2013 (10) TMI 1084 - HC - Income Tax

Court rejects appeal on incorrect tax section application, emphasizes clarity over contestable claims

COMMISSIONER OF INOCME TAX Versus RT PAPER BOARD

The High Court dismissed the appeal challenging the incorrect application of Section 154 of the Income Tax Act, 1961 by the Assessing Officer for the ... Disallowance as expenditure which was not claimed by assessee – Held that:- Rs.1,94,51,222/- in the earlier assessment year i.e., 2003-04, was shown as expense in the profit and loss account, but it was added back in the tax computation sheet. As there was error in the profit and loss account of the last assessment year, i.e. 2003-04, as the amount was treated/shown as an expenditure, a reverse entry was made in the profit and loss account of the current assessment year i.e. 2004-05 – Decided against the Revenue. Issues:1. Invocation of Section 154 of the Income Tax Act, 1961 by the Assessing Officer.2. Assessment related to the year 2004-05.3. Disallowance of claimed amount under Section 43B.4. Compliance with principles of natural justice by the Assessing Officer.5. Scope of rectification under Section 154.6. Contestable claims and rectification under Section 154.Analysis:1. The High Court dealt with an appeal challenging the findings of the Income Tax Appellate Tribunal regarding the incorrect application of Section 154 of the Income Tax Act, 1961 by the Assessing Officer. The dispute pertained to the assessment year 2004-05.2. Initially, the respondent-assessee filed a return for the year, resulting in a reduction of the declared income to a loss and the computation of unabsorbed depreciation.3. Subsequently, the Assessing Officer, through an order under Section 154, added back a specific amount claimed under Section 43B, citing a discrepancy in the audit report related to interest paid and waived off in a restructuring proposal.4. The first appellate authority and the tribunal ruled in favor of the assessee, primarily due to the Assessing Officer's failure to adhere to natural justice principles and the contention that the addition made under Section 154 exceeded the section's scope. The decision emphasized that rectification under Section 154 is reserved for clear mistakes evident from the record, not for debatable claims.5. The respondent-assessee's counsel highlighted that the disputed amount was not claimed as a deduction but was a result of rectifying an error from the previous assessment year, as duly noted in the CIT (Appeals) order.6. Ultimately, the High Court dismissed the appeal, affirming that it lacked merit, thereby upholding the decisions of the lower authorities and emphasizing the inapplicability of Section 154 for contestable claims.