Revenue appeal dismissed as AO exceeded jurisdiction disallowing unabsorbed depreciation under section 154 without CIT(A) direction

The ITAT Mumbai dismissed the Revenue's appeal regarding rectification under section 154. The AO exceeded jurisdiction by disallowing brought forward unabsorbed depreciation while giving effect to CIT(A)'s order, as this issue had already attained finality with no such direction from CIT(A). The Tribunal held that AO cannot rectify orders under section 154 without a mistake apparent from record, and confirmed the CIT(A)'s order finding the AO's action beyond his authority.

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Issues:
- Rectification of order u/s 154 of the Income Tax Act, 1961 for the Assessment Year 2013-14.
- Disallowance of claim of brought forward unabsorbed depreciation.
- Jurisdictional limits of Assessing Officer in giving effect to CIT (A) order and rectification u/s 154.

Analysis:
1. Rectification under Section 154: The appeal was filed by the Revenue against the order dated 20.02.2024, passed by the National Faceless Appeal Centre for the Assessment Year 2013-14. The Revenue raised grounds questioning the correctness of the CIT(A)'s decision on the rectification order u/s 154. The CIT (A) observed that the AO exceeded his jurisdiction by disallowing the claim of brought forward unabsorbed depreciation through rectification u/s 154, as there was no mistake apparent from the record. The CIT (A) held that the AO cannot go beyond the directions given by the CIT (A) while giving effect to the order, and confirmed the CIT (A)'s decision.

2. Disallowance of Unabsorbed Depreciation: The issue of disallowance of unabsorbed depreciation arose post the Tribunal's order, where the AO issued a notice u/s 154 to disallow the unabsorbed depreciation. The AO passed two orders on 31.03.2021, one giving effect to the CIT(A)'s order and the other combining the CIT(A)'s order and rectification u/s 154. The CIT (A) found fault with the AO's actions, noting that the AO mistakenly referred to the disallowed amount as brought forward losses instead of unabsorbed depreciation. The CIT (A) held that the AO should restrict himself to issues dealt with by the CIT (A) and directed the AO to rectify the errors accordingly.

3. Jurisdictional Limits of Assessing Officer: The CIT (A) emphasized that the AO cannot rectify an order beyond the directions of the CIT (A) and highlighted the AO's lack of application of mind in referring to the disallowed amount incorrectly. The CIT (A) allowed the appellant's grounds challenging the legality and validity of the order passed u/s 250 r.w.s. 154 of the Act and the failure to follow CBDT guidelines. The CIT (A) held the order dated 31.03.2021 as bad in law and invalid due to procedural and technical grounds, dismissing the appeal filed by the Revenue.

In conclusion, the judgment focused on the procedural correctness of the rectification order u/s 154, the disallowance of unabsorbed depreciation, and the jurisdictional limits of the Assessing Officer in giving effect to the CIT (A) order. The CIT (A) emphasized the importance of adhering to statutory provisions and directives while rectifying orders, ultimately dismissing the Revenue's appeal.

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