By Jagdish T. Punjabi | Devendra Jain | Tejaswini Ghag
Chartered Accountants
4.
[2019] 103 taxmann.com 154
(Mum.) Maccaferri
Environmental Solutions (P.) Ltd. vs. ITO ITA No.:
7105/Mum./2014 A.Y.: 2010-11 Dated: 12th
December, 2018
Section 154 – What is permissible is merely
rectification of an obvious and patent mistake apparent from record and not
wholesale review of an earlier order.
FACTS
The assessee, a private limited company,
filed its return of income declaring total income at NIL after setting off
brought forward losses under the normal provisions of the Act. Further, since
the book profit determined by the assessee was a negative figure, there was no
liability to pay MAT on book profits u/s. 115JB of the Act and the same was
accordingly declared and disclosed in the return of income filed by the
assessee. The case was selected for scrutiny and assessment was completed u/s.
143(3) of the Act determining the total income at NIL. Subsequently, the
Assessing Officer (AO) issued notice u/s. 154 of the Act so as to rectify the
mistake of accepting the book profits as such and thereby determined the book
profits at Rs. 6,95,57,438.
Aggrieved, the assessee preferred an appeal
to the CIT(A) who upheld the action of the AO.
Aggrieved, the assessee preferred an appeal
to the Tribunal,
HELD
The Tribunal made a reference to the well
settled position that the power u/s. 154 to rectify a mistake apparent from
record did not involve a wholesale review of the earlier order and rather, what
was permissible was only to rectify an obvious and patent mistake. The Tribunal
further noted that even debatable points of law would not fall in the meaning
of the expression “mistake apparent” for the purposes of section 154
of the Act. The Tribunal observed that the adjustments made by the AO disagreeing
with the determination of book profits by the assessee u/s. 115JB of the Act
involved a debatable issue which was outside the purview of section 154 of the
Act. The Tribunal held that action of the AO in invoking section 154 was unjust
in law as well as on facts. The appeal filed by the assessee was allowed.
