2019 (8) TMI 766 - AT - Income Tax

Rectification u/s 154 - deduction u/s 80P denied - a mistake apparent on the record must be an obvious and patent mistake - as per AO assessee was not eligible for deduction u/s 80P and was wrongly allowed - HELD THAT - In the present case with the passing of rectification order u/s 154 of the Act original order passed u/s 143(3) will be substituted by the new order with denial of claim of deduction u/s 80P(2)(b). This in our view is not permissible more so in view of the aforesaid decision of Hon ble Delhi High Court in the case of CIT Vs. M.M.T.C. Ltd. 2000 (8) TMI 63 - DELHI HIGH COURT wherein observed that power to rectify the mistake however does not cover cases where a revision or review of the order is intended. Further we find that Hon ble Supreme Court in the case of T.S. Balram ITO Vs. M/s. Volkart Brothers 1971 (8) TMI 3 - SUPREME COURT has held that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions . We further find that before Ld.CIT(A) it was assessee s contention that the deduction u/s 80P has been allowed to the assessee in earlier years. Considering the fact that assessee had been allowed deduction u/s 80P in earlier assessment years therefore also it cannot be said that the issue of deduction was a debatable issue which could be rectified u/s 154. We therefore considering the decisions cited hereinabove are of the view that in the present case AO could not have proceeded to withdrew the deduction u/s 80P in the order u/s 154. We therefore set aside the order of AO passed u/s 154 and thus the grounds of assessee are allowed.

Summary

Issues:
- Rectification order passed under section 154 by the AO
- Eligibility for deduction u/s 80P of the Act
- AO's withdrawal of deduction u/s 80P(2)(b) of the Act
- Applicability of section 154 of the Act
- Judicial pronouncements and legal interpretations

Issue 1: Rectification order passed under section 154 by the AO
The appeal was filed by the assessee challenging the rectification order passed by the Assessing Officer (AO) under section 154 of the Income Tax Act. The AO had withdrawn the deduction u/s 80P of the Act, which was originally allowed in the assessment proceedings u/s 143(3) of the Act. The assessee contended that there was no apparent mistake in the original assessment order that could be rectified under section 154. The issue revolved around whether the rectification order was justified under the provisions of section 154.

Issue 2: Eligibility for deduction u/s 80P of the Act
The core contention was whether the assessee, a Co-operative Society engaged in the business of collecting milk and selling it to a cooperative federation, was eligible for deduction u/s 80P of the Act. The AO initially allowed the deduction but later held that the assessee was not entitled to claim deduction u/s 80P(2)(b) of the Act, leading to the withdrawal of the claimed amount. The eligibility criteria for the deduction under section 80P were crucial in determining the tax liability of the assessee.

Issue 3: AO's withdrawal of deduction u/s 80P(2)(b) of the Act
The AO, through the rectification order u/s 154 of the Act, disallowed the claim of deduction u/s 80P(2)(b) made by the assessee. The dispute arose when the AO reversed the earlier decision to allow the deduction, citing reasons for ineligibility. The withdrawal of the deduction amount of &8377; 50,74,224/- was a significant point of contention in the appeal filed by the assessee.

Issue 4: Applicability of section 154 of the Act
The interpretation and application of section 154 of the Income Tax Act were crucial in this case. The section provides for the rectification of mistakes apparent from the record in specified orders. The tribunal analyzed the legal scope of what constitutes a mistake that can be rectified under section 154, emphasizing that the mistake must be patent, obvious, and not subject to debate or argument. The tribunal referred to judicial pronouncements to ascertain the correct application of the provision in the context of the case.

Issue 5: Judicial pronouncements and legal interpretations
The tribunal referred to various judicial pronouncements, including the decision of the Hon'ble Delhi High Court in CIT Vs. M.M.T.C. Ltd., to understand the scope and limitations of rectification under section 154 of the Act. The tribunal highlighted that rectification is not intended for cases requiring revision or review of orders but is limited to correcting apparent mistakes. Legal interpretations from the Hon'ble Supreme Court were also cited to support the conclusion that rectification should address obvious and patent mistakes, not debatable issues. The tribunal's decision was influenced by these legal interpretations and precedents.

This detailed analysis of the judgment highlights the key issues, arguments, and legal interpretations involved in the case, providing a comprehensive understanding of the tribunal's decision.