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Facts
The assessee's appeal arises against an order under section 263 invoking revision jurisdiction against an order passed under section 154. The PCIT held that the AO's rectification order, which deleted an addition of Rs. 4.55 crores made under section 68 for unexplained cash credits, was erroneous and prejudicial to the interest of the revenue.
Held
The Tribunal held that the AO's rectification order under section 154 deleting the addition was beyond the AO's jurisdiction as it was a debatable issue and not a mistake apparent from the record. The Tribunal found the PCIT's action under section 263 to be justified.
Key Issues
Whether the Assessing Officer's order under Section 154 rectifying an addition made under Section 68 was erroneous and prejudicial to the interest of revenue, justifying a revision under Section 263.
Sections Cited
154, 143(3), 68, 263
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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA
This assessee’s appeal for assessment year 2018-19, arises against the Principal Commissioner of Income Tax [in short, the “PCIT”], Delhi’s-1, DIN and order no. ITBA/REV/F/REV5/2024- 25/1066511346(1), dated 09.07.2024 involving proceedings under section 154 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
A perusal of the case file reveals at the outset that the learned PCIT has invoked his statutory section 263 revision jurisdiction thereby holding the Assessing Officer’s section 154 r.w.s. 143(3) rectification dated 17th May, 2023; framed in the assessee’s case, as an erroneous one causing prejudice to the interest of the Revenue.
Faced with this situation, leaned counsel vehemently argues that neither the Assessing Officer’s above rectification is erroneous in law nor does it cause any prejudice to the interest of the Revenue as what all has been done therein is to acknowledge and ensure that the assessee had filed all the relevant evidence proving identity, genuineness and creditworthiness of various cash credits involving Sh. Rakesh Kumar, M/s. Yashika Sales and Eternal International, involving varying sums.
4. The Revenue on the other hand has drawn strong support from the PCIT’s impugned revision direction reading as under: “6. Findings: 6.1. I have gone through the assessment record and submissions of the assessee. In this regard, it is observed that the reply and submissions filed by the assessee are not tenable in the light of the facts of the case. The submissions of the assessee that there was no basis for addition in assessment order is not acceptable as addition u/s 68 of the 1. T. Act was made in view of the fact that explanation 2 | P a g e offered by the assessee was not found to be satisfactory by the AO. It was a considered view of AO and detailed reasons have been given by AO in the assessment order at paras 5.1, 5.3 & 5.5 while making additions. 6.2. The powers of AO relating to section 154 of the I. T. Act are very limited, they are related to any mistake apparent from record only. The additions made u/s 68 of the I. T. Act after giving reasons may be a matter for appeal before CIT(A) but cannot be rectified by AO u/s 154 of the I. T. Act to the effect of deleting the additions u/s 68 of the I. T. Act. 6.3. In the current order u/s 154 of the I. T. Act, AO has transgressed to the territory of CIT(A), while deleting additiori made u/s 68 of the I. T. Act related to 3 creditors. 6.4. The assessee in its reply and submissions has also claimed the entries under consideration to be genuine. The genuineness of the claim of the assessee relating to section 68 of the I. T. Act & requirement of satisfaction of the AO for such credits is a matter which would require deliberation and application of mind. An addition for 6 three credits, found to be not fully explained u/s 68 of the I. T. Act, is not an addition which can be rectified u/s 154 of the I. T. Act as it is a debatable issue. The addition made by the AO is not a mistake which can be rectified as apparent from record. The AO while passing the assessment order has already considered submissions and contentions of the assessee. While passing order u/s 154 of the I. T. Act, the AO has gone beyond the jurisdiction of section 154 by deleting the addition of Rs. 4.55 crores.
In view of the discussion in the foregoing paragraphs, the rectification order completed in this case u/s 154 of the I. T. Act, 1961 for A.Y. 2018-19 on 17.03.2023 is held to be erroneous, in so far as it is prejudicial to the interest of revenue under the ambit of the provisions of section 263 of the I. T. Act, 1961. The order u/s 154/143(3) dated 17.03.2023 of the I. T. Act is cancelled.
The Assessing Officer is directed to pass an order u/s 263/154 of the I. T. Act, 1961 in this case as held in this order and add an amount of Rs. 4.55 crores for three creditors as per the facts of the case.”
We have given our thoughtful consideration to the assessee’s and the Revenue’s above vehement rival submissions. We find no merit in the assessee’s instant case. We make it clear first of all at the cost of repetition that the learned Assessing Officer had firstly 3 | P a g e framed his assessment on 9th September, 2021 assessing the assessee’s income as Rs.4,55,74,990/- involving section 68 unexplained cash credits representing unsecured loans of Rs.4,23,41,000/- as per the above rectification. He thereafter appears to have rectified the same vide order dated 17th March, 2023 that the assessee had filed all the relevant details during the course of scrutiny to revise the income assessed from Rs.4,55,74,990/- to Rs.33,13,935/-, in very terms.
We are of the considered view in this factual backdrop that such a course of substantive adjudication in an instance of section 154 rectification by the Assessing Officer could not be held sustainable in law as per T. S. Balaram, ITO v Volkart Bros (1971) 82 ITR 40 (SC). This is what has formed the precise reason for the learned PCIT to invoke section 263 revision jurisdiction in light of Malabar Industrial Co. Ltd. vs. CIT 243 ITR 83 (SC). We thus see no reason to interfere with the learned PCIT’s impugned action holding the Assessing Officer’s above section 154 rectification dated 17th March, 2023 as an erroneous one causing prejudice to the interest of the Revenue. Rejected accordingly.