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Income Tax Appellate Tribunal, DELHI BENCH “C” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER AMIT SHUKLA, JM:
The aforesaid appeal has been filed by the assessee against the impugned order dated 25.07.2016, passed by Ld. Commissioner of Income Tax (Appeals)-XXII, in relation to the order passed u/s.154 for the Assessment Year 2008-09. In the grounds of appeal
, the assessee has raised the following grounds:
1. That on the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) [‘CIT(A)’] erred in dismissing in limine, the appeal filed by the appellant against the order dated 28.07.2015 read along with order dated 19.02.2015, both passed under section 154 of the Income Tax Act, 1961 (‘the Act’). 1.1 That the CIT(A) erred in dismissing the appeal holding that the grounds of appeal raised by the appellant did not pertain to/arise from the rectification order dated 28.07.2015, which was under challenge, that too, without affording any opportunity of being heard to the appellant.
1.2 That the CIT(A) erred on facts and in law in not appreciating that rectification order dated 19.02.2015 stood merged with the subsequent order dated 28.07.2015 and thereby appeal filed by the appellant was sustainable and ought to have been admitted and decided on merits. On Merits 2. Without prejudice, that the CIT(A) erred on facts and in law in not deleting disallowance of prior period expenditure of Rs.25,76,38,511 made in the impugned rectification order(s) passed under section 154 of the Act. 2.1 That the Ld. CIT(A) erred on facts and in law in not appreciating that the issue of allowability of prior period expense, was, in any case, a debatable issue, and not a ‘mistake apparent from record’ rectifiable under section 154 of the Act.”
The assessee is a Government of India undertaking, engaged in the business of production of liquified petroleum gas and other natural gases, processing, transmission, fractionation and sales/distribution. The return of income was filed electronically on 29.09.2008 at Rs.3513,01,83,570/- and the order was passed u/s.143(3) vide order dated 24.12.2010 assessing the income at Rs.3779,17,08,542/-. Subsequently, the Assessing Officer passed an order u/s.154 dated 19.02.2015 revising the income to Rs.3827,81,08,542/- after making disallowance of prior period expenditure of Rs.28.64 crore. Later, on the application of the assessee u/s 154 income was further rectified and revised to Rs.3824,93,47,053/- vide order dated 28th July, 2015. The assessee during the year under consideration has offered to tax, prior period income of Rs.21.75 crores, which was net of the prior period income of Rs.50.39 crore and prior period expenditure of Rs.28.64 crore. This amount of Rs.28.64 crores was disallowed by Assessing Officer vide order dated 09.02.2015. Thereafter, assessee has filed an application dated 04.03.2015 pointing out that amount of disallowance of Rs.28,64,00,000/- includes amount of Rs.2,87,61,489/- which was the amount of prior period depreciation disallowed by the assessee suo motu. Ld. Assessing Officer besides other points has accepted the assessee’s contention and he reduced the income of the assessee by an amount of Rs.2,87,61,489/-.
In the appeal before the Ld. CIT (A), the assessee challenged the entire disallowance of prior period expenditure of Rs.25,76,38,511/-. This addition was basically arising out of rectification order dated 09.02.2015, wherein the Assessing Officer has made disallowance of Rs.28,64,00,000/- which though was further reduced to the extent of Rs.2,87,61,489/- in the impugned rectification order dated 28.07.2015.
Ld. CIT (A) held that the present appeal filed by the assessee is against the order u/s.154 passed on 28.07.2015, however, the issue of disallowance and grounds of appeal raised pertain to grievance arising from the order u/s.154 dated 19.02.2015 wherein the Assessing Officer has disallowed the entire prior paid expenditure. In the present rectification order u/s.154 dated 28.07.2015 only a relief of Rs.287,61,489/- was requested which has been allowed by the Assessing Officer. He held that since the grounds of appeal raised do not pertain to the order under appeal, he thus, dismissed the appeal. However, he clarified that this order shall not prejudice any legal right to the appeal pertaining to the order dated 19.02.2015 if otherwise available under the law.
4. Before us, the ld. counsel for the assessee though made a very detailed submission, however in sum and substance, he submitted that earlier order u/s.154 got merged with the subsequent order u/s.154, and therefore, the disallowance made by the Assessing Officer in the original rectification order can be challenged in the present proceedings. He submitted that if the appeal was defective, then the ld. CIT (A) should have granted opportunity for removing the defect or otherwise there was any technical defect then notice should have been issued. He submitted that assessee has a right for remedy and right to appeal if there is a wrong levy of tax or disallowance have been made which otherwise could not have been made on the facts and in law and there was a clear cut mistake apparent from the record, therefore, this issue of disallowance of Rs.25,76,38,511/- should be decided in the present proceedings itself.
5. On the other hand, ld. DR submitted that here in this case the assessee had a grievance on account of disallowance of prior paid expenditure made in the first rectification order dated 19.02.2015 for which there was a separate legal remedy. It was on assessee’s application u/s.154 requesting the Assessing Officer to grant relief of Rs.2,87,61,489/- which has already been allowed by the Assessing Officer, there was no grievance of the assessee against the order u/s.154, therefore, the Ld. CIT(A) has rightly dismissed the appeal.
We have heard the rival submissions and perused the material available on record. In the grounds of appeal raised before us, the assessee has challenged the disallowance of prior paid expenditure of Rs.25,26,38,511/-. This disallowance was made in the first rectification order dated 19.02.2015 wherein the Assessing Officer has made disallowance of prior paid expenditure of Rs.28,64,00,000/-. Thereafter, assessee has made an application on 04.03.2015 pointing out various mistakes and one of such mistake was that the amount of disallowance of Rs.28,64,00,000/- includes the amount of Rs.287,61,489/- which was on account of prior paid depreciation suo motu disallowed by the assessee, therefore, same should be rectified. The Assessing Officer accepted the assessee’s application and reduced the said amount. Now before the ld. CIT (A) and before us, the ld. counsel is agitating that the entire disallowance of expenditure in fact could not have been made on merits. Though, no fault can be found in the order of the Ld. CIT (A), because in so far as second rectification order dated 28.07.2015, no disallowance has been made; and in fact whatever relief was sought by the assessee in its application has been allowed. Ld. counsel has also informed that assessee has even filed second set of rectification application before the Assessing Officer against order dated 09.02.2015, wherein it has challenged the entire disallowance of prior period expenditure which has not been disposed off; and secondly, it has also been prayed before us that liberty should be given to file the appeal before the first appellate authority against the first rectification order passed u/s.154 dated 19.02.2015. These pleas have been taken only by way of alternative contention, otherwise the main contention of the ld. counsel is that the first rectification order has been merged with the second rectification order, and therefore, all these issues arising in the first rectification order are open and can be challenged by the assessee. However, we are unable to accept this contention of the ld. counsel, because the right course of remedy would have been that assessee should have filed the appeal before the appellate forum against the first rectification order dated 19.02.2015 and/ or had filed an application for rectification against the said order. Since right to appeal is a substantial right and if any disallowance has been made which otherwise is not sustainable in law and on facts, then such a legal remedy is always available to the assessee in the interest of substantial justice.
7. Accordingly, on the facts of the present case, we are granting liberty to the assessee to file appeal before the first appellate authority against the first rectification order dated 19.02.2015 along with petition for condonation of delay where it can challenge such disallowance in the said appeal. Further, Assessing Officer is also directed to dispose of the rectification application if the assessee has filed such an application against first rectification order dated 19.02.2015 expeditiously; and whatever may the outcome of such rectification, the assessee can explore the legal remedy of appeal for redressing its grievance. With this direction, though technically appeal of the assessee is treated as dismissed but subject to our aforesaid direction.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 9th October, 2020.