THE ITO, VIJAYAWADA vs. SRI M.N.S.VENKATESWARA RAO, VIJAYAWADA

Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) allowed the appeal of the assessee holding that the assessment made by the AO is outside the scope of Section 154 of I.T.Act. For the sake of clarity and convenience, we extract relevant paragraphs of the CIT(A) order which reads as under :

In the revised Return of Income, credit in appellant's capital account of Rs10lakh (being share profit) was offered for tax and appellant claimed rebate u/s88E of the Act as appellant paid STT to the tune of Rs.3,05,488/ -. Appellant enclosed Form 10DB in this regard. Assessing Officer while passing scrutiny assessment order examined all relevant details and allowed the rebate. 5.1. Rectification order was subsequently passed for the reason that the profit did not arise from taxable securities transactions and hence appellant is not entitled for rebate u/s88E of the Act. In the case of T.S. Balram, ITO Vs. Vdkart Bros (1971) 82 ITR 50 (SC), Hon’ble Apex Court held that a mistake which can be rectified u/s. 154 is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration (i.e.) debatable point of view. Courts have held in several decisions that where the controversy can be resolved only by way of a complicated process ofinvestigation, recourse cannot be taken to Sec.154 of the Act. CIT Vs. Delhi Cement Stockists (1971)81 ITR 515 (Del). 5.2. Without detailed examination of securities transactions, Assessing Officercannot hold that the claim of appellant for rebate u/s.88E of the Act is an after thought when appellant enclosed Form 10 DB and the same was accepted in the scrutiny assessment order dated 30.12.2008, Assessing Officer did not find any defect in such form in rectification proceedings also. In the revised computation it is clearly mentioned that profits of Rs.5,08,484/- are from share business only. Assessing Officer in his order u/s154 of the Act did not bring in any evidence to controvert this claim of appellant. 5.3. Hence I hold that rectification order passed for disallowance u/s.88E of theAct is outside the scope of Sec.154 of the Act. Consequently, rectification order passed is not in accordance with law.”

Aggrieved by the order of the Ld.CIT(A), the revenue is in appeal before this Tribunal. During the appeal hearing, the Ld.DR argued that withdrawing of rebate u/s 88E is a mistake apparent from record which can be rectified u/s 154.

On the other hand, Ld.AR supported the order of the Ld.CIT(A).

We have heard both the cases and perused the material placed on record. In this case as observed from the Ld.CIT(A) order, the assessee filed Form 10DB which was accepted by the AO in the assessment order. The assessee also submitted revised computation of income stating that the profits are from share business. Once the assessee admitted profit from share transactions, the issue with regard to the allowing rebate u/s 88E is subject to verification of the material and debatable issue which is not mistake apparent from record for rectification u/s 154. we hold that the Ld.CIT(A) rightly held the rectification order passed by the AO for disallowance of rebate u/s 88E is outside the scope of Section 154 of I.T.Act. Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue.