2024 (11) TMI 85 - HC - Income Tax

Revenue appeal dismissed as tax officer can rectify MAT liability calculation mistakes under Section 154

The HC dismissed the revenue's appeal regarding a rectification application under Section 154. The court held that the AO has wide powers to amend orders ... Rectification application u/s 154 - interpretation of the law as taken by the Karnataka High Court relating to Section 115J and 115JB - HELD THAT:- From the bare perusal of Section 154 it is apparent that the same allows the Income Tax Authorities to make amendments, corrections and even pass such orders notwithstanding anything in law for the time being in force and in relation to any matter other than the matter which might have been so considered by way of appeal or revision. Thus, the scope and powers of the AO are quite wider and he can even amend its earlier order suo-moto as well as on an application so moved for such rectification. Herein it is a case which was taken up for scrutiny by the AO and an order has been passed subsequently. At this stage, the AO could have examined the position of law and as per existing law, the deductions from the book profits for the purpose of calculation of MAT liability could have been waived and as noticed by the ITAT in its order, the inadvertent mistake occurred on account of misinterpretation, can always be corrected. It is not a case where any new facts or accounts have been introduced in the books of accounts. The ITAT has factually examined the balance sheets and discussed at length the facts in appeal. Thus, we are satisfied that there is no introduction of new facts to the books of accounts and the mistake which had occurred on account of misinterpretation of law in submission of ITR, can always be corrected and rectified in terms of Section 154 of the Act, 1961. Revenue's Appeal dismissed. Issues:1. Interpretation of Section 154 of the Income Tax Act, 1961 for rectification of mistake.2. Allowance of deduction for whole expenditure incurred by the assessee company for MAT liability calculation.3. Application of law in correcting misinterpretation in submission of Income Tax Return.Analysis:Issue 1: Interpretation of Section 154 of the Income Tax Act, 1961 for rectification of mistakeThe judgment deals with the interpretation of Section 154 of the Income Tax Act, 1961, which allows Income Tax Authorities to rectify any apparent mistakes in their orders. The court highlighted that the Assessing Officer has wide powers to amend orders suo-moto or based on applications for rectification. The section permits corrections even in matters not previously considered through appeal or revision, emphasizing the authority's broad discretion in rectifying errors.Issue 2: Allowance of deduction for whole expenditure incurred by the assessee company for MAT liability calculationThe case involved the computation of book profit for MAT liability under Section 115JB of the Income Tax Act, 1961. The appellant sought deduction of revenue expenditure incurred by the company, which was not initially allowed by the Assessing Officer. The court examined the balance sheets and determined that the entire revenue expenditure should be deducted while calculating net profit, as per Part II of Schedule VI of the Companies Act. The judgment emphasized that no new facts were introduced, and the mistake due to misinterpretation of law in the Income Tax Return submission could be rectified under Section 154.Issue 3: Application of law in correcting misinterpretation in submission of Income Tax ReturnThe court analyzed the case's history, where the Assessing Officer rejected the rectification application citing fresh determination of facts. However, subsequent appeals and orders highlighted the need for rectification based on the misinterpretation of law regarding deductions for MAT liability. The judgment emphasized that the mistake arising from misinterpretation could be corrected under Section 154 without introducing new facts, as evident from the books of accounts. Consequently, the appeals were dismissed, as no substantial question of law required further consideration.In conclusion, the judgment provides a detailed analysis of the issues related to the interpretation of Section 154 of the Income Tax Act, 1961, the allowance of deductions for MAT liability calculation, and the correction of misinterpretation in the submission of Income Tax Returns. The court's decision emphasizes the Assessing Officer's broad powers to rectify mistakes and the importance of adhering to statutory provisions for accurate computation of tax liabilities.