The Mumbai bench of the Income Tax Appellate Tribunal (ITAT), while allowing an appeal filed by the Union of India, held that a disallowance cannot be rectified through an application filed under section 154 of the Income Tax Act, 1961.
The assessee, Union Bank of India approached the Tribunal challenging an order of the Commissioner (Appeals) wherein it was held that the deduction allowed u/s 36(1)(viia) in an order dated 13.10.2010 could be rectified under section 154 on 31.03.2018 which was beyond the limitation period as per section 154(7).
The bench comprising Accountant Member Shri Shamim Yahya and Judicial Member Shri Amarjit Singh observed that in the said case of Maxopp Investment Ltd (supra) itself Hon’ble Supreme Court has upheld the Hon’ble Punjab and Haryana High Court decision to the extent that it was held that disallowances under section 14A cannot exceed the exempt income.
“From the above, it is apparent that said decision of Hon’ble Supreme Court in Maxopp Investment Ltd (supra) does not give a carte blanche to withdraw the relief granted u/s 14A. Or in other words that it mandates that without considering these aspects disallowances has to be done,” the bench said.”
Allowing the contentions of the assessee, the Tribunal held that “there is no doubt that Hon’ble Supreme Court held that relief granted from disallowances u/s 14A on the plank that the investment being stock in trade cannot be upheld. Hence, no relief can be granted to the assessee on this account. But, it is still deserved relief on the other issue for own interest-free funds for the purpose of u/s 8D(ii) and restricting the disallowances with that extent exempt income. These cannot be said to be a subject matter of rectification u/s 154. Hence, upon careful consideration, we hold that the disallowance is not coming under the realm for rectification of mistake u/s 154 and the AO order u/s 154 cannot be presumed to have considered these aspects.”
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