2019 (7) TMI 854 - AT - Income Tax

Tribunal overturns CIT(A) order, deems Section 56(2)(viib) issue not rectifiable.

The Tribunal allowed the appeal of the assessee, ruling that the order of the CIT(A) was invalid as the issue concerning the applicability of Section ... Rectification u/s 154 - mistake apparent on record requiring rectification for the reason that provisions of Section 56(2)(viib) is available from the Assessment Year 2013-14 and not from the Financial Year 2013-14 - debatable issue - HELD THAT:- The Hon’ble Jurisdictional High Court in the case of Piu Ghosh [2016 (8) TMI 99 - CALCUTTA HIGH COURT] held that the amendment brought into the statute by the Finance (No. 2), 2004 which stated that the sub-section (ia) which was added to Section 40(a) of the Act shall be operative from 01/04/2005, meant that it would be applicable during the Financial Year 2005-06 corresponding to the Assessment Year 2006-07. In the case on hand, the statute lays down that Section 56(2)(viib) of the Act is inserted by the Finance Act, 2012 w.e.f. 01/04/2013. The assessee claims that if the ratio of the judgment in the case of Piu Ghosh (supra) is applied, the amendment is for FInancial Year 2013-14, relatable to the Assessment Year 2014-15. We are not interpreting the provision as such as to the date of applicability but only examining the issue as to whether the issue is debatable for the purpose of Section 154 of the Act. We find force in the arguments of the assessee that this is a debatable issue and cannot be considered a mistake apparent on record for the purpose of Section 154, in view of the contrary view taken by the Hon’ble Jurisdictional High Court. Coming to the second ground on which the CIT(A) had granted relief to the assessee, we find that no rectification has been passed u/s 154 reversing the reasons given by the ld. CIT(A), based on which relief was given. Thus the entire decision cannot have been reversed in this order passed u/s 154. Thus, in our view, the order of the ld. CIT(A) is bad in law, as the issue is debatable and it is not a case where there is a mistake apparent on record which can be rectified in terms of Section 154. Issues:Appeal against order of CIT(A) - Validity of Section 56(2)(viib) application for Assessment Year 2013-14 - Rectification u/s 154 of the Income Tax Act, 1961.Analysis:Issue 1: Appeal against CIT(A) OrderThe appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals) for the Assessment Year 2013-14, where the CIT(A) initially held that Section 56(2)(viib) of the Act was not applicable for that year. The appellant contended that the amendment was for the Financial Year 2013-14, corresponding to the Assessment Year 2014-15, making it a debatable issue. The Tribunal agreed that the applicability of the amendment was debatable, citing a similar judgment by the Jurisdictional High Court in another case. Thus, the Tribunal held that the issue was not a mistake apparent on record and could not be rectified under Section 154 of the Act.Issue 2: Rectification u/s 154 of the Income Tax ActThe CIT(A) passed an order under Section 154 of the Act, stating that there was a mistake apparent on record regarding the applicability of Section 56(2)(viib) from the Assessment Year 2013-14. The appellant argued that the relief granted by the CIT(A) could not be reversed merely on the basis of a change in view, especially when the issue was debatable. The Tribunal noted that the entire decision could not be reversed without a rectification order under Section 154. Consequently, the Tribunal found that the order of the CIT(A) was legally flawed as the issue was debatable and did not constitute a mistake apparent on record for rectification under Section 154 of the Act.In conclusion, the Tribunal allowed the appeal of the assessee, holding that the order of the CIT(A) was not valid as the issue regarding the applicability of Section 56(2)(viib) for the Assessment Year 2013-14 was debatable and did not qualify as a mistake apparent on record for rectification under Section 154 of the Income Tax Act, 1961.