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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SMT. BEENA PILLAI, JM
Per: Smt. Beena Pillai, J.M.: Present appeal filed by the assessee is against the order passed by NFAC, Delhi, dated 27.09.2024 for assessment year 2019-20 on the following grounds of appeal:
1. The Learned Assessing Officer at the centralized processing centre (hereinafter referred to as CPC) in assessing the income of the assessee and The Commissioner of Income Tax Appeals - National Faceless Appeals Centre (hereinafter referred to as CIT-A-NFAC) in confirming the assessment at Rs. 4,46,105/- instead of Rs. 96,440/- as represented by the assessee.
2. The Learned Assessing Officer at the CPC in rectification proceedings in relation to the rectification application by the assessee under section 154 of the Income Tax Act, 1961 (hereinafter referred to as the Act) erred in making a disallowance of Rs. Rs. 3,69,663/- and the CIT-A-NFAC in confirming the same being interest and remuneration paid to partners which was duly allowed in the original intimation issued under section 143(1) of the Act without providing an opportunity to the assessee as required under section 154(3) of the Act.
3. The Learned Assessing Officer at the CPC erred in making a disallowance of Rs. Rs. 3,69,6637- being interest and remuneration paid to partners in the rectification proceedings and the CIT-A-NFAC in confirming the same as the same cannot be considered mistake apparent on records as envisaged in section 154 of the Act.
4. The Learned Assessing Officer at the CPC erred in not allowing the TDS credit to the tune of Rs. 2,382/- both while issuing the intimation under section 143(1) of the Act and while passing the rectification order under section 154 of the Act leading to demand of Rs.2,289/- in the intimation under section 143(1) of the Act and Rs.134290/- in the rectification order passed under section 154 of the Act.”
Brief facts of the case are as under:
2. The assessee filed its return of income year under consideration on 30.09.2022, the CPC processed the return and issued the intimation on 28.06.2024 wherein TDS credit to the tune of Rs.2,382/- was not provided as appearing in form 26AS. The assessee filed rectification petition on 28.02.2024 to rectify the mistake apparent on record. The CPC in its order also disallowed remuneration and interest paid to the partners to the tune of Rs.3,69,663/- without any intimation to the assessee or granting opportunity of being heard. Aggrieved by the order passed u/s 154 by the CPC, the assessee preferred an appeal before the Ld.CIT(A).
3. The submission of the assessee before the Ld.CIT(A) was that, the disallowance of Rs.3,69,663/- was not the issue raised by the assessee in its application filed u/s 154 dated 28.02.2024. However, disallowance in relation of the same was made, without granting an opportunity of being heard to the assessee. It was submitted that, the credit of TDS amounting to Rs.2,289/- was also not granted to the assessee though the same reflected in 26AS.
3.1 The Ld.CIT(A) after considering the submission of the assessee observed and held as under:
“7. The gist of the afore-stated decisions is that: - (i) A judgment is open to review inter alia if there is a mistake or an error apparent on the face of the record. (ii) A judgment pronounced by the Court is final, and departure from that principle is justified only when circumstances of a substantial and compelling character make it necessary to do so. (iii) An error which is not self-evident and has to be detected by a process of reasoning, can hardly be said to be an error apparent on the face of record justifying the court to exercise its power of review. (iv) In exercise of the jurisdiction under Order 47 Rule 1 CPC, it is not permissible for an erroneous decision to be “reheard and corrected.” (v) A Review Petition has a limited purpose and cannot be allowed to be “an appeal in disguise.”
(vi) Under the guise of review, the petitioner cannot be permitted to reagitate and reargue the questions which have already been addressed and decided. (vii) An error on the face of record must be such an error which, mere looking at the record should strike and it should not require any long-drawn process of reasoning on the points where there may conceivably be two opinions. (viii) Even the change in law or subsequent decision/ judgment of a co-ordinate or larger Bench by itself cannot be regarded as a ground for review.” The above discussion makes it clear that the issue is a controversial one and is yet to attain finality. Therefore, being a controversial issue, this issue is beyond the ambit of provisions of section 154 of the Act. Various courts of law have time and again held that any controversial issue cannot be entertained u/s 154 of the Act, as the same cannot be stated to be "mistake apparent on record". Therefore, there is no scope in interfering with the Order and it is upheld.”
Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this tribunal.
4. The Ld.AR submitted that an adjustment to the income can be made in the rectification proceedings u/s 154 of the Act only if the same is in relation to apparent on record.
4.1 He submitted that the remuneration and interest paid to the partners was originally claimed by the assessee and allow in the intimation issued u/s 143(1) of the Act. He submitted that if at all any amendment to the total income is to be made that will have an effect of enhancing the assessment or reducing the refund if otherwise increasing the liability of the assessee, could be done only by issuing a notice to the assessee and granting proper opportunity of being heard to the assessee. He placed reliance on the following decisions of Hon’ble Bombay High Court and Coordinate Bench of this Tribunal:
“2.4.1. Bharat Serums and Vaccines Ltd, v. Deputy Commissioner of Income Tax [2024] 162 taxmann.com 102 (Bombay) /[2024] 299 Taxman 246 Bombay 2.4.2. Hukamchand Mills Ltd v. Income Tax Officer, [1983] 15 TTJ 506 (Bombay)[31-08-1982] 2.4.3 SAHYADRI AEROSOLS LTD. (IN LIQUIDATION) V. ASSISTANT COMMISSIONER OF INCOME TAX [2007] 112 TTJ 962 (Mumbai)[ 16-04-2007]” 4.2 The Ld.AR submitted that the TDS credit claimed by the assessee in its application could be the only issue that could be considered in the order u/s 154 of the Act to such application. And if any new adjustment is to be made, a notice in respect of same must be issued calling upon assessee to furnish its response to such new proposed adjustment.
4.3 On the contrary, the Ld.DR relied on the order passed by authorities below. I have perused the submission advanced by both sides in the light of records placed before me.
5. Before this Tribunal it is the case of the assessee that no notice was issued in respect of the disallowance made of Rs.3,69,663/- being the remuneration and interest paid to the partners. It is also an admitted fact that the said adjustment was made by the CPC in an application u/s 154 made by the assessee requesting to grant the TDS credit of Rs.2,382/- appearing in form 26AS.
5.1 In my view such adjustment enhancing the disallowance cannot be permitted to be done which is not a mistake apparent on record in so far as the application u/s 154 filed by the assessee concerned. The revenue has other remedies under the statute to correct such issues u/s 147 or 263 of the Act. An enhancement of income or disallowance of a claim without granting opportunity of being heard to the assessee, and without issuing a notice, is bad in law and against principles of natural justice. I accordingly, quashed the order u/s 154 dated 28.06.2024 wherein the demand has been raised upon the assessee by disallowing the claim of assessee in respect of remuneration and interest paid to the partners. The Ld.AO is directed to restrict its verification only in respect of the TDS got claimed in the application filed u/s 154 by the assessee in accordance with law.
6. Accordingly, the grounds of appeal raised by the assessee stands allowed.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 14.01.2025
Sd/- (BEENA PILLAI) Judicial Member AKV (On Tour to Mumbai) Copy of the order forwarded to:
(1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order
Babu U Chokshi, Vs. AO, CPC, 601, Chandra Kutir Bhauji Bangalore, Dadaji Road Matunga West. Maharashtra. PAN:[AADFB6520F] (Appellant) (Respondent)
Appellant by Sh. Sanjay Chokshi, AR Respondent by Ms. Kavitha Kaushik, Sr. D.R. Date of Hearing 02.01.2025 Date of Pronouncement 14.01.2025
ORDER Per: Smt. Beena Pillai, J.M.: Present appeal filed by the assessee is against the order passed by NFAC, Delhi, dated 27.09.2024 for assessment year 2019-20 on the following grounds of appeal:
1. 1. The Learned Assessing Officer at the centralized processing centre (hereinafter referred to as CPC) in assessing the income of the assessee and The Commissioner of Income Tax Appeals - National Faceless Appeals Centre (hereinafter referred to as CIT-A-NFAC) in confirming the assessment at Rs. 4,46,105/- instead of Rs. 96,440/- as represented by the assessee.
2. The Learned Assessing Officer at the CPC in rectification proceedings in relation to the rectification application by the assessee under section 154 of the Income Tax Act, 1961 (hereinafter referred to as the Act) erred in making a disallowance of Rs. Rs. 3,69,663/- and the CIT-A-NFAC in confirming the same being interest and remuneration paid to partners which was duly allowed in the original intimation issued under section 143(1) of the Act without providing an opportunity to the assessee as required under section 154(3) of the Act.
3. The Learned Assessing Officer at the CPC erred in making a disallowance of Rs. Rs. 3,69,6637- being interest and remuneration paid to partners in the rectification proceedings and the CIT-A-NFAC in confirming the same as the same cannot be considered mistake apparent on records as envisaged in section 154 of the Act.
4. The Learned Assessing Officer at the CPC erred in not allowing the TDS credit to the tune of Rs. 2,382/- both while issuing the intimation under section 143(1) of the Act and while passing the rectification order under section 154 of the Act leading to demand of Rs.2,289/- in the intimation under section 143(1) of the Act and Rs.134290/- in the rectification order passed under section 154 of the Act.”
Brief facts of the case are as under:
The assessee filed its return of income year under consideration on 30.09.2022, the CPC processed the return and issued the intimation on 28.06.2024 wherein TDS credit to the tune of Rs.2,382/- was not provided as appearing in form 26AS. The assessee filed rectification petition on 28.02.2024 to rectify the mistake apparent on record. The CPC in its order also disallowed remuneration and interest paid to the partners to the tune of Rs.3,69,663/- without any intimation to the assessee or granting opportunity of being heard. Aggrieved by the order passed u/s 154 by the CPC, the assessee preferred an appeal before the Ld.CIT(A).
The submission of the assessee before the Ld.CIT(A) was that, the disallowance of Rs.3,69,663/- was not the issue raised by the assessee in its application filed u/s 154 dated 28.02.2024. However, disallowance in relation of the same was made, without granting an opportunity of being heard to the assessee. It was submitted that, the credit of TDS amounting to Rs.2,289/- was also not granted to the assessee though the same reflected in 26AS.
3.1 The Ld.CIT(A) after considering the submission of the assessee observed and held as under:
“7. The gist of the afore-stated decisions is that: - (i) A judgment is open to review inter alia if there is a mistake or an error apparent on the face of the record. (ii) A judgment pronounced by the Court is final, and departure from that principle is justified only when circumstances of a substantial and compelling character make it necessary to do so. (iii) An error which is not self-evident and has to be detected by a process of reasoning, can hardly be said to be an error apparent on the face of record justifying the court to exercise its power of review. (iv) In exercise of the jurisdiction under Order 47 Rule 1 CPC, it is not permissible for an erroneous decision to be “reheard and corrected.” (v) A Review Petition has a limited purpose and cannot be allowed to be “an appeal in disguise.”
(vi) Under the guise of review, the petitioner cannot be permitted to reagitate and reargue the questions which have already been addressed and decided. (vii) An error on the face of record must be such an error which, mere looking at the record should strike and it should not require any long-drawn process of reasoning on the points where there may conceivably be two opinions. (viii) Even the change in law or subsequent decision/ judgment of a co-ordinate or larger Bench by itself cannot be regarded as a ground for review.” The above discussion makes it clear that the issue is a controversial one and is yet to attain finality. Therefore, being a controversial issue, this issue is beyond the ambit of provisions of section 154 of the Act. Various courts of law have time and again held that any controversial issue cannot be entertained u/s 154 of the Act, as the same cannot be stated to be "mistake apparent on record". Therefore, there is no scope in interfering with the Order and it is upheld.”
Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this tribunal.
The Ld.AR submitted that an adjustment to the income can be made in the rectification proceedings u/s 154 of the Act only if the same is in relation to apparent on record.
4.1 He submitted that the remuneration and interest paid to the partners was originally claimed by the assessee and allow in the intimation issued u/s 143(1) of the Act. He submitted that if at all any amendment to the total income is to be made that will have an effect of enhancing the assessment or reducing the refund if otherwise increasing the liability of the assessee, could be done only by issuing a notice to the assessee and granting proper opportunity of being heard to the assessee. He placed reliance on the following decisions of Hon’ble Bombay High Court and Coordinate Bench of this Tribunal:
“2.4.1. Bharat Serums and Vaccines Ltd, v. Deputy Commissioner of Income Tax [2024] 162 taxmann.com 102 (Bombay) /[2024] 299 Taxman 246 Bombay 2.4.2. Hukamchand Mills Ltd v. Income Tax Officer, [1983] 15 TTJ 506 (Bombay)[31-08-1982] 2.4.3 SAHYADRI AEROSOLS LTD. (IN LIQUIDATION) V. ASSISTANT COMMISSIONER OF INCOME TAX [2007] 112 TTJ 962 (Mumbai)[ 16-04-2007]” 4.2 The Ld.AR submitted that the TDS credit claimed by the assessee in its application could be the only issue that could be considered in the order u/s 154 of the Act to such application. And if any new adjustment is to be made, a notice in respect of same must be issued calling upon assessee to furnish its response to such new proposed adjustment.
4.3 On the contrary, the Ld.DR relied on the order passed by authorities below. I have perused the submission advanced by both sides in the light of records placed before me.
Before this Tribunal it is the case of the assessee that no notice was issued in respect of the disallowance made of Rs.3,69,663/- being the remuneration and interest paid to the partners. It is also an admitted fact that the said adjustment was made by the CPC in an application u/s 154 made by the assessee requesting to grant the TDS credit of Rs.2,382/- appearing in form 26AS.
5.1 In my view such adjustment enhancing the disallowance cannot be permitted to be done which is not a mistake apparent on record in so far as the application u/s 154 filed by the assessee concerned. The revenue has other remedies under the statute to correct such issues u/s 147 or 263 of the Act. An enhancement of income or disallowance of a claim without granting opportunity of being heard to the assessee, and without issuing a notice, is bad in law and against principles of natural justice. I accordingly, quashed the order u/s 154 dated 28.06.2024 wherein the demand has been raised upon the assessee by disallowing the claim of assessee in respect of remuneration and interest paid to the partners. The Ld.AO is directed to restrict its verification only in respect of the TDS got claimed in the application filed u/s 154 by the assessee in accordance with law.
Accordingly, the grounds of appeal raised by the assessee stands allowed.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 14.01.2025