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November 17, 2023

According to Section 154 of the Income Tax Act, a debatable question cannot be resolved

According to Section 154 of the Income Tax Act, a debatable question cannot be resolved

Fact and issue of the case

The appeal by the Revenue in ITA No.981/CHNY/2020 is arising out of order of the Commissioner of Income Tax (Appeals), Puducherry in ITA No.47,48/CIT(A)-PDY/2017-18 dated 31.08.2020. The assessment was framed by the DCIT, Villupuram Circle, Villupuram, for the assessment year 2008-09 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 26.03.2015. ITA No.981/CHNY/2020

At the outset, it is noticed that this appeal by Revenue is barred by limitation by 37 days. The Revenue received the impugned appellate order on 18.09.2020 as per Form 36 and appeal was to be filed on or before 17.11.2020 but actually it was filed on 24.12.2020, thereby there was a delay of 37 days. The Revenue has filed condonation petition stating that this delay is due to pandemic period of Covid 19 and subsequent events. We noted that the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. Since the Hon’ble Supreme Court has condoned the delay during the said period, respectfully following the same we condone the delay and admit the appeal.

The only issue in this appeal of Revenue is as regards to the order of CIT(A) quashing the reopening initiated u/s.147 r.w.s. 148 of the Act, according to CIT(A) the Revenue could not establish failure on the part of the assessee to disclose fully and truly the material facts required for the assessment of the relevant assessment year in view of the proviso to section 147 of the Act. For this, Revenue has raised following ground nos. 2 & 3:-

The Ld. CIT(A) erred in quashing the proceedings u/s.147 without appreciating that the reopening does not fall within the 1st proviso of section 147, therefore not requiring the AO to establish failure on the part of assessee to fully and truly disclose the material and facts required for correct assessment of income.

The Ld. CIT(A) has erred in quashing the reassessment by holding that the reasons recorded by the AO do not indicate as to how and why there is an escapement of income and the reasons recorded do not have the required ingredients for invoking the jurisdiction u/s.147.

Briefly stated facts are that the assessee is a co-operative bank and it files its return of income originally i.e. e-return for the relevant assessment year 2008-09 on 29.09.2008. This return of income was processed u/s.143(1) of the Act. The assessee’s case was selected for scrutiny assessment under CASS and accordingly notice u/s.143(2) of the Act was issued on 17.08.2009. Accordingly, assessment was completed by the AO u/s.143(3)(ii) of the Act vide order dated 28.12.2010. The AO made certain additions by making disallowance of inadmissible items and also recomputed the claim of deduction u/s.36(1)(viia) of the Act. The assessee is in appeal against this assessment order before CIT(A) i.e., separate proceedings pending. In the mean time, the reassessment proceedings was initiated vide notice issued u/s.148 of the Act dated 20.03.2014 and served on the assessee.

Observation of the court

We have heard rival contentions and gone through facts and circumstances of the case. We noted that the AO wanted to rectify the claim of deduction u/s.36(1)(viia) of the Act which was allowed by AO and consequently while giving effect to the order of CIT(A) dated 18.07.2017 at Rs.33,42,28,494/- instead of Rs.20,00,18,732/-. According to AO, deduction u/s.36(1)(viia) of the Act is allowable only to the extent of claim made in the books of accounts i.e., provision for bad and doubtful debts made in the books of accounts and it cannot be claimed in the computation simpliciter. We noted that there is a lot of debate and it is highly debatable issue and it cannot be decided while acting u/s.154 of the Act as there is a limitation in the provisions of section 154 of the Act that only the mistake apparent from record which can be rectified but where two views are possible or there is a debate available, it cannot be rectified u/s.154 of the Act. Here is the case where the AO has allowed this claim while giving effect to the order of CIT(A) dated 18.07.2017 and that cannot be rectified while acting u/s.154 of the Act. Hence the very issue on assumption of jurisdiction, we allow in favour of assessee and against Revenue. This issue of assessee’s appeal is allowed.

Coming to the issue on merits, since we have adjudicated the issue on jurisdiction in favour of assessee, the issue on merits has become academic. Hence, we need not go into the same. Therefore, this appeal of the assessee is allowed.

In the result, the appeal filed by the Revenue in ITA No.981/CHNY/2020 is dismissed and the appeals filed by the assessees in ITA No. 2645/CHNY/2019 & ITA Nos. 854, 855, 856, 857 & 858/CHNY/2020 are dismissed and the appeal filed by the assessee in ITA No.3154/CHNY/2019 is allowed

Order pronounced in the open court on 18th October, 2023 at Chennai.

Read the full order from here


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