Loading judgment…
Facts
The assessee claimed a deduction u/s 80JJAA, which was initially allowed. However, the CPC later disallowed it, and a rectification order by the CPC also resulted in another disallowance u/s 80JJAA, despite correcting a double disallowance issue. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the disallowance of deduction u/s 80JJAA by the CPC u/s 154 of the Act was invalid as it was beyond the scope of Section 154. A controversial issue cannot be treated as a mistake apparent from the record for rectification under Section 154.
Key Issues
Whether the disallowance of deduction u/s 80JJAA under Section 154 of the Income Tax Act, 1961 is valid when it is a controversial issue and not a mistake apparent from record.
Sections Cited
80JJAA, 143(1), 154, 40(a)(ia), 143(1)(a)(ii), 40A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice-Shri Manjunatha, G.
Per Vijay Pal Rao, Vice President
This appeal by the assessee is directed against the order dated, 27/09/2024 of the learned CIT (A)-NFAC, Delhi, for the A.Y.2021-22.
The assessee has raised the following grounds of appeal: “1. Violation of Principles of Natural Justice.
2. The Ld. Commissioner of Income Tax (Appeals) failed to appreciate the fact that the appellant is eligible for deduction u/s 80JJAA as all the conditions laid down u/s 80JJAA have been complied with.
The Ld. Commissioner of Income Tax (Appeals) has erred in denying the deduction under section 80JJAA, failing to take into account that the deduction had already been allowed in the Intimation order under section 143(1) and that a claim for deduction was submitted through a Rectification Return under section 154.
4. The Ld. Commissioner of Income Tax (Appeals) has erred in upholding the CPC disallowance of deduction under section 80JJAA without giving due consideration to the fact that the claimed deduction aligns with the information provided in Form 10DA. 5. The Ld. Commissioner of Income Tax (Appeals) erred in disallowing the 80JJAA deduction under section 143(1)(a)(ii). 6. The Appellant craves leave to add, amend, alter or rescind any of the above grounds of appeal before or at the time of hearing.”
3. The assessee company filed its return of income on 22/02/2022 declaring total income of Rs.54,77,122/- after claiming deduction u/s 80JJAA of the I.T. Act, 1961 for Rs.6,12,505/-. The return was processed by CPC u/s 143(1) of the I.T. Act, 1961, dated 24/08/2022 whereby an adjustment on account of disallowance u/s 40(a)(ia) of the Act was made. The assessee filed rectification to point out that, there was a double disallowance u/s 40(a)(ia). The CPC while passing the rectification order dated 7/7/2023 u/s 154 of the I.T. Act, 1961 has rectified the mistake of double disallowance of the amount which was already disallowed u/s 40(a)(ia) of the Act. However, another
Page 2 of 5 adjustment was made by disallowing the claim of deduction u/s 80JJAA of the Act.
The assessee challenged the action of the CPC before the learned CIT (A) NFAC, but the appeal of the assessee was dismissed vide the impugned order.
Before the Tribunal, the learned AR has submitted that the issue of disallowance u/s 80JJAA is a debatable issue and cannot be made in the proceedings u/s 143(i)(a) of the I.T. Act, 1961. He has further submitted that even otherwise, the rectification order was passed by the CPC on the petition filed for rectification of mistake of double disallowance and therefore, the disallowance of deduction u/s 80JJAA while passing the order u/s 154 of the I.T. Act, 1961 by the CPC is not valid as well as beyond the jurisdiction u/s 143(1) of the Act. He has pointed out that the learned CIT (A) though has observed that this issue is beyond the ambit of section 154 of the I.T. Act, 1961, however, the appeal of the assessee was dismissed.
On the other hand, the learned DR has relied upon the orders of the authorities below.
We have considered the rival submissions and carefully perused the orders passed by the CPC as well as the impugned order of the learned CIT (A). We find that the assessee claimed deduction u/s 80JJAA of the I.T. Act, 1961 of Page 3 of 5 Rs.6,12,505/-. The return of income was processed by the CPC u/s 143(i) (a) of the I.T. Act, 1961 vide order dated 24/08/2022 whereby an adjustment of Rs.39,287/- was made by the CPC u/s 40A whereas the same amount was also disallowed u/s 40(a)(ia) of the Act. To rectify the mistake, the assessee filed petition u/s 154 of the Act on 3/6/2023 and consequently, the CPC passed the order u/s 154 on 7/7/2023 whereby the mistake of double disallowance was rectified but another disallowance was made on account of deduction u/s 80JJAA of the Act. On appeal, the learned CIT (A) has dismissed the appeal of the assessee as under: “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.”
Thus, the learned CIT (A) has also observed that the claim of deduction u/s 80JJAA of the Act being a controversial issue is beyond the ambit of provisions of section 154 of the I.T. Act, 1961. It is pertinent to note that the scope of rectification of mistake u/s 154 of the Act is very limited and circumvented only to rectify the mistake apparent from record and cannot be extend ed to the issues which requires a long drawn reasoning and decisions. The claim of deduction u/s 80JJAA of the Act cannot be disallowed without examining the relevant facts as well as law on the point. Accordingly, in our considered opinion, the Page 4 of 5 disallowance of deduction u/s 80JJAA of the Act by the CPC u/s 154 of the Act is not valid as the said issue is beyond the scope of provisions of section 154 of the I.T. Act, 1961 and hence the disallowance is deleted.