2022 (5) TMI 1178 - AT - Income Tax

ITAT quashes rectification order under section 154, emphasizing factual accuracy over presumptions.

M/s. Bhupati Tennis Academy Pvt. Ltd. Versus ITO, Ward – 1 (1) (3), Bengaluru.

The ITAT ruled in favor of the assessee, quashing the rectification order under section 154 of the Income Tax Act. The tribunal found no apparent mistake ... Rectification u/s 154 - addition u/s 40(a)(ia) - objections raised by “internal audit party” - short deduction of TDS from the payments made towards professional charges and advertisement charges - HELD THAT:- Internal audit party has gone by presumptions and accordingly taken the view that there was shortfall in deduction of TDS which would warrant disallowance expenditure under section 40(a)(ia) of the Act. On the contrary, the Ld AR demonstrated that the details of professional charges as well as advertisement expenses were duly furnished before the AO during the course of original assessment proceedings. The assessee has also submitted before the AO that some of the payments are not liable for deduction of tax at source since the payments made to each of the parties was less than the threshold limit prescribed in the respective section for deduction of tax at source. Under the set of facts, it cannot be said that there were mistakes apparent from record in the assessment order passed by the AO under section 143(3) of the Act. As submitted by the assessee, the AO has entertained the view that there were mistakes apparent from record only from the objections given by Internal Audit Party and not from the assessment record. Accordingly, we are of the view that the very initiation of rectification proceeding under section 154 of the Act is bad in law and accordingly the impugned rectification order is liable to be quashed. Accordingly, we set aside the order passed by Ld CIT(A) and quash the rectification order passed by the AO under section 154 of the Act. Appeal of assessee allowed. Issues:Challenge to rectification order under section 154 of the Income Tax Act for the assessment year 2013-14.Analysis:The appeal was filed by the assessee against the order passed by the Ld Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi, upholding the rectification order under section 154 of the Act. The dispute arose from the AO initiating rectification proceedings based on objections raised by the LAP Audit regarding the deduction of TDS on professional and advertisement charges. The AO added a sum to the assessed income under section 40(a)(ia) of the Act. The assessee objected to the initiation of rectification proceedings, contending that there was no mistake apparent from the record justifying such proceedings. The Ld AR argued that the objections were based on presumptions and calculations by the internal audit party, not on the assessment record. The assessee had furnished details during the original assessment proceedings, showing that TDS was deducted as per the prescribed limits. The Ld DR, however, supported the initiation of rectification proceedings due to the alleged shortfall in TDS deduction by the assessee.The ITAT, after considering the submissions, held that there was no mistake apparent on record to justify the initiation of rectification proceedings under section 154. The tribunal observed that the internal audit party's presumptions were not sufficient grounds for rectification. The Ld AR demonstrated that the necessary details were provided to the AO during the original assessment, showing compliance with TDS requirements. The tribunal emphasized that the objections were based on conjectures and not on factual discrepancies in the assessment order. Therefore, the tribunal concluded that the rectification order was unjustified in law and proceeded to quash it. Consequently, the order passed by the Ld CIT(A) upholding the rectification was set aside, and the appeal filed by the assessee was allowed.In conclusion, the ITAT's judgment favored the assessee by ruling that the initiation of rectification proceedings under section 154 was unwarranted, as there were no apparent mistakes in the assessment order. The tribunal emphasized the importance of factual accuracy over presumptions and conjectures in such proceedings, ultimately leading to the quashing of the rectification order.