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2014 (9) TMI 273 - AT - Income TaxRectification of mistake u/s 154 Bar of limitation - Held that - CIT(A) has held that the AO has not revised order dated 22.03.2005 but he has revised order dated 19.12.2006 passed u/s 245/251/143(3) of the Act - CIT(A) has also placed reliance upon Hind Wire Industries Limited Versus Commissioner of Income-Tax 1995 (1) TMI 2 - SUPREME Court - order in the expression from the date of the order sought to be amended in section 154(7) was not qualified in any way, it did not necessarily mean the original order it could be any order including the amended or rectified order there was no infirmity in the order of the CIT(A) on this issue Decided against assessee. Merger of orders by AO Held that - The matter in appeal before the authorities below related to allowability of deduction u/s 80IB in respect of income arising from foreign exchange fluctuation, discount on purchase, interest received on FDR with bank, interest received from Super stockist for late payment, rent received from staff and job charges received - As against the above the matter which has been rectified pertains to allowances of 80IB deduction with respect to DEPB/duty draw back/export benefit - the aspect which has been rectified was not at all the subject matter of the appeal before the authorities below - section 154(1)(A) of the Act cannot come to the rescue of the assessee and the order of the CIT(A) is upheld Decided against assessee. Following the precedent - Decision came subsequently much after filing of the return Held that - There was conflict of opinion as to whether DEPB/duty drawback/export benefit would come under the computation of profit eligible for deduction of section 80IB of the Act - at the time of filing of the return by the assessee there was conflict of opinion - The decision in M/s Liberty India Versus Commissioner of Income Tax 2009 (8) TMI 63 - SUPREME COURT came much later and following the decision in Mepco Industries Ltd., Madurai Versus Commissioner of Income Tax & Anr 2009 (11) TMI 24 - SUPREME COURT - there was a conflict of opinion prior to the decision and as such the mistake cannot be held to be a mistake apparent from the record to come under the ken of section 154 of the Act - rectification of the mistake apparent from record u/s 154 on this issue cannot be upheld Decided in favour of assessee.
Issues Involved:
1. Whether the rectification order passed by the Assessing Officer (AO) under section 154 of the Income Tax Act, 1961, was barred by limitation. 2. Whether the AO had jurisdiction to rectify the order under section 154. 3. Whether the rectification was feasible with reference to the decision of the Hon'ble Supreme Court in the case of Liberty India vs. CIT. 4. Whether the AO's order had merged with the appellate orders and was not amenable to rectification. 5. The allowability of deduction under section 80-IB for incomes derived by the appellant apart from DEPB and export benefits. Detailed Analysis: 1. Limitation of Rectification Order: The appellant contended that the rectification order passed by the AO was barred by limitation. The original assessment order was passed on 22.03.2005, and the rectification proceedings were initiated on 01.03.2010, which was beyond the four-year limitation period prescribed under section 154(7) of the Act. However, the CIT(A) held that the rectification was made on the revised order dated 19.12.2006, not the original order, and thus was within the limitation period. The CIT(A) relied on the Supreme Court's decision in Hind Wire Industries Ltd. v. Commissioner of Income-tax, which stated that "order" in section 154(7) includes amended or rectified orders. The Tribunal upheld this view, finding no infirmity in the CIT(A)'s decision. 2. Jurisdiction of AO to Rectify the Order: The appellant argued that the AO lacked jurisdiction to rectify the order since the matter had already been considered by the CIT(A) and the ITAT. The CIT(A) dismissed this argument, stating that the mistake rectified by the AO was neither raised nor decided in any appeal or revision proceeding. Therefore, the AO had jurisdiction under section 154 to rectify the order. The Tribunal agreed with this reasoning, noting that the rectified matter was not the subject of the appeal before the appellate authorities. 3. Feasibility of Rectification with Reference to Liberty India Case: The appellant contended that the rectification could not be based on the Liberty India judgment, as it was decided after the completion of the assessment. The CIT(A) held that for rectification proceedings, the relevant date is the date of initiation of the rectification, not the date of the original assessment order. Since the Liberty India decision was in existence at the time of the rectification proceedings, the AO had jurisdiction to rectify the order. The Tribunal upheld this view, citing the Supreme Court's decision in ACIT vs. Saurashtra Kutch Stock Exchange Ltd., which stated that a subsequent judicial decision acts retrospectively and clarifies the legal position as it always was. 4. Merger of AO's Order with Appellate Orders: The appellant argued that the AO's order had merged with the appellate orders and was not amenable to rectification. The Tribunal noted that the rectification pertained to the inclusion of DEPB/duty drawback/export benefits in the net profit for deduction under section 80-IB, which was not the subject matter of the appeal before the appellate authorities. Therefore, section 154(1)(A) did not bar the rectification, and the AO's order had not merged with the appellate orders on this specific issue. 5. Allowability of Deduction under Section 80-IB: The appellant argued that the CIT(A) did not properly consider the issue of deduction under section 80-IB for incomes derived apart from DEPB and export benefits. The Tribunal set aside this issue to the file of the CIT(A) for adjudication, directing the CIT(A) to consider the appellant's contentions and provide an adequate opportunity for being heard. Conclusion: The Tribunal partly allowed the appeal, upholding the CIT(A)'s decision on the issues of limitation, jurisdiction, and the applicability of the Liberty India judgment for rectification. However, it remanded the issue of the allowability of deduction under section 80-IB for further consideration by the CIT(A). The order was pronounced on 14.07.2014.
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