2015 (9) TMI 1288 - AT - Income Tax

Rectification of mistake - claim for bad and doubtful debts under section 36(1)(vii) - Held that - The issue before the Tribunal was whether the provisions for bad and doubtful debts can be allowed under section 36(1)(vii) on the basis of approval of the Board of Directors of the assessee-company. The Tribunal has examined this issue in para 9 of its order and has given a categorical finding that the assessee has claimed deduction for bad and doubtful debts under section 36(1)(vii) of the Act; whereas this section deals with only actual claim of deduction. Since the Tribunal has taken into account all the arguments of the assessee while adjudicating the issue, we find no error apparent in the order of the Tribunal. The Tribunal has given a categorical finding that the provisions for bad and doubtful debts cannot be claimed under section 36(1)(vii) of the Act, as it deals with actual claim of deduction. The Tribunal has also taken cognizance of the provisions of clause (vii)(a) of section 36(1) of the Act, which deals with the issue of claim of provision for bad and doubtful debts made by the Scheduled Bank, non-Scheduled Bank or Corporation Bank, etc. Therefore, it cannot be said that the Tribunal has not dealt with the issue in the light of assessee s contentions. Since the Tribunal has taken a particular view in the light of assessee s contentions, the findings of the Tribunal cannot be reviewed under the garb of rectification. No merit in this Miscellaneous Application of the assessee, as no error apparent in the order of the Tribunal is pointed out. The ld. counsel for the assessee has tried to dispute the findings of the Tribunal and seeking a review of the order of the Tribunal which is not permissible under section 254(2) of the Act and we accordingly reject the Miscellaneous Application. - Decided against assessee.

Summary

Issues:
Rectification of order regarding claim for bad and doubtful debts under section 36(1)(vii) of the Income-tax Act, 1961.

Analysis:
1. The Miscellaneous Application was filed by the assessee against the Tribunal's order, claiming that the Tribunal did not appreciate the claim for bad and doubtful debts under section 36(1)(vii) of the Act. The assessee contended that the provision for bad debts was approved by the Board of Directors and should be allowed. The Tribunal, however, held that the provisions for bad and doubtful debts cannot be claimed under section 36(1)(vii) as it deals with actual deduction claims only. The Tribunal also considered clause (vii)(a) of section 36(1) regarding provisions for bad and doubtful debts by banks. The Tribunal's decision was based on a specific interpretation of the law and cannot be reviewed under rectification.

2. The scope of section 254(2) for rectification is limited to apparent or arithmetical errors. The Tribunal cannot review its own order under the guise of rectification. Various High Courts have emphasized that rectification can only correct mistakes that are apparent on the record without the need for extensive reasoning. Mistakes that involve a debate or oversight of facts do not fall under rectifiable errors. The Tribunal's power to rectify is not equivalent to reviewing or modifying its orders.

3. The judgments of different High Courts and the Supreme Court provide clear guidelines on the limitations of rectification powers under section 254(2) of the Income-tax Act. The Tribunal's jurisdiction is restricted to rectifying patent errors and not to revisit or amend its orders based on fresh legal interpretations or facts. The Tribunal's decision is final unless there is a clear and unmistakable error on the face of the record. The Tribunal cannot recall or review its orders beyond rectifying apparent mistakes.

4. The Tribunal's decision in this case was based on a specific interpretation of the law and the facts presented. The assessee's attempt to challenge the Tribunal's findings and seek a review through rectification was deemed impermissible under section 254(2) of the Act. The Tribunal rejected the Miscellaneous Application as it failed to demonstrate any error apparent in the original order. The Tribunal's decision was final, and the application was dismissed accordingly.

In conclusion, the Tribunal's judgment emphasized the limited scope of rectification under section 254(2) and reiterated that rectification powers are not meant for reviewing or modifying orders based on differing interpretations or arguments. The decision highlighted the importance of clear and apparent errors for rectification and upheld the finality of the Tribunal's orders unless a genuine mistake on the record is identified.