1984 (5) TMI 80 - AT - Income Tax

Tribunal rejects rectification of assessment order, ruling against allowance of arrear rent as business expenditure

Laktaria Limited. Versus Income-Tax Officer.

The Tribunal overturned the decision of the Commissioner (Appeals) and ITO regarding the rectification of the assessment order under section 154 for the ... - Issues:1. Rectification of assessment order under section 154 for assessment year 1976-77.2. Allowance of arrear rent as a business expenditure.3. Determination of liability to pay arrear rent during the accounting period.4. Mistake apparent from record for rectification under section 154.5. Onus of Revenue to prove mistake in original assessment order.Detailed Analysis:1. The appeal was against the order under section 154 passed by the ITO for the assessment year 1976-77, which was upheld by the Commissioner (Appeals). The issue revolved around the rectification of the original assessment order.2. The company, owning tea estates, had declared part of its estate as surplus in 1955. Arrear rent paid during the accounting period corresponding to the assessment year 1976-77 was initially allowed as a business expenditure by the ITO. However, the ITO rectified the assessment order under section 154, stating that the arrear rent was not allowable as a deduction.3. The determination of the liability to pay arrear rent was crucial. The Commissioner (Appeals) highlighted that events leading to the liability did not occur during the previous year of the assessee company. The timing of when the liability accrued was a key factor in deciding the allowability of the expenditure.4. The crux of the matter was whether the mistake in the original assessment order was apparent from the record for rectification under section 154. The Tribunal emphasized that a mistake must be evident from existing facts on record and cannot involve fresh investigation or new facts not present during the original assessment.5. The onus was on the Revenue to demonstrate that a mistake apparent from the record existed in the original assessment order. However, both the ITO and the Commissioner (Appeals) failed to provide sufficient evidence or legal basis to support the rectification under section 154. The Tribunal ultimately quashed the orders of the authorities below, deeming the rectification beyond the jurisdiction of section 154.This detailed analysis of the judgment highlights the legal intricacies surrounding the rectification of assessment orders, the determination of liabilities, and the burden of proof on the Revenue in tax matters.