2002 (10) TMI 42 - HC - Income Tax

High Court rules for assessee in Income Tax Act disallowance case, Assessing Officer exceeded jurisdiction

The High Court of Madras ruled in favor of the assessee in a case involving disallowance under section 40A(5) of the Income Tax Act. The court held that ... '1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the recomputation of disallowance under section 40A(5) made by the Assessing Officer in an order under section 154 is not valid as the matter involved is a debatable point ? - 2. Whether the Appellate Tribunal is right in law in holding that during the period of pendency of reference applications before the High Court, the Assessing Officer's action in rectifying the assessment according to the Appellate Tribunal's decision would fall beyond the scope of section 154 ?' - The scope of section 40A(5) of the Act and the extent to which the amounts exempt under section 10(6)(viia) have to be considered for the purpose of computation under section 40A(5) were indeed debatable at that time. This court laid down the law in relation thereto only in the year 1997 in the case of CIT v. Lucas TVS Ltd. - The Assessing Officer therefore could not have regarded a debatable issue as a mistake apparent from the face of the record for invoking his power under section 154 of the Act. - The questions therefore are answered in favour of the assessee and against the Revenue. The High Court of Madras ruled in favor of the assessee in a case involving disallowance under section 40A(5) of the Income Tax Act. The court held that the Assessing Officer exceeded his jurisdiction by rectifying the assessment as the issue was debatable. The court emphasized that a debatable issue cannot be considered a mistake apparent on the face of the record for invoking Section 154 of the Act. The judgment favored the assessee and went against the Revenue.