2022 (3) TMI 654 - AT - Income Tax

Rectification of mistake u/s 254 - mistake apparent on record or not? - HELD THAT - A careful perusal of the rectification petition clearly shows that the applicant Assessing Officer has not pointed out any mistake, much less a mistake apparent on record which can be rectified within inherently limited scope of Section 254(2), in the impugned order. What he has pointed out are possible arguments in support of the stand of the Assessing Officer in the appeal. At this stage, however, it is neither open for us to re-visit the conclusions arrived at on the merits nor the Assessing Officer has pointed out any mistakes in the conclusions arrived at by us. We therefore, deem it fit and proper to dismiss the rectification petition as ill conceived and devoid of substance. Rectification petition is dismissed.

Summary

Issues:
1. Rectification of mistakes apparent on record in the order passed by the ITAT.
2. Justification of quashing the draft assessment order by the ITAT.
3. Determination of beneficial ownership of interest in the hands of the assessee.
4. Validity of passing the draft assessment order by the Assessing Officer under section 143(3) read with section 144C(1) of the Act.

Analysis:
1. The Assessing Officer filed a rectification petition pointing out alleged mistakes in the ITAT's order dated 25th February 2021. The AO argued that the ITAT was not justified in quashing the draft assessment order passed under section 143(3) read with section 144C(1) of the IT Act. The AO contended that the assessment under section 143(3) aims to determine the exact tax liability of the assessee, which may result from additions to income or varying tax rates on the returned income. Moreover, the AO claimed that the ITAT's decision prejudiced the assessee's interest by enhancing the tax liability fourfold. The ITAT dismissed the rectification petition, stating that the AO failed to identify any mistake apparent on record that could be rectified under Section 254(2).

2. The case involved the determination of beneficial ownership of interest income in the hands of the assessee, a Cyprus-based SPV investing in India. The assessee received interest on compulsory convertible debentures (CCDs) and claimed the benefit of the India-Cyprus DTAA, treating itself as the beneficial owner of the interest. However, the AO rejected this claim, asserting that the assessee was merely a conduit for funds and not the beneficial owner. The Dispute Resolution Panel (DRP) upheld the AO's decision. The ITAT allowed the assessee's appeal, ruling the assessment order as time-barred, making other issues raised in the appeal moot.

3. The ITAT's decision highlighted that since the assessment order was time-barred, all other contentions regarding the merits of the AO's stand became irrelevant. The ITAT dismissed the miscellaneous appeal challenging the quashing of the assessment order, emphasizing that the AO's understanding of Section 144C was correct. The ITAT clarified that the rectification petition lacked substance as it did not identify any actual mistakes in the ITAT's conclusions. Therefore, the ITAT upheld its original decision, dismissing the rectification petition.

In conclusion, the judgment addressed the rectification of alleged mistakes in the ITAT's order, the determination of beneficial ownership of interest income, and the validity of the AO's draft assessment order. The ITAT's decision to dismiss the rectification petition was based on the lack of identifiable mistakes and the time-barred nature of the assessment order, rendering other issues moot.