2023 (12) TMI 278 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision: No Detailed Inquiries Allowed in Section 154 Rectification of Prior Period Expenses.

The Tribunal dismissed the Revenue's appeal against the CIT(A)'s decision concerning the disallowance of prior period expenses under section 154 ... Rectification u/s 154 - Disallowance of prior period expenses - Revenue has vehemently argued before us that the Assessing Officer had rightly initiated the impugned rectification process for the purpose of disallowing the assessee’s foregoing prior period expenses - HELD THAT: He fails to dispute the clinching fact emerging from the case records that the AO had very well issued sec. 142(1) notice seeking to disallow the same on 26.02.2016 i.e., prior to sec. 143(3) assessment which stood duly explained by the assessee on 08.03.2016. These relevant documents duly form part of the case records. That being the case, we quote hon’ble apex court’s landmark decision in T.S. Balram, ITO vs. Volkart Brothers [1971 (8) TMI 3 - SUPREME COURT] that purpose of sec. 154 rectification is only to deal with apparent mistakes on record than those involving detailed roving enquiries and confirm the CIT(A)'s action reversing the AO’s impugned action to this effect. Appeal is dismissed. Issues involved:The judgment involves the appeal against the CIT(A)'s Order in relation to rectification proceedings under section 154 of the Income Tax Act, 1961 concerning disallowance of prior period expenses.Rectification of prior period expenses:The Revenue contended that the Assessing Officer rightly initiated the rectification process to disallow the prior period expenses of Rs. 16,30,873. The Assessing Officer had issued a notice prior to the assessment, and the relevant documents supported this claim. The Tribunal referred to the Supreme Court's decision in T.S. Balram, ITO vs. Volkart Brothers [1971] 82 ITR 50 (SC), emphasizing that the purpose of rectification under section 154 is to address apparent mistakes on record, not detailed inquiries. The Tribunal upheld the CIT(A)'s decision to reverse the Assessing Officer's action and dismissed the Revenue's appeal accordingly.Conclusion:The Tribunal dismissed the Revenue's appeal against the CIT(A)'s decision regarding the disallowance of prior period expenses under section 154 rectification proceedings. The order was pronounced in open court on 30.11.2023.