2013 (11) TMI 1248 - HC - Income Tax

Supreme Court Upholds Tribunal Decision on Income Tax Disallowance

The Supreme Court dismissed the Income Tax Application, upholding the decision of the Income Tax Appellate Tribunal in favor of the assessee for the ... Rectification of mistake - Tax and other statutory liabilities – Held that:- The assessee had incurred liabilities in respect of deductions in the assessment year in question i.e. 1984-85. It is also not disputed that the deductions, except dues of PF, are covered under Section 43-B of the Act and thus the first proviso to Section 43-B, with retrospective effect will apply - The dues of PF are also covered by second proviso to Section 45-B which was in force in the relevant assessment year i.e. 1984-85 – This is a debatable issue. In the debatable issue proceedings under Section 154 cannot be taken up - Following T.S. Balaram, Income Tax Officer, Company Circle IV. Bombay Vs. Volkart Brothers and others [1971 (8) TMI 3 - SUPREME Court] - 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 – Decided against Revenue. Issues:- Refusal to refer questions of law under Section 256 (2) of the Income Tax Act, 1961 by the Income Tax Appellate Tribunal, Delhi Bench 'A', Delhi for the Assessment Year 1984-85.- Disallowance of certain liabilities under Section 43-B of the Income Tax Act.- Interpretation of the first and second provisos to Section 43-B of the Income Tax Act.- Applicability of retrospective effect to the amended provisions of Section 43-B of the Income Tax Act.- Rectification under Section 154 based on debatable issues of law.Analysis:1. The judgment involves a challenge against the order of the Income Tax Appellate Tribunal, Delhi Bench 'A', Delhi, which refused to refer questions of law under Section 256 (2) of the Income Tax Act for the Assessment Year 1984-85. The questions pertained to the legality of additions made under Section 43-B of the Act, specifically regarding professional tax payable and other liabilities.2. The dispute arose when the original assessment was revised to disallow certain liabilities under Section 43-B of the Income Tax Act, resulting in an addition of Rs. 32,80,806. The Commissioner of Income Tax (Appeals) upheld this addition, leading the assessee to appeal before the ITAT. The ITAT set aside the CIT(A)'s order, citing conflicting decisions of different High Courts on the matter, making it a debatable issue.3. The Tribunal's decision was challenged based on the interpretation of the first proviso to Section 43-B and the retrospective effect of the amended provisions. The Supreme Court's judgments in Allied Motors Pvt Ltd and Alom Extrusions Ltd were cited to support the retrospective operation of the Finance Act, 2003, from 1st April 1988, impacting the interpretation of Section 43-B.4. The Court clarified that liabilities covered under Section 43-B, including professional tax and other payments, were rightly disallowed, except for dues of PF, which fell under the second proviso to Section 43-B applicable for the relevant assessment year 1984-85.5. The judgment also addressed the issue of rectification under Section 154 concerning debatable points of law. The Court held that a debatable issue could not be a ground for rectification, citing the Supreme Court's decision in Allied Motors Pvt Ltd and Alom Extrusions Ltd, ultimately deciding the questions of law in favor of the assessee and against the revenue.6. In conclusion, the Income Tax Application was dismissed, upholding the ITAT's decision in favor of the assessee and emphasizing the settled legal position on the interpretation of Section 43-B and the retrospective effect of relevant provisions.