2020 (3) TMI 556 - HC - Income Tax

Rectification of mistake u/s 154 - Assessee did not claim deduction under Section 43B for interest payments to IDBI in the original returns filed by them - HELD THAT - In the case on hand, the claim for interest deductions under section 43B of the Income Tax Act, which was omitted by the Appellant/assessee company while filing the original returns can be adjudicated by the assessing officer only through a process of investigation. Even as seen from the computation of income filed along with the rectification applications filed u/s 154 the Assessee has produced a self serving statement of account disclosing interest payments which does not exactly tally with the computation of income filed along with the section 154 applications. Therefore, unless and until a complete investigation is done by the assessing officer, the quantum of deduction for interest payments cannot be ascertained. Hence, the omission claimed by the Appellant/Assessee will not fall under the category of a mistake apparent from the record . The judgment relied upon by the learned counsel for the Appellant/Assessee in the case of Commissioner of Income Tax vs. Pruthvi Brokers and Shareholders Pvt. Ltd. 2012 (7) TMI 158 - BOMBAY HIGH COURT will not apply to the case on hand as it was not a decision rendered under Section 154 as its scope falls on a narrow compass involving mistakes apparent from the record . Circular No.14 (XL-35 1955 dated 11.04.1955) has no bearing to the facts of the present case as the payment of interest to IDBI was never disclosed by the Appellant/Assessee in the income tax returns. Unless and until, the tax returns disclosed interest payments, it is impossible for the assessing officer to assist the Appellant/Assessee to rectify the alleged mistake of omission to claim deduction for interest payments under section 43B of the Income Tax Act. - Decided against the Appellant/Assessee

Summary

Issues Involved:
1. Whether the omission to claim deduction for interest payments under Section 43B of the Income Tax Act in the original returns can be rectified under Section 154.
2. Applicability of CBDT Circular No.669 dated 25.10.1993 to the facts of the case.

Detailed Analysis:

Issue 1: Rectification under Section 154

The assessee filed appeals under Section 260-A of the Income Tax Act, 1961, challenging the common order dated 11.10.2012 by the Income Tax Appellate Tribunal, which dismissed their claims for rectification under Section 154. The assessee omitted to claim deduction for interest payments to IDBI in the original returns for Assessment Years 2003-04 and 2004-05 and filed petitions under Section 154 to rectify this omission. The Assessing Officer rejected these petitions, stating that the mistake was not apparent from the record as it involved a debatable point of law. This decision was upheld by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal.

The court examined whether the omission to claim deduction for interest payments in the original returns could be rectified under Section 154. It was noted that the assessee did not claim the deduction in the original returns and did not file revised returns under Section 139(5) within the prescribed period. The court emphasized that Section 154 is meant to rectify mistakes apparent from the record, which are patent, obvious, and do not require further investigation. The omission to claim deduction for interest payments was not considered a mistake apparent from the record as it required further investigation to determine its allowability.

The court referred to the Supreme Court's interpretation in Master Construction Private Limited vs. State of Orissa, which held that rectification under a similar provision is limited to correcting arithmetical or clerical mistakes or errors apparent on the face of the record. The court concluded that the omission to claim deduction for interest payments did not fall within these parameters and could not be rectified under Section 154.

Issue 2: Applicability of CBDT Circular No.669

The assessee argued that CBDT Circular No.669 dated 25.10.1993 supported their claim for rectification. However, the court held that the circular was not applicable as the interest payments were not disclosed in the original returns. The court stated that unless the tax returns disclosed the interest payments, the assessing officer could not assist the assessee in rectifying the omission under Section 43B.

Conclusion:

The court dismissed the appeals, holding that the concurrent findings of the authorities did not suffer from any perversity or illegality. The substantial questions of law raised by the appellant/assessee were answered against them, and the Tax Case Appeals were dismissed without costs. The court reiterated that Section 154 is meant only to rectify mistakes apparent from the record and not to address omissions requiring further investigation.