2019 (1) TMI 1407 - AT - Income Tax

Revision u/s 263 - rectification of mistake - jurisdiction of section 254(2) - Held that - Where during the course of hearing, the attention of the Bench was drawn to the written submissions or certain specific facts stated therein and then, in such a scenario, the Tribunal has not considered the same, it can be a case while may fall under jurisdiction of section 254(2). However, where there is nothing on record that attention of the Bench was drawn to the written submissions during the course of hearing and where the Tribunal has considered the verbal contentions so advanced by the ld AR, in our view, there is no interference which is called for in terms of section 254(2) of the Act. In the instant case, the attention of the Co-ordinate Bench was drawn to the decision passed by the AO u/s 143(3) for AY 2006-07 and in the said order, there is no discussion regarding the issues which have come up for consideration before the Co-ordinate Bench being the subject matter of impunged order u/s 263, we donot think there is any mistake which has been committed by the Coordinate Bench where it states that the contention regarding the past history and rule of consistency doesn t help the case of the assessee. In light of above discussions, we are of the considered view that the contention of the ld AR where accepted will amount to a review of the order passed by the Co-ordinate Bench and will fall outside the jurisdiction of the Tribunal u/s section 254(2) of the Act.

Summary

Issues Involved:
1. Examination of past settled history and applicability of Section 40A(9) of the Income Tax Act.
2. The reasoning and findings of the Principal Commissioner of Income Tax (Pr. CIT).
3. The Assessing Officer's (AO) application of mind and examination of claims.
4. The rule of consistency in tax assessments.
5. The role of audit objections in invoking Section 263 of the Income Tax Act.
6. Allowability of deductions under various sections including Section 40A(9) and Section 37(1).
7. Jurisdiction of the Tribunal under Section 254(2) for rectification of mistakes.

Detailed Analysis:

1. Examination of Past Settled History and Applicability of Section 40A(9):
The assessee argued that the Tribunal's finding that there was no past examination of the issue under Section 40A(9) was contrary to the facts. The assessee provided written submissions showing that queries regarding Section 40A(9) were raised and responded to in previous assessments, particularly for AY 2006-07. The Tribunal, however, noted that there was no specific mention or examination of Section 40A(9) in the past assessments, thereby rejecting the assessee's contention.

2. Reasoning and Findings of the Principal Commissioner of Income Tax (Pr. CIT):
The Tribunal reviewed the Pr. CIT's reasoning, which stated that the reserves created under the Rajasthan Cooperative Societies Act did not qualify for deductions under Section 40A(9). The Pr. CIT clarified that Section 40A(9) only allows deductions for contributions to specific funds like provident funds, superannuation funds, and approved gratuity funds, and not for general or education reserves.

3. The Assessing Officer's (AO) Application of Mind and Examination of Claims:
The Tribunal found that the AO did not apply his mind properly to the claims regarding general and education reserves and provision for gratuity. The AO merely reproduced accounting entries without examining their allowability for tax purposes. The Tribunal highlighted that there was no specific query or examination by the AO regarding these reserves, thus the AO's order was deemed erroneous.

4. Rule of Consistency in Tax Assessments:
The assessee argued that the deductions were allowed in previous years, and there was no material change in facts or law to justify a different view. The Tribunal, however, noted that there was no evidence that the issue was examined from the perspective of Section 40A(9) in the past. Therefore, the rule of consistency did not apply.

5. Role of Audit Objections in Invoking Section 263:
The Tribunal addressed the contention that action under Section 263 was initiated merely on audit objections. It clarified that the Pr. CIT examined the assessment records and the audit memo independently and provided detailed reasoning for finding the assessment order erroneous and prejudicial to the interest of the Revenue. Thus, it was not a case of borrowed satisfaction.

6. Allowability of Deductions under Various Sections:
The Tribunal allowed that the AO should re-examine the claims of deductions under Section 40A(9), Section 37(1), and the concept of diversion by overriding title. The assessee was permitted to present these arguments afresh before the AO.

7. Jurisdiction of the Tribunal under Section 254(2) for Rectification of Mistakes:
The Tribunal held that the contentions of the assessee were duly considered in the original order, and there was no apparent mistake on record. It emphasized that the Tribunal is not required to review its order under Section 254(2) unless there is a clear mistake. The Tribunal found no basis for the assessee's claim that written submissions were not considered, as verbal contentions were addressed during the hearing.

Conclusion:
The Tribunal dismissed the miscellaneous application filed by the assessee, finding no apparent mistake in the original order that warranted rectification under Section 254(2) of the Income Tax Act. The decision emphasized the need for proper examination and application of mind by the AO and upheld the Pr. CIT's reasoning and findings.