The Income Tax Appellate Tribunal (ITAT), Bangalore Bench held that Enhancing book profit for amount disallowed under Section 14A of the Income Tax, 1961 is not a mistake apparent on record, cannot be rectified by rectification order.
The assessee, M/s. Manyata Promoters Pvt Ltd is engaged in the business of development and lease of office space and related interiors. The assessee has constructed office buildings in software park in Bangalore. The assessee filed the original return of income for the AY 2017-18 and later filed a revised return declaring total income of NIL under normal provisions of the Income Tax Act and a book of profits of Rs.26,04,02,080 u/s. 115JB of the Act.
The case was selected for scrutiny and notice u/s. 143(2) of the Act was served on the assessee. In the assessment proceedings the AO made a disallowance u/s. 14A for an amount of Rs.14,49,60,000 and also made an addition of Rs.58,29,802 towards for the difference in the income as per Form 26AS and financials of the assessee. Subsequently the AO passed an order u/s. 154 in which he made an adjustment to the book profits u/s.115JB for the amount disallowed u/s. 14A considering the same as a mistake apparent from the record.
The CIT(Appeals) while allowing the issue in favour of the assessee has considered the issue both from the point of view, whether disallowance u/s. 14A adjusted against the book profits is a mistake apparent on record and also on merits by relying the decision of the jurisdictional High Court in the case of Gokaldas Images Pvt Ltd
The Bench consisting of N V Vasudevan, Vice President and Padmavathy S, Accountant Member observed that “In the given case enhancing the book profit for the amount disallowed u/s.14A is not a mistake apparent on record but is subject to interpretations and hence cannot be rectified by an order passed u/s.154. We therefore see no reason to interfere with the decision of the CIT(Appeals).”
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