Rectification proceedings cannot be invoked by Assessing Officer (AO) in case of Debatable Issue, so was held by the Income Tax Appellate Tribunal (ITAT), New Delhi.
The assessee, M/s. Avisha Credit Capital Ltd is a resident corporate entity. For the assessment year under dispute, the assessee filed its return of income on 31.03.2015 declaring income of Rs.95,580/-. Assessee’s case was selected for scrutiny and assessment was completed under section 143(3) of the Act vide order accepting the income returned by the assessee. Post completion of assessment, the Assessing Officer issued a show cause notice to the assessee seeking to rectify the assessment order by exercising power conferred under section 154 of the Act.
In the show-cause notice, the Assessing Officer observed that interest on income tax amounting to Rs.7,172/- was inadvertently allowed, though, it is not an eligible business expenditure. Further, he observed, loss on sale of shares of VKJ Infra Developers Ltd. amounting to Rs.6,00,000/- debited to the profit and loss account was wrongly allowed as the shares were held as investment and not as stock in trade.
In reply to the show-cause notice, though, the assessee accepted the mistake insofar as deduction of interest on income tax amounting to Rs.7,172/-, however, insofar as claim of loss of Rs.6,00,000/-, the assessee submitted that it does not come within the purview of rectifiable mistake. The Assessing Officer, however, rejected the explanation of the assessee and proceeded to pass an order under section 154 adding back the amounts of Rs.7,172/- and Rs.6,00,000/- respectively. Though, the assessee contested the addition of Rs.6,00,000/- before the Commissioner however, the addition was sustained.
Saktijit Dey, Judicial Member observed that “Thus, from the aforesaid facts, it is patent and obvious that the issue, whether the loss on sale of shares claimed by the assessee is a trading loss or capital loss is a highly debatable issue. That being the factual position emerging on record, in my considered opinion, proceeding under section 154 of the Act could not have been initiated by the Assessing Officer to rectify the so-called mistake as it is not a mistake in the nature of mistake apparent on the fact of record. Therefore, I delete the addition of Rs.6,00,000/-.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
