Surlon India Private Limited Vs DCIT (ITAT Delhi)
The appeal concerned the validity of rectification proceedings initiated under Section 154 of the Income-tax Act for Assessment Year 2017-18. The Assessing Officer had originally completed the assessment under Section 143(3) on 12.12.2019. Subsequently, relying on certain observations from the assessee’s Form 3CD tax audit report, the Assessing Officer initiated proceedings under Section 154 to invoke Section 36(1)(ii) and disallow bonus paid to the directors. A rectification order dated 30.03.2024 was passed, which was upheld by the Commissioner of Income Tax (Appeals), leading to the present appeal before the Tribunal.
The Tribunal examined whether the invocation of Section 154 was legally valid. It noted that the Assessing Officer sought to apply Section 36(1)(ii) through rectification after the completion of the regular assessment under Section 143(3).
Relying on the Supreme Court’s decision in T.S. Balram, Income Tax Officer vs. Volkart Brothers (1971) 82 ITR 50 (SC), the Tribunal held that Section 154 can be invoked only to correct mistakes apparent from the record and not issues requiring detailed inquiry or examination. Since the impugned rectification involved matters beyond an apparent mistake, the proceedings under Section 154 were not sustainable.
The Tribunal accepted the assessee’s legal ground, quashed the rectification proceedings under Section 154, and allowed the appeal. In view of this finding, all other issues raised on merits were held to be academic and were not adjudicated.
