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Income Tax Appellate Tribunal, KOLKATA ‘B(SMC
Before: Shri P.M. Jagtap
Date of concluding the hearing : March 09, 2017 Date of pronouncing the order : March 17, 2017 O R D E R
This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-1, Kolkata dated 06.04.2016 on the following grounds:- “1. Whether on the basis of facts and circumstances of the instant case, the ld. CIT(A)-1, Kolkata has erred in holding that the rectification made u/s 154 on 28.09.2007 was bad in law on the ground of service of the rectification order after a period of 3 years from the end of the relevant year.
2. Whether on the basis of facts and circumstances of the instant case, the ld. CIT(A)-1, Kolkata has erred in holding that the rectification made u/s 154 on 28.09.2007 was bad in law as the issue involved was debatable”.
./2016 Assessment year: 1999-2000 Page 2 of 4
The assessee in the present case is a Company. As per the order passed by the Assessing Officer under section 143(3)/147 on 21.03.2006, its total income was determined at a loss of Rs.35,02,370/-. Subsequently it was noticed by the Assessing Officer that a sum of Rs.35,69,552/- shown as unpaid by the assessee on account of cess on cost of Drawings and Designs/Technical Know-how fees had remained to be disallowed and added back to the total income of the assessee under section 43B of the Act. According to him, there was thus a mistake in the order passed under section 143(3)/147 by the Assessing Officer and to rectify the same, a notice under section 154 was issued by him to the assessee on 14.08.2007. In reply to the said notice, it was submitted by the assessee before the Assessing Officer that the provision for the said cess has already been offered to tax in assessment year 2001-02 and, therefore, any disallowance of the same in the year under consideration would result in double disallowance. This submission of the assessee was not found acceptable by the Assessing Officer and vide an order dated 28.09.2007 passed under section 154 of the Act, he disallowed the sum of Rs.35,69,552/- on account of cess payable under section 43B and added the same to the total income of the assessee.
Against the order passed by the Assessing Officer under section 154, an appeal was preferred by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the addition made by the Assessing Officer on account of cess payable for the following reason given in his impugned order:- “I have carefully gone through the submission of the A.R. of the appellant and the material before me and I am of the opinion that there has been a considerable delay of more than 3 years from the date of passing the impugned order u/s 154 [28.09.2007] and the date of serving such order to the assessee on 24.12.2010. In view of the above mentioned fact, I find that there is considerable force in the submission of the appellant and also considering the judicial pronouncement in the case laws relied upon by the assessee, I find that the order passed u/s 154 on 28.09.2007 is bad in ./2016 Assessment year: 1999-2000 Page 3 of 4
law. Moreover, any Order passed u/s 154 resulting in enhancing of income of the assessee should be passed only after giving the assessee an opportunity of being heard. In the instant case, the AO in his rectification order u/s 154 dated 28.09.2007 did not consider the submission of the appellant wherein the appellant had clearly stated that such sums were not debited in the profit and loss accounts for the year under consideration and thus, disallowance of the same during the A.Y. 1999-2000 is not justified.
It is also seen that an order u/s 154 should be passed to rectify a mistake which is apparent from record. In the instant case, the question of disallowance of Rs. 35.69 Lacs is a debatable issue and has got two views [one in which the disallowance has to be made and the other in which such an amount is not liable for disallowances. The scope of Section 154 clearly mandates that only a mistake apparent from records, which is not debatable, may be rectified by the AO. In view of the above mentioned facts and circumstances, I have no hesitation is treating the rectification Order dated 28.09.20007 passed u/s 154 as illegal and bad in law. These grounds are allowed”.
Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and also perused the relevant material available on record. The ld. counsel for the assessee has reiterated before me the contention raised before the ld. CIT(Appeals) that the provision for cess in question was made by the assessee in assessment year 1998-99 and not in assessment year under consideration, i.e. 1999-2000. He has submitted that the said amount remained payable even in the year under consideration and the quantum thereof was varied only as a result of fluctuation in foreign exchange. He has also filed the audited accounts of the assessee-company for both the years under consideration to support and substantiate his contention and a perusal of the same shows that the provision for cess in question disallowed by the Assessing Officer under section 43B was actually made by the assessee in the immediately preceding year, i.e. A.Y. 1998-99 and not in the year under consideration. Moreover, as rightly held by the ld. ./2016 Assessment year: 1999-2000 Page 4 of 4 CIT(Appeals), a disallowance of such provision under section 43B involved a debatable issue and the same, therefore, was beyond the scope of rectification permissible under section 154. I, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of provision for cess under section 43B by way of rectification and upholding the same, I dismiss this appeal filed by the Revenue.