2016 (12) TMI 949 - AT - Income Tax

Rectification of mistake - reduce the deduction allowable under section 80HHC - Held that - Ostensibly, section 154 permits the Assessing Officer to rectify any mistake apparent from the record by amending an order. Quite clearly, in the present case, the issue revolves around the amount of interest which is liable to be excluded from the profits of the business in terms of clause(1) of Explanation (baa) to section 80HHC of the Act. As per the assessee, what is excludible is net interest and for that matter he has also referred to the judgment of the Hon ble Supreme Court in the ACG Associated Capsules Pvt. Ltd v. CIT ,(2012 (2) TMI 101 - SUPREME COURT OF INDIA). Be that as it may, what is relevant is that the impugned decision could not have been taken by the Assessing Officer in a summary manner so as to suggest that there is a mistake apparent from record. Notably, a mistake apparent from record is one which is patent and obvious, on which no two views are possible. Therefore, the action of the Assessing Officer is beyond the scope and ambit of section 154 of the Act and the same is hereby set-aside and assessee succeeds.

Summary

Issues:
Appeal against invoking section 154 of the Income Tax Act to reduce deduction under section 80HHC.

Analysis:
The appeal pertains to the assessment year 2001-02, challenging the Assessing Officer's decision to reduce the deduction under section 80HHC by a specific amount. The initial assessment allowed a deduction of a certain sum under section 80HHC, but the Assessing Officer later found an error in the calculation related to interest receipts. The Assessing Officer issued a notice under section 154 of the Act, pointing out the mistake and recalculated the deduction amount, which was affirmed by the CIT(A).

The main contention of the assessee was that the Assessing Officer incorrectly interpreted the provisions of Explanation (baa) to section 80HHC by not considering the 'net interest' for exclusion from profits. The assessee argued that the Assessing Officer's decision was debatable and not a clear mistake apparent from the record. The assessee emphasized that the exclusion of interest should be based on net interest after deducting interest paid, as shown in the P&L account.

On the other hand, the Departmental Representative supported the decisions of the lower authorities, asserting that the adjustment made under section 154 was rectifiable based on the provisions of Explanation (baa) to section 80HHC.

The ITAT Mumbai, after considering the submissions, held that the Assessing Officer's decision to reduce the deduction under section 80HHC was beyond the scope of section 154. The tribunal noted that the issue of what constitutes excludable interest was not a clear-cut mistake apparent from the record. Referring to the judgment of the Hon'ble Supreme Court, the tribunal emphasized that a mistake apparent from the record should be patent and obvious without room for differing views. Consequently, the tribunal set aside the Assessing Officer's decision, ruling in favor of the assessee.

In conclusion, the tribunal allowed the appeal of the assessee, declaring the Assessing Officer's action as impermissible under section 154 of the Income Tax Act.