TaxTMI 
TaxTMI 
2026 (10) TMI 498
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....der passed by the Deputy Commissioner of Income Tax, Corporate Circle 1(1), Chennai ("the AO") u/s. 154 r.w.s.143(3) of the Act on the ground that the disallowance made u/s. 14A of the Act read with Rule 8D of the Income-tax Rules, 1962 ("the Rules") directly in the rectification order is a mistake apparent from record. 1.2 The Appellant prays that it be held that the issue of disallowance u/s. 14A cannot be regarded as a mistake apparent from record and accordingly, the order passed u/s. 154 r.w.s. 143(3) of the Act be treated as bad in law and be quashed. WITHOUT PREJUDICE TO GROUND NO. I GROUND NO. II: DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 ("THE RULES") AMOUNTING TO Rs. 35,37,216/- IS BAD IN LAW:- 2.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the disallowance made by the AO of Rs. 35,37,216/- u/s. 14A of the Act by applying Rule 8D of the Rules. 2.2 The Appellant prays that the disallowance of Rs. 35,37,216/- u/s. 14A r.w.r. 8D of the Rules be held to bad in law and accordingly, be deleted. WITHOUT PREJUDICE TO GROUND NO. I & II GROUND NO. III: DISALL....
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....w.s. 143(3) vide order dated 19.08.2021 and the total income was determined at Rs. 8,95,07,697/-. 3.2 Thereafter, the AO noticed from the return that the assessee had earned exempt dividend income of Rs. 1,10,77,100/- and had not made any disallowance under section 14A. The AO further noticed investments in shares, including investment in Apollo Hospitals Enterprises Ltd. of Rs. 1,06,26,500/- made during the year and investment in Keimed Pvt. Ltd. of Rs. 34,88,51,110/- made in an earlier year. On the basis of the above, the AO proceeded to compute disallowance under section 14A read with Rule 8D at Rs. 35,37,216/- and, by order dated 27.03.2025 passed under section 154 r.w.s. 143(3), determined the total income at Rs. 9,30,44,913/-. 4. The assessee aggrieved by the very assumption of jurisdiction under section 154 by the AO, challenged the order u/s. 154 dated 27.03.2025 beofre the ld.CIT(A). However, ld.CIT(A) rejected the submissions of assessee and upheld the order of AO. Now assessee is in appeal before the Tribunal. 5. The learned counsel for the assessee submitted that the impugned order is beyond the scope of section 154. It was submitted that the original assess....
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....r of rectification under section 154 of the Act as the same would be tantamount to review of the assessment order passed which is not permissible under the Act 9. Commissioner of Income-tax v. R.K. Shrivastav (HUF) [2008] 172 Taxman 147 (HC Delhi) 5-6 10. Maccaferri Environmental Solutions (P.) Ltd. v. Income Tax Officer, Ward-3(2)(2), Mumbai [2019] 103 taxmann.com 154 (Mumbai - Trib.) 7-10 11. Varindra Construction v. Income-tax Officer [2004] 1 SOT 152 (Amritsar ITAT) 11- 12 6. Per contra, the learned Departmental Representative (DR) supported the order of the AO. It was submitted that the assessee had earned exempt dividend income and had not made any disallowance under section 14A. The investments were available on the balance sheet and the disallowance under Rule 8D could be computed from the figures available on record. It was, therefore, contended that the omission constituted a mistake apparent from the record. 7. We have considered the rival submissions and perused the material available on record, paper book filed by the assessee. The solitary effective issue before us is whether the Assessing Office....
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....lished by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record-see Sidhramappa Andannappa Manvi v. Commissioner of Income-tax (1952) 21 ITR 333 (Bom.). The power of the officers mentioned in section 154 of the Income Tax Act, 1961, to correct "any mistake apparent from the record" is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an "error apparent on the face of the record." in this case it is not necessary for us to spell out the distinction between the expressions "error apparent on the face of the record" and "mistake apparent from the record". But suffice it to say that the Income-tax Officer was wholly wrong in holding that there was a mistake apparent from the record of the assessments of the first respondent." 10. The principle laid down by the Hon'ble Supreme Court (supra) is not that every error committed in an assessment is incapable of rectification. The test is whether the error is self-evident and patent from the existing record, withou....
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....lf demonstrates that the alleged error cannot be treated as a patent mistake. 13. We find that the issue is squarely supported by the judgment of the Hon'ble Karnataka High Court in PCIT v. Mphasis Software and Services (India) Pvt. Ltd. (2022) 445 ITR 468 (Karn.). In that case, the assessee had earned exempt dividend income and had itself made a disallowance under section 14A. The scrutiny assessment under section 143(3) accepted the returned income. Subsequently, the AO invoked section 154 and enhanced the disallowance under section 14A by applying Rule 8D. The Tribunal held that the issue was debatable and could not be rectified under section 154. The Hon'ble Karnataka High Court affirmed the Tribunal and held that the AO was required to examine the assessee's claim having regard to the accounts and record satisfaction. The Court specifically held that recording of satisfaction under Rule 8D was mandatory and that invocation of section 154 was untenable because there was no mistake apparent from the record and the matter required adjudication. In Mphasis Software, there was already a disallowance under section 14A made by the assessee and the dispute was essential....
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.... 14A. He is making a determination under section 14A for the first time. This distinction, in our considered view, is sufficient to take the matter outside the scope of section 154. 17. The Revenue has emphasised that the exempt income and investments were disclosed in the return and balance sheet and, therefore, the disallowance could be worked out from the existing record. We are unable to accept the proposition in this form. The question is not whether the figures were available. The question is whether the mistake was apparent. The figures of dividend income and investments may have been available. However, the conclusion that the assessee had incurred expenditure relatable to such exempt income, the rejection of the assessee's claim, the satisfaction contemplated under section 14A(2), and the consequent determination of disallowance are matters of adjudication. Availability of material on record does not mean that every conclusion which could possibly be drawn from that material becomes a mistake apparent from the record. If the AO is required to examine and adjudicate the issue, the same cannot be undertaken under section 154. 18. We make it clear that our findings ....