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Section 154 can not be applied if a debatable point involved

Mistake apparent on the record u/s 154 must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions.

Mistake apparent on the record u/s 154 must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record.

This interpretation made by Hon’ble Supreme Court in case of T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50, was followed by Delhi High Court in the present case. The assessee, in the present case, claimed business expenditure u/s 43B to the tune of Rs.9132404 paid to Cooperative Education Fund u/s 61 (1)(b) of the Multi State Cooperative Education Fund Act, 1984 and also sought relief u/s 80-I of the Income tax Act. AO disallowed the claim. On an appeal, the assessee claimed the benefit and relied upon the ruling of the Supreme Court in CIT v. Canara Workshops (P) Ltd. 1986 (161) ITR 320. In the light of these, CIT(A) was of the opinion that the AO had to verify the details mentioned by the assessee before the claims could be considered and the benefit of Section 80-I given. This remand led to the AO considering the submissions of the appellant, who had provided the necessary details under cover of letter dated 24.04.1995.

The order of the AO under Section 250 granted the relief in terms claimed, i.e. to the tune of 18,26,481/-; revised forms were apparently issued to the assessee. Whilst so, on 22.05.1995 – after the effect was given on 12.05.1995, the AO issued a Show Cause Notice stating that at the time of giving effect to the above order of the Ld. CIT(A) on other points, claim was also allowed on this point inadvertently through oversight whereas the issue is still to be decided. The mistake being apparent on records is rectified u/s 154 of the Income Tax Act. The assessee again approached the CIT(A) which, after recapitulating the facts, reversed the rectification order. The revenue’s appeal was accepted by the ITAT.

Learned counsel for the revenue urged that Court should not interfere with the order of the ITAT. He submitted that given the language of Section 43B, the assessee could not have claimed that the payment to the Cooperative Education Funds were in the nature of a statutory impost or cess falling within the purview of Section 43B. Consequently, the AO, in the rectification order and the ITAT correctly deduced that the relief was wrongly granted. Learned counsel for the assessee relies upon the decision of Court in its own case for the same assessment year in respect of some other income. In that instance too, for A.Y. 1992-93, when the assessment for subsequent year 1993-94 was taken-up, the AO felt that the order for 1992-93 required rectification and proceeded to do so. On that occasion too, the relief with respect to Section 80-I was in question. Learned counsel relied upon the said order to say that once an appeal effect is given, it is open to the authorities – be it AO or the CIT(A) to seek recourse to the rectification proceedings if the issue or question of law is debatable.

Given that this issue as to the admissibility of relief either before the benefit of Section 80-I could be granted or thereafter, was a matter which required debate and some process of reasoning, the decision in T.S. Balaram, ITO (supra) clearly held the field. In other words, the revenue could not legitimately contend that the view expressed by the CIT(A) given effect to by the AO in his initial order of 12.05.1995, was utterly implausible. Such being the case, the issue was debatable. Therefore, recourse to the power of rectification under Section 154 was unwarranted in the given facts of this case. The appeal of the assessee, was therefore, allowed.

Categories: Income Tax
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