2013 (11) TMI 420 - AT - Income Tax

ITAT upholds CIT(A)'s decision on profit inclusion in composite income under Rule 8 for AY 1998-99

JCIT. (OSD), Circle-4, Kolkata Versus M/s. Norben Tea & Export Ltd.

The ITAT affirmed the CIT(A)'s decision in a case concerning the inclusion of profit on the sale of bought tea in composite income under Rule 8 for AY ... Rectification u/s 154 of the Income Tax Act – Held that:- Once the income is from the tea grown by the assessee, as is the settled legal position in view of Rule 8 of the Income Tax Rules 1962, only 40% of the same can be taken as nonagricultural income - It is elementary that what can be rectified u/s.154 is a mistake which is glaring, unambiguous and incapable of two views being taken. Therefore, proceeding on the basis that income of Rs.29,42,802/- was trading income, for which no support is available from material on record, would not be possible under the inherently limited scope of section 154, even if that be so - Assessment was completed under section 143(3) and yet no material was brought on record to support such a finding - In this view of the matter, decided against the Revenue. Issues:Challenge to CIT(A)'s order in rectification proceeding u/s. 154 r.w.s. 143(3) for AY 1998-99 - Inclusion of profit on sale of bought tea in composite income under Rule 8.Analysis:The Assessing Officer (AO) challenged the correctness of the CIT(A)'s consolidated order regarding the inclusion of profit on sale of bought tea in composite income under Rule 8. The AO added back Rs.29,42,802/- to the business income of the assessee, treating it as profit on sale of bought tea. The CIT(A) upheld the assessee's grievance, considering only 40% of the amount as nonagricultural income. The AO's claim that the amount represented trading income was unsupported by findings in the assessment order. The legal position under Rule 8 stipulates that only 40% of income from tea grown by the assessee can be considered nonagricultural income. The ITAT affirmed the CIT(A)'s decision, emphasizing that a mistake rectifiable under section 154 must be clear and unambiguous. Since the assessment lacked evidence to support the AO's stance on the nature of the income, the ITAT dismissed the appeal in ITA No.592/Kol/12.The subsequent rectification order dated 27.10.2008 passed by the AO became infructuous once the original order dated 16.9.2003 was quashed. Therefore, the appeal in ITA No.524/Kol/2012 was also dismissed. The ITAT concluded that both appeals challenging the CIT(A)'s order in the rectification proceeding for AY 1998-99 were to be dismissed, upholding the CIT(A)'s decision regarding the treatment of profit on sale of bought tea in the composite income under Rule 8.