2021 (10) TMI 1048 - AT - Income Tax

Tribunal denies rectification appeal on interest expenses disallowance due to tax non-deduction

The Tribunal dismissed the Miscellaneous Application filed by the assessee seeking rectification in the order related to the disallowance of interest ... Rectification under section 254(2) of the Income Tax Act - mistake apparent on the face of the record - giving effect to appellate order - order passed under section 154 withdrawing relief - opportunity of hearing before passing a consequential/rectificatory orderRectification under section 254(2) of the Income Tax Act - mistake apparent on the face of the record - Whether the Tribunal should rectify its order dated 10.12.2020 under section 254(2) of the Act on the ground of a mistake apparent on the face of the record. - HELD THAT: - The assessee sought rectification of the Tribunal's order of 10.12.2020 after the Assessing Officer, while initially giving effect in terms of that order, withdrew the relief by a subsequent order purportedly under section 154. The Revenue correctly submitted that rectification requires a mistake apparent on the face of the record. On being invited to point out any such mistake, the authorised representative conceded that no mistake appears in the Tribunal's order dated 10.12.2020. The Tribunal therefore found no basis to invoke rectification jurisdiction under section 254(2) and declined to exercise that power.Application for rectification dismissed for want of any mistake apparent on the face of the record.Giving effect to appellate order - order passed under section 154 withdrawing relief - opportunity of hearing before passing a consequential/rectificatory order - Whether the Tribunal should direct the Assessing Officer to restore relief or otherwise intervene because the AO withdrew relief without affording opportunity of hearing. - HELD THAT: - The Tribunal examined the sequence: AO initially complied with the Tribunal's direction and granted relief, but the AO thereafter issued an order withdrawing that relief without giving the assessee an opportunity of hearing. While noting this factual finding, the Tribunal emphasised that the present application under section 254(2) cannot be used to correct an absence of hearing or to re open the Assessing Officer's exercise of power under section 154 in these proceedings when no mistake in the Tribunal's order exists. Consequently, the Tribunal declined to pass any supervisory direction to restore relief in these proceedings but left the assessee free to pursue available remedies under the Act.No direction issued to the Assessing Officer; assessee granted liberty to seek appropriate application/appeal/representation in accordance with the Income Tax Act.Final Conclusion: Miscellaneous Application under section 254(2) dismissed: no mistake apparent in the Tribunal's order dated 10.12.2020 to warrant rectification; factual finding recorded that AO withdrew relief without hearing, but no direction issued and the assessee is at liberty to pursue remedies provided under the Income Tax Act. Issues:Rectification of order related to disallowance of interest expenses for want of non-deduction of tax at source.Analysis:The Miscellaneous Application was filed by the assessee seeking rectification in the order dated 10.12.2020. The sole ground of appeal raised by the assessee was regarding the disallowance of interest expenses due to non-deduction of tax at source while making interest payments to a non-banking finance company (NBFC). The assessee argued that the recipient of the interest had included the income in their total income and paid tax on it. The Tribunal allowed the appeal subject to verification of this fact by the Assessing Officer (AO) to determine if the recipient had paid tax on the interest income. The AO initially verified the fact and granted relief to the assessee. However, the relief was later withdrawn by the AO in an order passed under section 154 of the Income Tax Act without providing an opportunity of hearing to the assessee.The Senior Departmental Representative for the Revenue contended that there was no mistake apparent in the order that could be rectified under section 254(2) of the Act. The assessee was advised to seek appropriate recourse as per the provisions of the Income Tax Act if they had grievances. The assessee's representative acknowledged that there was no mistake in the order but requested the Bench to direct the AO to consider the matter in line with the Tribunal's direction in its previous order.After considering the submissions of both parties and reviewing the relevant orders, the Tribunal found that the AO had withdrawn the relief granted to the assessee without providing a hearing. The Tribunal concluded that the assessee had not identified any mistake apparent in the order dated 10.12.2020. Consequently, the application filed by the assessee under section 254(2) of the Act was dismissed. However, the assessee was granted liberty to pursue appropriate application, appeal, or representation to the relevant authority as per the provisions of the Income Tax Act.In conclusion, the Miscellaneous Application filed by the assessee seeking rectification in the order related to the disallowance of interest expenses was dismissed by the Tribunal on 04 October 2021 during a virtual court hearing.