Disallowance of 80IB deduction by passing rectification order u/s 154 quashed as AO took a conscious and considered view to allow deduction which was not mistake apparent – ITAT
ABCAUS Case Law Citation:
ABCAUS 2654 (2018) (11) ITAT
Important Case Laws Cited/relied upon:
CIT vs. Krishak Bharti Co-operative Ltd. (2004) 266 ITR 208 (Del.)
The instant appeal was filed by assessee against the Order passed by the CIT(A) confirming the action of the Assessing Officer (AO) in invocation of section 154 of the Income Tax Act, 1961 (the Act) for disallowance u/s 80IB in respect of interest from debtors and on FDR.
The assessee filed return of income claiming deduction u/s 80-IB of the Act at the rate of 25% in respect of income from manufacturing. The deduction claimed u/s 80-IB of the Act included interest also.
During the hearing, the assessee was directed to explain why interest income should not be excluded from the profits for calculating deduction u/s. 80-IB of the Act.
In response, the Assessee made detailed submissions. After considering the submissions, the Assessing Officer assessed the interest received from debtors and on fixed deposits with banks as income from business; and allowed the deduction u/s. 80-IB of the Act. The assessment was completed u/s 143(3) of the Act.
Subsequently, the AO, served a notice u/s 154 / 155 alleging that the assessee had claimed excess deduction u/s 80IB of the Act in respect of interest from debtors and interest on FDR.
In reply, the assessee sought clarifications and requested an adjournment for 15 days. AO observed that since ample opportunities as well as time was allowed to the assessee to file its reply and proper reply was not submitted therefore, the rectification order is passed on the basis of the facts available on the record.
The AO further observed that since the mistake was apparent from the record so he has no other alternate except to disallow the excess deduction and added back the same to the income of the assessee.
Against the rectification order the, assessee appealed before the CIT(A), who vide his impugned order partly allowed the appeal of the assessee. Aggrieved with the impugned order, the Assessee was in appeal before the Tribunal.
The assessee submitted that the deduction u/s 80IB of the Act in respect of interest from debtors and, on FDR was allowed in the assessment order after considering the detailed submissions made by the Assessee, in response to the query by the AO and the deduction u/s. 80IB of the Act in respect of income from interest received from debtors and on fixed deposits with banks and the same was allowed in preceding three years.
It was further submitted that provisions of section 154 of the Act are applicable to the mistake, which is apparent, glaring, obvious, self evident or ex facie that it is un-capable of argument or proof; and are not applicable to debatable issues or when two view are possible.
It was further submitted that the proceedings under the provisions of section 154 of the Act cannot be initiated on the directions of the Audit Note, and also submitted that AO have not concluded anything in the assessment order regarding deduction u/s 80IB of the Act in respect of interest from debtors and debtors and fixed deposits with Bank.
In view of above, the assessee requested to cancel the orders of the authorities below and allow the deduction u/s. 80IB of the Act.
The Tribunal observed that as per the assessment order u/s 143(3) passed by the Assessing Officer (AO), he had examined and considered the allowability of deduction u/s 80IB of the Act in respect of interest from debtors and fixed deposit with bank vis-vis books of accounts and in light of the submissions made and details/documents filed by the assessee allowed the deduction.
The Tribunal opined that the AO made the assessment u/s. 143(3) of the Act and took a conscious and considered view to allow deduction u/s. 80IB of the Act in respect of interest from debtors and fixed deposits with Banks; and therefore, now the same could not be said to be mistake apparent from record.
The Tribunal said that it was clear case of change of opinion. It was noted that:
(i) the order did not even mention the nature of amount disallowed;
(ii) the order did not show any basis, reason or logic to arrive at a conclusion that deduction allowed u/s. 80IB of the Act was mistake apparent from record much less patent and glaring
(iii) the assessment order did not point any mistake of fact or application of any law.
Hence, the Tribunal concluded that there was no mistake apparent on record rectifiable u/s 154 of the Act, therefore, it quashed the orders of the authorities below and allowed the deduction in dispute u/s 80IB of the Act in respect of the interest received from debtors and on fixed deposit with banks.