Income Tax Officer, Shahdol V. Smt.Rekha Kesharwani, Anuppur

MA 17/JAB/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4903 (ITAT-JABALPUR)
• Duration Of Justice: 3 year(s) 11 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-03-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rectification of order; Set aside
• Section: 154; 143(3); 254(2)

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR (through web-based video conferencing platform) BEFORE SHRI SANJAY ARORA, HON’BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON’BLE JUDICIAL MEMBER M.A.No. 17/JAB/2018 (arising out of I.T.A. No. 32/JAB/2017) (Asst. Year : 2009-10) Applicant by : Shri S.K. Halder, Sr. DR Respondent by : Shri Sapan Usrethe, Advocate Date of hearing : 25/03/2022 Date of pronouncement : 30/03/2022 O R D E R Per Sanjay Arora: This is a Miscellaneous Petition by the Revenue directed against the Order under section 254(1) of the Income Tax Act, 1961 (‘the Act’ hereinafter) dated 16/11/2017 by the Tribunal, allowing the assessee’s appeal contesting the order dated 12/06/2017 by the Commissioner of Income Tax (Appeals)-2, Jabalpur (‘CIT(A)’ for short) partly allowing the assessee’s appeal against the rectification of her assessment u/s. 143(3) of the Act dated 17/06/2011 for the Assessment Year (AY) 2009-10 vide order u/s. 154 dated 12/10/2012. 2. The Assessing Officer (AO) had, in assessment, disallowed 15% of three specified expenses claimed by the assessee per her return of income for the relevant year, being as under, aggregating to Rs. 68,656-, i.e., at Rs. 10,298: ITO, Ward - Shahdol vs. Rekha Kesharwani, Opp. State Bank of India, Anuppur (MP) PAN: AINPG 4015 C (Applicant) (Respondent) MA No. 17/JAB/2018 (A.Y. 2009-10) ITO v. Rekha Kesharwani 2 a) Claim paid expenses : Rs. 44,496/- b) Shop expenses : Rs. 8,560/- c) Travelling : Rs. 15,600/- Subsequently, it was found that the total expenditure claimed by the assessee under these three heads of expenditure (through the Profit & Loss A/c) is in fact Rs. 5,07,412, 15% (wrongly mentioned as 25% in the rectification order) of which, therefore, works to Rs. 76,111, and not Rs. 10,298, disallowed in assessment. The assessed income was accordingly increased by the difference, being Rs. 65,813 (i.e., Rs. 76,111 – Rs. 10,298) through rectification u/s. 154. The increased disallowance was confirmed in first appeal; the ld. CIT(A) finding it to be a mere clerical mistake in an arithmetical calculation (para 6.2.3 of his order). In second appeal, the Tribunal found that the AO could not have u/s. 154 increased the rate of disallowance from 15% to 25%, and restored the disallowance to that made in assessment, i.e., at Rs. 10,298, quashing the rectification. The Revenue has now moved a rectification petition u/s. 254(2) stating that the mention of 25% (instead of 15%) in the rectification order dated 12/10/2012 is a typing mistake, and that there has been in fact no ‘enhancement’ of income thereby, i.e., as held by the Tribunal in accepting the assessee’s plea. We are accordingly urged to recall the impugned order to be reheard on merits 3. We have heard the parties, and perused the material on record. 3.1 The relevant ground, forming part of the authorization u/s. 254(2), dated 23/03/2018, which we are called upon to answer, reads as under: ‘Whether, in fact and circumstance of the case, where the A.O. disallowed 15% of Rs. 5,07,412 which works out to Rs. 76,111 in the order passed u/s. 154 in accordance with the finding in assessment order passed u/s. 143(3) (but wrongly mentioned 25% instead of 15%), was the Hon'ble ITAT was justified in holding that the same amount to enhancement of income which does not come under the purview of section 154 of the Act.’ Inasmuch as 15% of Rs. 5,07,412 works to Rs. 76,111, which is a matter of simple calculation, there has been clearly a typing mistake by the AO in, while increasing MA No. 17/JAB/2018 (A.Y. 2009-10) ITO v. Rekha Kesharwani 3 the disallowance by Rs. 65,811, stating in the section 154 order that 25% of the relevant expenditure had been disallowed in assessment. What the AO had clearly purported to do was to effect the disallowance at 15% of the three specified expenses, which were found by him to be at Rs. 5,07,412, and not, as stated mistakenly in the assessment order, Rs. 68,656. Nothing more and nothing less. All that therefore was required to be seen is if the total of the said expenses, as debited to the P&L A/c, did indeed amount to, as being now stated, Rs. 5,07,412, and issue a finding accordingly, in modification or, as the case may be, confirmation of the finding by the first appellate authority. Nothing more, and nothing less. There has been in any case no enhancement in disallowance per se, i.e., from 15% to 25%, which weighed with the Tribunal, and forms the basis of the impugned order, the relevant part of which reads as under, reversing in effect that by the first appellate authority, and without any reference thereto: ‘5. We have perused the case records, heard the rival contentions and have considered in detail the assessment order as well as the rectification order that speaking of disallowance of expenses in the assessment order 15% of those expenses were disallowed and added to the income of the assessee whereas that 15% u/s. 154 order was increased to 25% this exercise of Assessing officer is not something which is warranted within the ambit of section 154 of the Act which specifically says that rectification of mistake apparent from record here we find that there has been an enhancement of disallowance from 15% to 25% in the 154 order which is not allowed within the entire ambit of the Income Tax laws. We are of the considered view that the order passed u/s. 154 by the Assessing Officer does not have any leg to stand and hence has to be quashed. We accordingly set aside the order of the learned CIT(A) and allow the relief to the assessee. Thus, the grounds of appeal of the assessee are allowed.’ 3.2 Inasmuch as, as afore-noted, there was no attempt by the AO to enhance the rate of disallowance, even otherwise impermissible u/s. 154, there has clearly occurred a mistake by the Tribunal in presuming so, and deciding on that basis. The same could have been easily avoided had the Tribunal made the calculation itself. Disallowance @ 25% (of Rs. 5,07,412) in fact works to Rs. 1,26,853, and not Rs. 76,111, as proposed in rectification. It could have even called upon the parties to furnish the profit & loss account, i.e., in case it wanted to verify and MA No. 17/JAB/2018 (A.Y. 2009-10) ITO v. Rekha Kesharwani 4 satisfy itself if the claim qua the three expenses disallowed in assessment (per para 4 of the assessment order) indeed amounted to Rs. 5,07,412, as being now stated by the Revenue, instead of at Rs. 68,656, and which is clearly a matter of record. This aspect in fact does not appear to be in dispute, and there is nothing to suggest that the assessee disputed the same, for which, given the limited scope of s. 154, all that was required was to produce the P&L A/c for the relevant year. This, rather, would be the first thing that an assessee would point out before the assessing and the first appellate authority, as indeed the Tribunal, which has not been in the instant case even before us in the rectification proceedings u/s. 254(2); the assessee’s plea being restricted to the impermissibility of an increase in the rate of disallowance (from 15% to 25%) in rectification proceedings, and on which proposition there can be no quarrel, though is factually not so. If this is not misrepresentation, and for the second time running, what we wonder is. We are, rather, at a loss to understand as to why did the assessee prefer an appeal against the rectification, which was only toward making the disallowance at the correct figure, unless of course the total amount of expenditure claimed under the said three heads is not what was being stated to be. And, further, capitalizing on a typing mistake (of mention at 25% instead of 15%) in the rectification order. Rather than the rectification resulting in correction of a calculation mistake occurred in assessment, this thus led to a new controversy, nay, the quashing of the rectification itself, for which there was again no warrant. 3.3 As afore-noted, the assessee has not disputed the Revenue’s claim of the three specified expenditure as debited to her profit & loss account for the relevant year being at total of Rs. 5,07,412, which forms the basis of the increase in disallowance in rectification. The assessee per the written submissions before us, which though were not read out or otherwise argued, states of not being clear as to from where the said figure of Rs. 5,07,412 has been taken by the AO. This is specious inasmuch as the basis of the same is, clearly, as stated, the assessee’s MA No. 17/JAB/2018 (A.Y. 2009-10) ITO v. Rekha Kesharwani 5 profit & loss account for the relevant year. That the three expenses find mention in the P&L A/c is apparent as the assessee did not dispute the assessment. Further, where not so, i.e., their total does not work to, as stated, Rs. 5,07,412, she ought to have, as afore-noted, said so, stating the correct figure (of each of the three expenses) as per the profit & loss account, which is a matter of record, and which has not been at any stage. It is this that has led to our stating of the said argument before us as specious. Why, full and proper facts were not stated even before us, by either party, which is again unfortunate. There is, further, apart from the quantum of correct disallowance in assessment, which is purport of rectification and, which was the only issue before the Tribunal, the issue of quashing of section 154 order by it, and for which no reason stands stated. An order restoring the disallowance to that made in the assessment would have met the ends of justice and, in any case, would make the quashing inconsequential. 4. Even as we observe no dispute with regard to the quantum of the three expenses under reference, allowing the assessee the benefit of doubt, as well as to eschew any error, of which there has been a string in the instant case, we consider it only proper to, in the given facts and circumstances, amend para 5 of the impugned order by holding as under, and which would also obviate the need to recall the matter for fresh hearing inasmuch as it protects the interest of either party while addressing the issue at hand: ‘5. We have heard the parties, and perused the material on record. In view of the facts and circumstances as explained and borne out by the record, we consider it fit to remit this aspect of rectification back to the file of the Assessing Officer, to work out the disallowance in respect of the three expenditures specified at para 4 of the assessment order dated 17/06/2011, at 15% (fifteen per cent.) thereof, stating separately the amount of each, as in fact is done in the said order, at the amount debited to and claimed per the assessee’s profit & loss account for the relevant year in its respect. And modify para 2 of the rectification order dated 12/10/2012 accordingly. This he shall do promptly. We decide accordingly.’ MA No. 17/JAB/2018 (A.Y. 2009-10) ITO v. Rekha Kesharwani 6 5. In the result, Revenue’s MA is disposed of on the aforesaid terms. Order pronounced in open court on March 30, 2022 sd/- sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Dated: 30/03/2022 vr/- Copy forwa rded to: 1. The Applicant: ITO, Ward - Shahdol 2. The Respondent: Smt. Rekha Kesharwani, Opp. State Bank of India, Anuppur (MP) 3. The Principal CI T-2, Jabalpur(MP) 4. The CI T( A)-2, Jabalpur (MP) 5. The Sr . DR, I TAT, Jablapur 6. Guard File By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur.