DY. COMMISSIONER OF INCOME TAX CIRCLE-1, NAGPUR vs. M/S SPACEWOOD OFFICE SOLUTIONS PRIVATE LIMITED, MUMBAI

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ITA 162/NAG/2019Status: DisposedITAT Nagpur30 November 2023AY 2013-14Bench: SHRI SATBEER SINGH GODARA (Judicial Member), DR. DIPAK P. RIPOTE (Accountant Member)4 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that Section 154 rectification is only for apparent mistakes and not for detailed inquiries. Since the AO had already considered and received explanations for these expenses before the original assessment, the rectification was not permissible.

What were the facts?

The Assessing Officer (AO) disallowed prior period expenses of Rs. 16,30,873/- through rectification proceedings under Section 154. The assessee had explained these expenses prior to the original assessment order.

What were the issues?

Whether prior period expenses disallowed in rectification proceedings under Section 154, when the issue was already addressed before the original assessment, is valid.

Which sections of the Income-tax Act were involved?

Section 154,Section 143(3),Section 142(1)

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Income Tax Appellate Tribunal, NAGPUR BENCH : NAGPUR

Before: SHRI SATBEER SINGH GODARA & DR. DIPAK P. RIPOTE

Hearing: 29.11.2023Pronounced: 30.11.2023

ORDER PER SATBEER SINGH GODARA, J.M. :

This Revenue’s appeal for assessment year 2013-14, arises against the CIT(A)-3, Nagpur's Order in Appeal No. CIT(A)-3/6/2018-19, dated 29.04.2019, involving proceedings u/s.154 r.w.s. 143(3) of the Income Tax Act, 1961 (in short “the Act”).

Heard both the parties. Case file perused.

2.

The Revenue raises the following substantive grounds in the instant appeal :

2 ITA.No.162/NAG./2019

1.

“On the facts and circumstances of the case, the Ld. CIT(Appeals) has erred in holding that the disallowance amounting to Rs.16,30,873/- of prior period expenses cannot be subject matter of rectification order u/s 154 of the Act without appreciating the fact that the Auditor himself in the Tax Audit Report has reported the amount of prior period expenses as per clause 22.b, Annexure E of Form 3CD of his report hence the fact is apparent from records.

2. On the facts and circumstances of the case, the Ld.CIT(Appeals) has erred in directing the AO to delete the addition of Rs.16,30,873/- without appreciating the fact that otherwise also the prior period expenses are not an allowable expenditure unless a provision is made for the same. The AO was therefore justified in disallowing the prior period expenditure amounting to Rs.16,30,873/-. 3. Any other ground which may be taken with the permission of the Hon’ble Tribunal.”

3.

It next emerges with the able assistance coming from both the parties that there is hardly much a need for us to delve deeper in the relevant factual matrix once it has come on record that we are dealing with sec.154 rectification proceedings. We further note that the learned Assessing Officer had invoked his impugned jurisdiction to disallow prior period expenses of Rs.16,30,873/- after having framed his sec.143(3) assessment dated 21.03.2016.

3 ITA.No.162/NAG./2019

4.

The Revenue has vehemently argued before us that the Assessing Officer had rightly initiated the impugned rectification process for the purpose of disallowing the assessee’s foregoing prior period expenses. He fails to dispute the clinching fact emerging from the case records that the Assessing Officer had very well issued sec.142(1) notice seeking to disallow the same on 26.02.2016 i.e., prior to sec.143(3) assessment which stood duly explained by the assessee on 08.03.2016. These relevant documents duly form part of the case records before us at pages 3 to 6 of the assessee’s paper book. That being the case, we quote hon’ble apex court’s landmark decision in T.S. Balram, ITO vs. Volkart Brothers [1971] 82 ITR 50 (SC) that purpose of sec.154 rectification is only to deal with apparent mistakes on record than those involving detailed roving enquiries and confirm the CIT(A)'s action reversing the Assessing Officer’s impugned action to this effect. Ordered accordingly.

5.

This Revenue’s appeal is dismissed in above terms.

Order pronounced in the open Court on 30.11.2023.

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