ACIT CEN CIR 20, MUMBAI vs. PAREKH ALUMINEX LTD, MUMBAI

The present appeal is filed by the Revenue against the order dated 16.05.2011 passed by the CIT(A)-39, Mumbai on the following grounds: "

The AO further issued a notice u/s. 154 dated 24.02.2010 and asked the assessee as to why the credit given for Rs. 33,00,000/- and advance tax Rs. 20,08,000/- for self-assessment tax should not be withdrawn. The assessee filed objection to the notice u/s.

The objection of assessee rejected and AO rectified the assessment order dated 30.12.2009 vide order dated 15.03.2010 and calculated interest u/s. 234A and 234B at Rs. 20,86,682/- and u/s. 234C at Rs. 4,50,288/-.

Aggrieved by the order of AO, the assessee filed appeal before the CIT(A) raising the ground that AO erred in rectifying the order u/s. 154 and thereby withdrawing the credit granted for advance tax and in levying interest u/s. 234B & 234C. The CIT(A) after hearing of the appeal of the assessee allowed the appeal in the impugned order dated 16.05.2011 against which the present appeal is filed before us.

We have heard the Departmental Representative (DR) of the Revenue and Authorised Representative (AR) for the assessee and perused the material available on record.

DR of the Revenue has argued that the assessee has not made any specific request for adjustment of cash deposited in the PD account towards the tax liability and in absence of challan of advance tax or self-assessment tax, the AO passed the rectification order. DR further argued that the order of AO be upheld and that the order passed by the CIT(A) be reversed.

AR of the revenue has argued that the assessee made its intention clear in return of income by treating Rs. 33,00,000/- found and seized on 31.03.2007 as advance tax and remaining 20,08,000/- as self-assessment tax and the AO accepted the assessee’s request to treat the said amount as self-assessment tax and thus all calculated interest u/s. 234B and 234C of the Act while invoking the provision u/s. 234B(ii) of the Act. AR of the assessee further argued that the assessee has made its intention clear at the time of filing the return of income which was duly accepted by the AO and hence, there was no reason with assessee to given in writing to adjust the cash deposit in the PD account towards tax liability. AR further argued that the rectification was based on change of opinion and beyond the scope of section 154 of the Act. 8. We have considered the rival contentions of the parties and perused the material available on record. We have seen that AO duly accepted that Rs. 33,00,000/- was claimed as advance tax and for the last quarter Rs. 20,08,000/- was claimed as self-assessment tax. This amount was with the department as the cash seized during the search proceeding. Moreover, the request of assessee was accepted during the assessment proceeding. The CIT(A) also observed in its order that the AO treated the seized money as advance tax and self-assessment tax and computed the interest u/s. 234B and 234C and lateron AO passed the rectification order for the interest payable u/s. 234B and 234C. The CIT(A) after considering the decision of ITAT in Sudhakar Shetty Vs. ACIT 10 DTR Mumbai (Tribunal) 173 gave the relief to the assessee. The relevant part of the order of CIT(A) are reproduced herein below: “I have gone through the decision in the case of Sudhakar Shetty (supra). In para 10,10,1 and 11, the Hon’ble ITAT has held as follows: “10. As stated above, keeping in mind the difficulties faced by the assessee, the provisions have been amended. As per the amended provisions of law, now the AO is empowered to take into consideration the seized cash against various demands, i.e. old or in view of the income detected during the course of search.

In view of the above facts and circumstances, we direct the AO to adjust the remaining cash seized by the Department from the date of seizure because if any amount is to be adjusted against any liability the date of payment of that liability shall be the date of seizure and not the date of adjustment and/or the date of order. The A.O. is therefore, directed to modify his order accordingly." Further the appellant has contended that the Issue is debatable and it is not a mistake apparent from records and hence cannot be rectified u/s.154 of the IT Act.” “I agree with the views of the appellant. It is seen that the Hon’ble ITAT, Mumbai held that the seized cash has to be adjusted for advance tax and self assessment tax and the Hon’ble ITAT has held that there is no requirement to seek any request from the assessee for adjustment. In view of this decision, the issue whether the cash seized is to be adjusted for advance tax/self assessment tax or not is itself a debatable issue and hence such issue cannot be considered u/s. 154 of the I.T. Act.”

The Hon’ble Supreme Court in P.S. Balaram (ITO) vs. Volkart Brothers and Others 82 ITR 50 has categorically held, “That a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on debatable point of law is not a mistake apparent from the record”.

The Hon’ble Calcutta High Court in case of Vijay Mallya vs ACIT while following the judgment of T.S. Balaram vs. Volkart Brothers had held, “That Section 154 of the Income-tax Act, 1961, empowers the income-tax authority to rectify a mistake apparent from the record. The mistake contemplated under section 154 must be a mistake apparent on the face of the records. It must be obvious, clear and patent. It must not be a mistake, to establish which a long and elaborate reasoning and arguments is required on points on which there may conceivably be two opinions. It must not be a debatable point of law”