The SMC Bench of Income Tax Appellate Tribunal, Chandigarh in a recent ruling held that an issue regarding the set-off in case of surrendered income cannot be a subject-matter of rectification proceedings since it is a debatable issue. The highlights of the judgment are as follows.
The assessee filed return conceding income of Rs.15,060/-. In consequent to a survey conducted in the business premises of the assessee, the assessee had made a disclosure of his additional income of Rs. 38 lacs which was related to the stock found at the business premises as well as documents found in the course of survey operations. Based on this,the Assessing Officer has passed an original assessment at Rs.29,54,357/-.Though the assessee voluntarily surrendered the said undisclosed income the Assessing Officer maintained that the assessee is not entitled to adjustment of loss from the business against the income disclosed in the course of survey.
The above order was challenged by the assessee before the CIT(A) alleging that the Assessing Officer was not justified in making addition under sect ion 69 of the Act. The assessee also maintained that the Assessing Officer was not justified in not setting off the business loss against the income surrendered. The CIT(A), vide its order held that the assessee is not entitled to claim set off against the surrendered income.
The Assessing Officer issued a notice under section 154 of the Income Tax Act on 24.03.2014 pointing out that while giving appeal effect to the orders of CIT (Appeals), Karnal dated 30.03.2012, a mistake occur red by which business set off was inadvertently allowed against the income surrendered the said mistake was proposed to be rectified by recomputing the income of the assessee. In these proceedings, the assessee raised content ions, which were considered and the Assessing Officer passed rectification order disallowing the set off business loss against the income surrendered.
The assessee challenged the above order u/s 154 of the Income Tax Act contending that the original assessment under sect ion 143(3) of the Act dated 30.12.2009 was passed and the income of the assessee was determined at Rs.29,54,357/-. The CIT(A), granted partial relief to the assessee. The assessee further brought the matter before the Appellate Tribunal.
The issue to be decided by the Tribunal was that whether set off any loss or otherwise as allowed against surrendered income by Assessing Officer can be taken in proceedings under section 154 of the Act.The Tribunal opined that being a debatable issue, it cannot be subject matter of rectification proceedings under sect ion 154 of the Act.It was further observed that the CIT(A) has sustained the assessment order along with the method of computation, The CIT (Appeals) has co- terminus powers to that of the Assessing Officer and If there was any objection to the computation of income passed by the Assessing Officer , the CIT(Appeals) could have taken cognizance of the same and passed the necessary order thereon. The CIT (Appeals) affirmed the order of the Assessing Officer in this regard. Therefore, the assessment order dated 30.12.2009 would merge with the appellate order dated 30.3.2012. Therefore, the assessment order which has merged with the appellate order cannot remain subject matter of rectification under section 154 of the Act.
The Judicial Member, in this regard, further pointed out that “It appears from the impugned order that the Assessing Officer after long drawn process of reasonings and after examining record and details has passed the impugned order under sect ion 154/155 of the Act , which is not permissible in law. I t further appears that subsequent Assessing Officer tried to differ with the earlier Assessing Officer who has passed the original assessment order . Therefore, the impugned order cannot be sustained in law. I, therefore, set aside the orders of the authori ties below and quash the same, resultantly, the additions are deleted”.
Read the full text of the order below.
