with law. Therefore, there was no justification for A.O. to pass the order under Section 154 of the Act - No merit in the appeal of the Revenue Decided against the Revenue.
Issues Involved:
1. Applicability of Section 154 of the Income Tax Act. 2. Applicability of Section 115JB of the Income Tax Act. 3. Jurisdiction of the Assessing Officer (A.O.) to rectify an order under Section 154. 4. Determination of whether the mistake is apparent from the record. Detailed Analysis: 1. Applicability of Section 154 of the Income Tax Act: The core issue in the appeal relates to whether the provisions of Section 154, which allow for rectification of mistakes apparent from the record, are applicable in this case. The A.O. issued a show cause notice under Section 154 to rectify the alleged mistake of not assessing the income under Section 115JB, which resulted in a short levy of tax and interest. The assessee argued that neither Section 115JB nor Section 154 applies to their case, as the mistake is not apparent but debatable. 2. Applicability of Section 115JB of the Income Tax Act: The A.O. contended that the company was liable to be assessed under Section 115JB, the Minimum Alternate Tax (MAT) provision, as the company's net worth had become positive, and it was no longer a sick industrial undertaking. The assessee countered that the waiver of loans and interest was not considered in the computation of book profit under Section 115JB, as these were not revenue receipts but capital in nature. The CIT(A) and ITAT upheld that the issues were highly debatable and not apparent mistakes, thus Section 154 could not be invoked. 3. Jurisdiction of the Assessing Officer (A.O.) to Rectify an Order Under Section 154: The A.O. attempted to rectify the order under Section 154 based on an audit objection regarding the non-computation of income under Section 115JB. The CIT(A) found that the A.O. did not independently identify the mistake but was influenced by the audit objection. The CIT(A) emphasized that the A.O. must apply his mind independently and cannot be guided by external influences. The rectification power under Section 154 is to correct obvious mistakes, not to review or revise the original order. 4. Determination of Whether the Mistake is Apparent from the Record: The CIT(A) and ITAT both held that the issues raised by the A.O. were debatable and not apparent from the record. The CIT(A) noted that the assessee had filed all necessary documents, including the audit report certifying that the tax payable under Section 115JB was nil. The Supreme Court's decisions in "CIT Vs. Hero Cycles (P) Ltd." and "ITO Vs. Volkart Brothers" were cited, emphasizing that a mistake must be obvious and patent, not one that requires a long-drawn process of reasoning or involves debatable points of law. Conclusion: The ITAT upheld the CIT(A)'s decision, stating that the A.O. was not justified in invoking Section 154 to rectify the order as the issues were debatable and not apparent mistakes. The appeal by the Revenue was dismissed, affirming that the rectification power under Section 154 cannot be used to review or revise the original assessment order, especially on debatable issues. The ITAT concluded that the CIT(A) correctly canceled the order under Section 154, as there was no mistake apparent from the record.
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