2022 (5) TMI 368 - AT - Income Tax

Rectification u/s 154 - AO has not discussed the allowability or otherwise the high interest expenditure claimed against the addition to the fixed assets - HELD THAT - The assessee has not claimed in the return of income in respect interest expenditure. Subsequently, the assessee filed a letter before the AO. AO has not considered the letter filed by the assessee with regard to the interest expenditure and concluded the assessment order under section 143(3) of the Act. Subsequently, the assessee has filed a petition u/s 154 of the Act to rectify the assessment order passed under section 143(3) of the Act dated 24.12.2016 and the same was rejected by the Assessing Officer on the ground that the assessee has not claimed interest expenditure in the original return of income filed by the assessee. On appeal, the ld. CIT(A) confirmed the rejection of petition filed by the assessee under section 154 of the Act. Since the Assessing Officer has no power to adjudicate a claim, which was not made in the original return of income filed by the assessee or filed any revised return of income before conclusion of assessment, we find no infirmity in the order passed by the ld. CIT(A) on this issue and accordingly, the appeal filed by the assessee is dismissed.

Summary

Issues:
1. Rectification under Section 154 of the Income Tax Act, 1961 - Whether rejection of application by Assessing Officer and confirmation by CIT(A) is correct.

Analysis:

1. The appeal was against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2014-15. The Assessing Officer completed the assessment under section 143(3) of the Income Tax Act, 1961. The assessee's return was selected for limited scrutiny to examine various issues, including high interest expenditure against new capital added. The Assessing Officer disallowed a small sum for marine insurance/transport expenses but did not address the high interest expenditure against fixed assets. The assessee filed a petition under section 154 for rectification, which was rejected by the Assessing Officer stating that rectification would amount to review/revision by the same officer. The assessee appealed this decision before the CIT(A), challenging the rejection of the rectification request.

2. The grounds of appeal raised by the assessee before the CIT(A) included arguments regarding the provisions of Section 154 empowering the Assessing Authority to rectify mistakes brought to its notice by the assessee. The appellant contended that the interest portion related to bank loans for machinery purchase was mistakenly added to the total interest figure. However, the Assessing Officer did not find this to be a mistake apparent from the record. The CIT(A) upheld the Assessing Officer's decision, stating that the issue required analysis and investigation, not constituting a mistake apparent from the record. The CIT(A) also noted that the appellant could have raised this complex issue during the appeal against the original assessment order under section 143(3).

3. The Tribunal considered whether the rejection of the application under section 154 by the Assessing Officer and confirmed by the CIT(A) was correct. The assessee had not initially claimed interest expenditure but later submitted a letter to the Assessing Officer, which was not considered in the assessment order under section 143(3). The petition under section 154 was rejected on the grounds of the original return not including the interest expenditure claim. The Tribunal held that since the claim was not made in the original return or a revised return before the assessment's conclusion, the Assessing Officer had no authority to adjudicate on it. Therefore, the Tribunal dismissed the appeal, upholding the decision of the CIT(A) regarding the rejection of the petition under section 154.

In conclusion, the Tribunal upheld the decision to dismiss the appeal, emphasizing that claims not made in the original return or a revised return before assessment cannot be adjudicated upon by the Assessing Officer.