BHAWANI CHEM,JAIPUR vs. ASSESING OFFICER, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, ‘’SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: Hon’ble SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 279/JP/2021 fu/kZkj.k o"kZ@Assessment Year : 2018-19 cuke M/s. Bhawani Chem The ITO 53, Kaushal Nagar, Sanganer Vs. Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAKFB 9086 D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Ashok Kanodia, CA jktLo dh vksj ls@ Revenue by: Smt. Monisha Choudhary, JCIT lquokbZ dh rkjh[k@ Date of Hearing : 17/11/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 14/12/2022 vkns'k@ ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 9-09-2021, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2018-19 wherein the assessee has raised the following ground of appeal. ‘’1. Under the facts and circumstances of the case the ld. CIT(A) was not justified while confirming the demand u/s 154 raising the demand of Rs.3,01,650/-.

2 ITA NO. 279/JP/2021 M/S. BHAWANI CHEM VS ITO 2. Under the facts and circumstances of the case ld. CIT(A) was not justified overlooking the grounds filed against the order u/s 154 by making the academic discussion u/s 143(1) proving the order as advisory in nature. 3. Under the facts and circumstances of the case the ld. CIT(A) was not justified while confirming the addition of Rs.8,14,617/- on account of salary to partners Rs.3,45,419/- and interest of partners Rs.4,69,198/-. 4. Under the facts and circumstances of the case the ld. CIT(A) was not justified while confirming the demand u/s 154 on the sole reason that appeal has not been filed against the order u/s 143(1).’’ 2.1 At the outset of the hearing of the case, the Bench noted that there is delay of 15 days in filing the appeal by the assessee for which the assessee filed an affidavit dated 15th Nov. 2022 praying therein as under:- ‘’2. That the time of filing appeal before the Tribunal was on 12-11-2021 and it was filed online on 10-11-2021 and physical copy was filed on 26-111-2021. However, it has been informed by the Registry that appeal is delayed for 15 days. 3. That due to the continuous ill health issue since 10-11-2021, it could not be possible to file on due date, therefore physical copy was filed before registry on 26-11-2021. Therefore, appeal was delayed by 15 days which was beyond the control of the appellant.’’

2.2 On the other hand, the ld. DR opposed the condonation application of the assessee.

3 ITA NO. 279/JP/2021 M/S. BHAWANI CHEM VS ITO 2.3 After hearing both the parties and perusing the materials available on record including the affidavit of the assessee, the Bench finds that the assessee is prevented by sufficient cause in late filing the appeal. Hence, in view of the decision of Hon’ble Supreme Court in the case of Collector, land Acquisition vs. MSt. Katiji and Others, 167 ITR 471, the delay of 15 days in filing the appeal by the assessee is condoned. 3.1 Brief facts of the case are that the assessee is a firm and the return of income was filed by the assessee showing a total income of Rs.80,280/-. In assessment proceedings, the AO made the addition of Rs.3,45,419/- on account of salary paid to partners and interest paid to partners amounting to Rs.4,69,198/- . Accordingly, the income was assessed and intimation u/s 143(1) dated 31-05-2019 was issued. The assessee did not file appeal against this intimation and filed rectification petition u/s 154 of the Act on 20-03-2020 which was rejected by the CPC Bangalore. 3.2 Aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A), NFAC, Delhi who dismissed the appeal of the assessee by observing as under:- 5. Decision I have carefully considered the facts and circumstances of the case and statement of facts and grounds of appeal filed by the appellant. I have also

4 ITA NO. 279/JP/2021 M/S. BHAWANI CHEM VS ITO carefully gone through the rectification order u/s 154 dated 5-05-2020. 5.1 Ground No. 1 to 3 5.1.1. These grounds of appeal are not related to mistake apparent from record i.e. out of order u/s 143(1) of the Act but all are related to addition of Rs.3,45,419/- on account of salary to partners and Rs.4,69,198/- on account to partners. From form number 35, it is clear that appeal has been filed against order u/s 154 of the Act and not against the original intimation u/s 143(1). 5.1.2 Now the extracts of Section 154 of the Act is reproduced below for appreciating the issue:-. ‘’(1) With a view to rectify any mistake apparent from record an income tax authority referred under section 116 may 1. Amend any order passed by it 2. Amend intimation or deemed intimation under section 143(1) ….. The Income Tax Authorities referred under section 116 may amend any ORDER passed by it or Intimation under section 143(1), if found any mistake apparent from the record. Further, the literal interpretation of the mistake apparent from the record means "A mistake apparent from the record must be an obvious and patent mistake and not something which is established by a long-drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent on record". Thus, the order passed by CPC, Bangalore is rectifiable but then the mistake should be apparent from the record. There are a catena of case laws on this aspect, wherein it has been emphasized that mistake must be obvious and patent. Some of them are quoted below: 1. TS Balram, ITO vs. Volkart Bros. Ors. 82 ITR 50(SC) Mistake must be obvious and apparent. - not something which can be established by a long

5 ITA NO. 279/JP/2021 M/S. BHAWANI CHEM VS ITO drawn process of reasoning on points on which there may be two opinions. 2 CIT vs Lakshmi Prasad Lahkar [11996) 220 ITR 100 Gauhati)]- Mistake means commission that is not designed and which is obvious and something which has no two opinions or which is debatable. C. Ram Lal Raivadiua Vs. CIT 104 CTR 403 (Calcutta High Court):- A highly debatable question cannot be made amenable to the rectification jurisdiction." 5.1.3 The intimation order was passed u/s. 143(1) on 31.05.2019, which was appealable. However, the appellant has not filed any appeal against the intimation order within the specified time period. Rather, the appellant has filed rectification application u/s. 154. In response, the rectification order was passed on 05.05.2020, wherein no changes have been made by the ADIT, CPC, Bangalore and passed same as original order, as no mistakes apparent from record were found. The appellant agitated against the rectification order and filed the instant appeal. On perusal of the grounds of appeal, no ground has been raised in respect to rectification of mistake which is alleged to be apparent from record. 5.1.4 If the appellant was aggrieved by addition of Rs. 3,45,419/- on account of salary to partners and Rs. 4,69,198/- on account of interest to partners, it should have challenged the said order by filing appeal against the same. Apparently, the appellant has chosen not to do so. It has later on, filed a rectification petition u/s 154 and claimed that the said additions were a mistake apparent from the record. In rectification, the most important aspect which needs to be looked into is, whether the claim of the appellant is within the scope of section 154 or not. Scope of rectification is limited to correcting error of fact or error of law, on the basis of material available on record. In the appeal under consideration the appellant has sought rectification on issues which will require fresh investigations of facts. The appellant has tried to use appeal against rejection of rectification application as a method to challenge the intimation u/s 143(1), as it has not filed any appeal against the same. 5.1.5 The addition of Rs. 3,45,419/- on account of salary to partners and Rs. 4.69.198/- on account of interest to partners could have been looked into once the appeal would have been filed against the order u/s. 143(1) of the Act. But, for rectification purpose, issues cannot be examined which are not apparent from the record. The appeal against order u/s. 154 has been filed to agitate the grievances against the order u/s. 143(1) of the Act. It is explicitly clear that the grounds of appeal filed by the appellant company are not eminating from the order u/s. 154 of the Act. The appellant cannot use proceeding u/s. 154 to file appeal against the

6 ITA NO. 279/JP/2021 M/S. BHAWANI CHEM VS ITO intimation u/s. 143(1) of the Act. Thus, the appeal on this issue is not admissible and therefore, dismissed. 5.2 Ground No. 4 & 5:- are general in nature and does not require specific adjudication. 6. Thus, the appeal filed by the appellant is Dismissed u/s. 250 read with section 251 of Income tax Act, 1961.’’ 3.3 During the course of hearing, the ld. AR prayed that the lower authorities have erred in confirming the addition for which following written submission has been filed by the ld. AR of the assessee. ‘’The main issue in this case relates to disallowance of Rs 469198.00 as interest to partners and Rs 345419.00 as salary to partners u/s 40b on the basis of tax audit report filed (P.B NO 44) with return of income in which same amount was written in admissible as well as inadmissible due to typing. error informed vide intimation u/s 143(1) against the said intimation. assessee filed rectification u/s 154 clarifying that due to typing error in tax audit report amount was shown in admissible as well inadmissible and auditors certificate was also enclosed (P.B NO 34) along with computation of total income and in return of income (P.B. No. 35-37) and copy of partners' capital account which was rejected without assigning any reason. It is respectfully submitted that in fact appellant had paid Rs 469198.00 as interest to partners and Rs 345419.00 as salary to partners which is also appearing in capital account of the partners( P.B. No. 31-32) and which is admissible which is apparent from the computation of total income and which has been shown correctly shown in return of income (P.B. No. 35- 38) against these order u/s 154 appeal was filed before CIT appeals who passed the order without considering facts of the case confirmed the disallowance and asserted that assessee should filed the appeal against the intimation u/s 143(1) instead of order u/s 154 even a single word has not been discussed about the grounds of appeal and disallowance made in the order u/s 154. It is further submitted that CIT appeal has stated in his order that appellant should file the appeal against the intimation u/s 143 (1) instead of filling the appeal u/s 154 as this is long way to approach but it could not be established By the CIT that this was not mistake apparent from record and nothing has been said about ground of appeal similarly there is no restriction to file appeal u/s 154 instead u/s 143 (1)before filling the appeal. Therefore CIT appeal was not justified while confirming the disallowance u/s 40b without considering the facts of case and suggesting that appeal was liable to be file against the order u/s 143 (1) instead of order u/s 154 and rejected the appeal which is not

7 ITA NO. 279/JP/2021 M/S. BHAWANI CHEM VS ITO correct decision in the light of the facts narrated above, therefore, it is humbly prayed before yours goodself to allow admissible amount.’’ 3.4 During the course of hearing, the ld. DR supported the order of the ld. CIT(A). 3.5 The Bench has heard both the parties and perused the materials available on record. In this case, it is noted that the issue relates to disallowance of Rs.4,69,198/- on account of interest paid to partners and Rs.3,45,419/- on account of salary paid to partners u/s 40b of the Act. Whereas on the contrary, it was submitted that although the assessee had paid interest of Rs.4,69,198/- and salary of Rs.3,45,419-/- to the partners as are appearing in the capital account of the partners as well. While filing the details in Form No. 3CD, these amounts were shown inadmissible as well as in column of ‘’inadmissible’’ while processing the return u/s 143(1) of the Act and the AO ignored the admissible amount and taken into consideration the ‘’inadmissible amount’’ and thus made addition. However, immediately after coming to know about this mistake, an application for rectification was moved by the assessee but the said application was dismissed against which the assessee filed the appeal before the ld. CIT(A), NFAC, Delhi who while rejecting the appeal of the assessee concluded that in case the assessee was aggrieved by the addition then in that eventuality, the assessee should have challenged the said order by filing the appeal against the same but instead of filing the appeal the assessee had chosen to file rectification petition u/s 154 of the Act

8 ITA NO. 279/JP/2021 M/S. BHAWANI CHEM VS ITO which is not maintainable and thus rejected the appeal filed by the assessee without discussing the merit of the claim raised by the assessee. The Bench has perused copy of capital account of the partners which is placed at PBP 31 to 32, is duly audited by the Auditors and also perused the computation of total income which is placed at PBP 35 to 38. After going through the entire documents placed on record, it is found that there was typing error as has been mentioned by the ld. AR in clause 21(c) of the statement as the amount of remuneration and interest i.e. admissible and inadmissible cannot be same. The amount mentioned in the column of ‘’amount inadmissible’’ have been wrongly entered and should have been considered as ‘’Zero’’ i.e. interest and remuneration u/s 40b. In this regard, the certificate of C.A. is also placed on record at PBP 34 who conducted the Audit u/s 44AB of the Act alongwith computation of total income. Thus from these documents, it becomes clear that no addition could have been made by the AO. However, Revenue Authorities rejected the rectification application in a mechanical manner without going into the facts of the case. The Bench has also perused the CBDT Circular No. 14 (XL 35) of 1955 dated 11-04-1955 which is relevant in the present case as it has been categorically mentioned in that Circular that taxpayer should be guided by the AO to file the correct return and to allow him to the deductions which he is entitled under the Income Tax Act, 1961. However, in the instant case, instead of allowing the ‘’admissible amount’’, the

9 ITA NO. 279/JP/2021 M/S. BHAWANI CHEM VS ITO AO on the contrary disallowed the amount without any justification and without looking into the reality of the facts of the case as the assesee was legally entitled for deduction. The Bench finds that Hon’ble Supreme Court in number of cases has held that real income should be assessed which in the Bench view has not been done in this case. Therefore, considering the totality of the facts and circumstances of the case, the Bench feels that the assessee is entitled to deduction u/s 40b of the Act and thus the AO is directed to delete the addition which has been made while relying upon the amount wrongly mentioned by the assessee in the column of ‘’inadmissible’’. Thus the appeal of the assessee is allowed. 4.0 In the result, the appeal of the assessee is allowed Order pronounced in the open court on 14 / 12/2022. Sd/- ¼lanhi xkslkbZ½ (Sandeep Gosain) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 14 /12/2022 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- M/s. Bhawani Chem, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 279/JP/2021) vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेजज. त्महपेजतंत