2015 (11) TMI 268 - AT - Income Tax

Rectification of mistake - omission to disallow a sum towards loss on sale/exchange of fixed assets in the original assessment - Held that - Notice issued u/s 154 of the Act clearly mentions the intention of the Learned AO by duly mentioning the mistake that had crept in the original assessment order towards omission to disallow the loss on sale of fixed assets to the tune of ₹ 10,27,456/-. Admittedly, the loss on sale of fixed assets is only a capital loss and cannot be construed as a loss incidental to the business as claimed by the Learned AR. Hence the said capital loss ought to have been disallowed in the computation of total income by the assessee voluntarily or by the Learned AO in the original scrutiny assessment proceedings in accordance with law. However, the same was duly sought to be rectified by the Learned AO in section 154 proceedings as it is not a debatable issue and the said mistake is patent , glaring and very obvious AO had clearly mentioned the mistake sought to be rectified in the notice u/s 154 of the Act itself. We don t endorse the arguments of the Learned AR that when there is no computation under the head capital gains while determining the taxable income, the resultant capital loss cannot be set off against the business income. This is a glaring mistake committed by both assessee as well as by the Learned AO in original scrutiny assessment proceedings which was later rectified u/s 154 by the Learned AO and we hold that the action of the Learned CITA does not require any interference in this regard. - Decided against assessee.

Summary

Issues: Whether the omission to disallow a sum towards loss on sale/exchange of fixed assets in the original assessment is a mistake apparent from record or not.

Analysis:
The appeal before the Appellate Tribunal ITAT Kolkata pertains to an order of the Learned CITA against the assessment framed by the Learned AO under the Income Tax Act, 1961. The main issue revolves around the omission to disallow a specific sum related to the loss on sale/exchange of fixed assets in the original assessment. The assessee had purchased a CT Scan machine by exchanging an old one, resulting in a loss debited in the books of accounts. The Learned AO did not disturb the income tax depreciation figure claimed by the assessee initially. However, the AO later sought to rectify this omission by disallowing the loss on sale of fixed assets through a notice u/s 154, which was upheld by the Learned CITA, leading to the appeal before the Tribunal.

The Learned AR argued that the loss on sale of fixed assets should be allowable as a deduction as it was incidental to the business. He contended that the notice issued under section 154 was vague and did not specify the apparent mistake, citing a Supreme Court decision in support. On the other hand, the Learned DR supported the lower authorities' orders, emphasizing that the mistake was clearly stated in the notice issued by the AO under section 154.

After considering the submissions, the Tribunal found that the loss on sale of fixed assets was a capital loss and not incidental to the business. The Tribunal noted that the mistake in not disallowing this loss was apparent and rectifiable, as it impacted the computation of total income. The Tribunal distinguished the case law cited by the AR, stating that the notice issued u/s 154 in the present case was clear about the mistake to be rectified. Therefore, the Tribunal upheld the actions of the lower authorities and dismissed the appeal, affirming the rectification made by the AO under section 154.

In conclusion, the Tribunal held that the omission to disallow the loss on sale of fixed assets in the original assessment was a clear mistake, rectifiable under section 154. The Tribunal found no merit in the arguments presented by the assessee and upheld the decision of the lower authorities, ultimately dismissing the appeal.