2023 (6) TMI 820 - AT - Income Tax

Tribunal upholds decision on MAT credit issue for AY 2016-17, deems it non-rectifiable under IT Act

The Income Tax Appellate Tribunal affirmed the decision of the Commissioner of Income Tax (Appeals) regarding the short-granting of MAT credit under ... Rectification of mistake u/s 154 - AO did not include the surcharge and education cess in MAT credit - mistake apparent from record or debatable issue - HELD THAT:- The assessee’s ground pertains to the issue whether MAT Credit is excluding surcharge and education cess or not. CIT(A) rightly pointed out that assessee has not filed any appeal against order u/s 143(1) and since the issue is a debatable issue therefore it cannot be rectified under section 154 of the Act, unless there is a mistake apparent from record. As gone through the above findings of Ld. CIT(A), and noted that there is no infirmity in the order passed by CIT(A), therefore, we dismiss the appeal of the assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether an assessing officer may rectify an assessment/intimation under section 154 by altering the computation of Minimum Alternate Tax (MAT) credit to include surcharge and education cess as part of tax for set-off purposes. 2. Whether a dispute over inclusion of surcharge and education cess in MAT credit is a debatable question of law (or fact) that cannot be remedied by a section 154 rectification unless a mistake is apparent on the record. 3. Whether an application under section 154 can be used to revisit or revise matters arising from an intimation under section 143(1) where no appeal was filed against that intimation. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power under section 154 to rectify MAT credit to include surcharge and education cess Legal framework: Section 154 permits rectification of any mistake apparent from the record in an order or intimation. MAT credit entitlement depends on the tax treated as paid under the relevant provisions; the question is whether surcharge and education cess constitute tax for purposes of computing MAT credit. Precedent treatment: Tribunal decisions relied upon by the appellant (referred to) have held that tax liability for MAT includes surcharge and education cess; those decisions were cited to support rectification. The Court did not overrule or expressly follow those decisions but treated the cited authorities as addressing a debatable legal issue. Interpretation and reasoning: The Court examined the nature of the appellant's claim and the relief sought in the section 154 application. It concluded that the grievance-whether MAT credit should include surcharge and education cess-constitutes a substantive controversy about tax computation rather than an obvious clerical or arithmetical mistake apparent on the face of the record. The Assessing Officer's action did not purport to correct a manifest error; instead it involved a substantive tax position drawn from processing under section 143(1). Ratio vs. Obiter: Ratio - section 154 cannot be used to alter the MAT credit computation to include surcharge and education cess where the matter is a debatable question of law/fact and not a mistake apparent on the record. Obiter - the existence of contrary Tribunal decisions was noted but not adopted as determinative for rectification under section 154. Conclusions: Rectification under section 154 to include surcharge and education cess within MAT credit was not permissible on the facts; the Assessing Officer's refusal to include them was not shown to be a mistake apparent on record and thus warranted no interference under section 154. Issue 2 - Distinction between debatable issues and mistakes apparent on record under section 154 Legal framework: The scope of section 154 is limited to correcting mistakes apparent on the face of the record; it does not empower the authority to decide debatable questions of law or revisit substantive conclusions reached in the original order/intimation. Precedent treatment: The Court treated the appellant's reliance on Tribunal decisions as evidence that the question is debatable; it relied on the settled principle that debatable legal issues are not amenable to section 154 rectification unless a true 'mistake apparent' exists. Interpretation and reasoning: The Court found that the controversy over inclusion of surcharge and education cess in MAT credit had been the subject of differing tribunal views, establishing it as a debatable legal question. The impugned action arose from processing under section 143(1) and was subsequently addressed by an order under section 154 that, on its face, corrected tax credit entries due to withdrawal by deductors or incorrect return schedules rather than rectifying a patent clerical error. Accordingly, the Court held that the matter could not be resolved in a section 154 proceeding. Ratio vs. Obiter: Ratio - where a question is debatable and not an obvious, self-evident error, section 154 is an inappropriate forum for resolution; corrective power under section 154 does not extend to substantive disputes arising from processing under section 143(1). Conclusions: The issue is debatable and therefore not susceptible to rectification under section 154 absent a demonstrable mistake apparent on the face of the record; the section 154 application could not be used to decide the substantive MAT credit question. Issue 3 - Effect of not appealing a section 143(1) intimation on a subsequent section 154 rectification application Legal framework: A party aggrieved by an intimation under section 143(1) has remedies (appeal where available) and cannot ordinarily use a subsequent section 154 application to obtain substantive relief that should have been sought by proper appellate process, unless the impugned action displays a mistake apparent on the record. Precedent treatment: The Court relied on the principle that section 154 is not a substitute for appeal against a section 143(1) intimation and noted that the appellant had not filed any appeal against the section 143(1) order. Interpretation and reasoning: The Court observed that the rectification relied upon by the appellant stemmed from processing under section 143(1). Because no appeal was filed against that intimation, and because the present dispute is debatable rather than a clear accidental error, the appropriate remedy would have been to challenge the 143(1) intimation through available appellate channels rather than seek substantive change via section 154. Ratio vs. Obiter: Ratio - absence of an appeal against a section 143(1) intimation precludes using section 154 to obtain relief on debatable matters arising from that intimation; relief must be sought through appropriate appellate remedies unless a mistake apparent on record is shown. Conclusions: The appellant's failure to appeal the section 143(1) intimation, coupled with the debatable nature of the MAT credit issue, barred relief by way of section 154 rectification in the present proceedings. Final Disposition The Court affirmed the conclusion that the application under section 154 could not be used to grant the disputed MAT credit (surcharge and education cess) because the question was debatable, arose from a section 143(1) processing/intimation against which no appeal was filed, and no mistake apparent on the record was established; accordingly, the appeal was dismissed.