MC MOWJEE & CO PRIVATE LIMITED,KOLKATA vs. I.T.O. WARD-4(1), KOLKATA

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ITA 2118/KOL/2024Status: DisposedITAT Kolkata17 March 2025AY 2015-16Bench: SHRI RAJESH KUMAR (Accountant Member), SHRI PRADIP KUMAR CHOUBEY (Judicial Member)4 pages

AI SummaryAllowed

Facts

The assessee filed a return for AY 2015-16, which was assessed under Section 143(3). After a rectification order allowing MAT credit, a successor AO initiated new rectification proceedings under Section 154, disallowing director's remuneration of ₹31,35,000/- paid in cash. The CIT(A) dismissed the assessee's appeal, misconstruing facts regarding the director's age.

Held

The Tribunal held that the disallowance of director's remuneration under Section 154 was not an apparent mistake but a debatable issue involving interpretation of the Act. Rectification under Section 154 is permissible only for glaring mistakes apparent from the record, not for debatable questions. Thus, the rectification proceedings and the resulting addition were set aside.

Key Issues

Whether a debatable issue involving the disallowance of director's remuneration can be rectified under Section 154 of the Income Tax Act, 1961 as a 'mistake apparent from record'.

Sections Cited

143(1), 143(3), 154, 40(b)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

CIT v. Hero Cycles (P.) Ltd.
228 ITR 463 · 1997 · SC
262 citing
Md. Serajuddin & Brothers v. CIT
210 Taxmann 84 · 2012 · HC
16 citing

Income Tax Appellate Tribunal, “C” BENCH, KOLKATA

For Appellant: Shri Akkal Dudhewala, AR

For Respondent: Shri Arup Chatterjee, DR

Hearing: 10.03.2025Pronounced: 17.03.2025

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 06.09.2024 for the AY 2015-16.

The only issue pressed at the time of hearing by the Counsel of the assessee is against the ground no.2, which is extracted below:-

The facts in brief are that the assessee filed the return of income on 16.10.2015, declaring a total income of ₹29,80,320/-, which was processed u/s 143(1) of the Income-tax Act, 1961 (the Act). The case of the assessee was selected for limited scrutiny and statutory notices were duly issued and served upon the assessee. The assessee

In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee by mis-construing the facts as to the assessee’s age. The ld. CIT (A) noted that in Para 1.4, the appellate stated that Mr. Sajid Mowjee is aged 61 years, however ld. CIT(A) noted that in Para 1.6 as well as in the accompanying affidavit, the age of Mr. Sajid Mowjee is shown as 66 years.

After hearing the rival contentions and perusing the materials available on record, we find that the ld. AO has initiated the proceedings u/s 154 of the Act by passing an order by making disallowance of ₹31,35,000/- in respect of director’s remuneration paid in cash, which is not an apparent mistake in the records and cannot be rectified by resorting to the provisions of Section 154 of the Act. In our opinion, the said issue is debatable issue and cannot be rectified u/s 154 of the Act. We note that the correct appreciation of this issue involves the interpretation of provision of the Act and therefore, the jurisdiction exercise u/s 154 of the Act is bad in law. The case of the assessee find force from the decision of Hon'ble Apex Court in the case of CIT vs. Hero Cycles (P). Ltd. 228 ITR 463 (SC), wherein Hon'ble Supreme Court held that rectification u/s 154 of the “1.4. Similar view was expressed by the Calcutta High Court in the case of Md. Serajuddin & Bros. Vs CIT (210 Taxman 84). In the decided case, the AO had initiated rectification proceedings u/s 154 on account of excessive claim of deduction by the assessee firm on account of partner's remuneration u/s 40(b) of the Income-tax Act, 1961. It was the Department's contention that profits of the business alone was to be considered as 'book profit' for the purposes of Section 40(b) and income earned from any other sources was to be ignored. On appeal the assessee challenged the validity of the proceedings u/s 154 since the question of determination & quantification of partner's remuneration was a debatable question both on facts and in law. The High Court accepted the assessee's contention and held the question of manner of determination of 'book profit for the purposes of Sec 40(b) was a contentious issue and had been considered by various judicial forums. In the circumstances it was held that such debatable issue cannot be a ground for rectification under Section 154 of the said Act and therefore the order passed u/s 154 was quashed.”