No Rectification under section 154 by AO if issue if debatable

Firoze Andhyarujina for the Appellant. Neil Philip for the Respondent.

ORDER

N.K. Billaiya, Accountant Member – This appeal by the Revenue is directed against the order of the learned Commissioner of Income-tax (Appeals)-20, Mumbai dated April 15, 2013 pertaining to the assessment year 2008-09.

2. The assessee has raised three substantive grounds of appeal. With ground No. 1, the assessee has challenged the assumption of jurisdiction under section 154 of the Act by the Deputy Commissioner of Income-tax.

3. Facts relating to the issues show that in this case the assessment order was passed under section 143(3) of the Act vide order dated nil. Pursuant to the assessment order, the assessee was granted refund with interest under section 244A of the Act. The Assessing Officer sought to rectify the assessment order under section 154 of the Act. The notice was issued to the assessee for withdrawing the interest granted under section 244A of the Act. The Assessing Officer completed the proceeding by rectifying the assessment order under section 154 of the Act holding that no interest is payable to the assessee and withdrew the interest granted under section 244A of the Act.

4. Aggrieved by this, the assessee carried the matter before the learned Commissioner of Income-tax (Appeals). It was strongly contended that the Assessing Officer grossly erred in assuming jurisdiction under section 154 of the Act inasmuch as the issue is debatable and it is not a mistake apparent from record which can be rectified under section 154 of the Act. The learned Commissioner of Income-tax (Appeals) was not convinced as he was of the opinion that there is no debatable issue regarding refund due is less than 10 per cent. of the total tax payable. Therefore, the assessee was not entitled for interest on excess tax. The appeal filed by the assessee was dismissed.

5. Aggrieved by this, the assessee is before us. Learned counsel for the assessee stated that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on the points on which there may be conceivably be two opinions. Learned counsel relied upon the decision of the hon’ble Supreme Court in the case of T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50. Learned counsel further stated that the hon’ble jurisdictional High Court in the case of Stock Holding Corpn. of India Ltd. v. N.C. Tewari, CIT [2015] 373 ITR 282 has held that interest is payable from the date of payment of the tax on self assessment to the date of refund of the amount under section 244A of the Act. It is the say of learned counsel that looking from any angle assumption of jurisdiction under section 154 of the Act is erroneous.

6. Per contra, the learned Departmental representative strongly supported the order of the learned Commissioner of Income-tax (Appeals).

7. We have carefully perused the orders of the authorities below. It is not in dispute that the refund granted to the assessee was withdrawn by way of rectification order under section 154 of the Act. It is also not in dispute that the hon’ble High Court of Bombay in the case of Stock Holding Corpn. of India Ltd. (supra) has held that the assessee is entitled to interest on refund under section 244A of the Act in respect of self-assessment tax paid. Considering the facts in the light of the judicial decisions referred to hereinabove, in our considered view, the Assessing Officer erred in assuming jurisdiction under section 154 of the Act on a debatable issue. The learned Commissioner of Income-tax (Appeals) further erred in confirming the order of the Assessing Officer. We, therefore, set aside the order of the learned Commissioner of Income-tax (Appeals) and hold that the order passed by the Assessing Officer under section 154 of the Act is bad in law.

8. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.