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2018 (10) TMI 1403 - AT - Income TaxRectification of mistake u/ 154 - Claim of benefit of section 40(b) being HUF as a working partner in the partnership firm - due date of filing of return in case of HUF claiming partner in the firm whose accounts are liable to be audited - filling of belated return - Held that - We observe that the assessee has claimed HUF as a working partner which is not correct as per many judicial precedents as relied by the ld. CIT(A) in the impugned order. This issue has been settled in Coal India Ltd. vs. M/s. Continental & Eastern Agency (RFA) OS 2011 (12) TMI 711 - DELHI HIGH COURT considered the earlier judgments and concluded that the HUF itself cannot become a working partner in the partnership firm. Therefore, there is no question for the HUF to become a working partner. The due date of filing of return of income will be 31st July of the relevant assessment year as per section 139 of the Act and the due date for filing of return for working partner has been mentioned in Section 139(1) Explanation 2(iii). The benefit of extended date by the CBDT will not help the assessee as contended by him that due date for filing of income-tax return cannot be 15th October, 2010. In our considered opinion, AO has rightly invoked section 154 because the assessee wanted to take benefit of the notification issued by the CBDT. In the present case, as per judicial precedents, the HUF itself cannot become a partner in the partnership firm and as such the HUF can also not be a working partner in partnership firm as defined u/s. 40(b) Expln. 4 of the IT Act. The due date of filing of IT return will be 31st July and in the given case, the assessee has filed his return on 01.10.2010 which has been later on revised and claimed deduction u/s. 80C of ₹ 1 lakh which was accepted by the Assessing Officer in the original assessment proceedings. The return cannot be revised because the assessee had filed belated return. Therefore, there was a mistake apparent from the record. Accordingly, this issue is rejected. Disallowance of deduction claimed u/s. 80C - Held that - Assessing Officer is always required to assess correct income of the assessee even if the claim was not made in the original return. For this, he has referred to CBDT circular No. 14 dated 11.04.1955 and also relied on the decision of Co-ordinate Bench of Delhi Tribunal in the case of ACIT vs. Technofab Engineering Ltd. (2009 (7) TMI 1345 - ITAT DELHI). He has also relied on a judgment in the case of CIT vs. Remco International, 2008 (12) TMI 413 - PUNJAB AND HARYANA HIGH COURT and decision of Goetz India Ltd. 2006 (3) TMI 75 - SUPREME COURT . Respectfully following the above judgments, cited by the assessee, we allow the appeal of the assessee and the assessee will get deduction of ₹ 1 lakh claimed u/s. 80C of the Act. - Decided in favour of assessee.
Issues Involved:
1. Validity of rectification under Section 154 of the Income Tax Act. 2. Validity of the revised return filed by the assessee. 3. Eligibility of HUF to be a working partner in a firm. 4. Disallowance of deduction claimed under Section 80C. 5. Charging of interest under Sections 234B and 234C. Issue-wise Detailed Analysis: 1. Validity of Rectification under Section 154: The assessee contended that there was no mistake apparent from the record capable of being rectified under Section 154 of the Income Tax Act. The rectification powers under Section 154 can only be exercised for obvious and patent mistakes, not for errors requiring extensive reasoning. The assessee argued that the original return was filed as per the due date applicable to a working partner in a firm, and thus, the rectification was not justified. The Tribunal referenced the Supreme Court's decision in T.S. Balaram, ITO v. Volkart Brothers, which held that a debatable point of law is not a mistake apparent from the record. However, the Tribunal concluded that the Assessing Officer correctly invoked Section 154, as the HUF cannot be a working partner, making the original return belated and the revised return invalid. 2. Validity of the Revised Return: The assessee argued that the original return filed on 01.10.2010 was within the due date extended by the Board and thus valid. The revised return filed on 20.11.2011 claimed a deduction under Section 80C, which was initially accepted by the Assessing Officer. However, the Tribunal upheld the lower authorities' view that the original return was belated as HUF cannot be a working partner, thus invalidating the revised return. 3. Eligibility of HUF to be a Working Partner: The Tribunal referred to judicial precedents, including the Supreme Court's decisions in Ram Laxman Sugar Mills v. CIT and Rashiklal & Co. v. CIT, which established that an HUF cannot be a partner in a firm. The Tribunal concluded that the HUF cannot be a working partner, and the due date for filing the return was 31st July, not 30th September, as claimed by the assessee. 4. Disallowance of Deduction Claimed under Section 80C: The assessee claimed a deduction of ?1,00,000 under Section 80C in the revised return, which was disallowed by the Assessing Officer in the rectification order. The Tribunal, however, allowed the deduction based on the CBDT Circular No. 14 dated 11.04.1955, which emphasizes that the correct income should be assessed even if the claim is not made in the original return. The Tribunal cited the Delhi Tribunal's decision in ACIT v. Technofab Engineering Ltd. and the Punjab & Haryana High Court's decision in CIT v. Ramco International, supporting the view that claims permissible under the law can be made during assessment proceedings. 5. Charging of Interest under Sections 234B and 234C: The Tribunal did not specifically address the issue of charging interest under Sections 234B and 234C in detail, as the primary focus was on the validity of the revised return and the disallowance of the Section 80C deduction. Conclusion: The Tribunal allowed the appeal, granting the assessee the deduction of ?1,00,000 under Section 80C, despite the invalidation of the revised return. The decision emphasized the importance of assessing the correct income as per the provisions of the Act, even if the claim was not made in the original return, in line with the CBDT Circular No. 14 and relevant judicial precedents. The order was pronounced on 24th October 2018.
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