The ITAT, Chandigarh, in the case of City Clinic Pvt Ltd v. ACIT, held that the Assessing Officer (AO) cannot dispute computation u/s 115JB through rectification under Section 154 of the Income Tax Act when he has not disputed the same during original assessment. It further clarified that AO has no power to review his entire assessment order and to make certain additions in the order under section 154 of the Act.
The AO originally completed assessment after scrutiny and examining the books of account produced before him. AO did not dispute the computation under section 115JB of the Act at original assessment stage and sent a notice for rectification was issued. The assessee, contended that the issue of computation under section 115JB is highly debatable and as such no order under section 154 should have been passed by the AO.
They relied on the Calcutta High Court decision in case of Hindustan Lever Ltd. Vs. JCIT and Others, wherein it was held that mistake must be obvious that it can be easily corrected, to wit an arithmetical mistake, quotation of wrong section etc. and not on debatable issue.
Hon’ble Supreme Court in the case of ITO vs. Volkart Brothers and others held that a mistake apparent on record 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.
Considering the facts of the case in the light of the above decisions, it is clear that AO has wrongly exercised jurisdiction under section 154 of the Act. The calculation u/s 115JB was available on record of the AO. “The assessee explained before the AO that there is dispute with regard to the explanation sought from the assessee in the rectification notice and actual calculation made by the assessee as per law. Therefore, the AO, on long drawn process of reasoning should not have passed the order under section154 of the Act. The issue raised by the AO in proceeding under section 154 of the Act is highly debatable and requires the issue to be reconsidered by the AO about applicability of provision of section 115JB of the Act which was not raised by the AO in the original assessment proceeding. Therefore AO has no power to review his entire assessment order and to make certain additions in the order under section 154 of the Act. The assessee has declared all particulars regarding computation and assessment to be framed under section 115JB of the Act. When the AO has consciously taken the view to frame regular assessment and made certain additions, AO is not empower to take contrary view to review entire assessment order already framed. It is against the spirit of provision of section 154 of the Act. The AO cannot be allowed to pass impugned order under section 154 on debatable issue.”
Read the full text of the Order below.
