BEFORE
SHRI G.S. PANNU, HON’BLE PRESIDENT
AND
MS. ASTHA CHANDRA, JUDICIAL MEMBER
ITA No. 2023/Del/2022
Asstt. Year: 2014-15
PER ASTHA CHANDRA, JM
The appeal filed by the Revenue is directed against the order of the Ld. Commissioner of Income Tax, (Appeals), Delhi-42 (“CIT(A)”) dated 17.06.2022 pertaining to Assessment Year (“AY”) 2014-15.
The Revenue has raised the following grounds of appeal:
It is a case of rectificatory order under section 154 of the Income Tax Act, 1961 (the “Act”) of an assessment framed upon the assessee company under section 143(3)/144C(3) of the Act dated 06.12.2016 for the AY 2014-15. The impugned order is passed due to an audit objection resulting in an addition of Rs. 2,25,29,243/- to the income of the assessee.
The assessee appealed before the Ld. CIT(A) who held that the audit objection was based on incorrect appreciation of facts and vacated the impugned order under section 154 of the Act by observing and recording the following findings:
Dissatisfied, the Revenue is in appeal before the Tribunal and all the grounds relate thereto.
The case was fixed for hearing on 10.01.2023, 24.05.2023 and finally on 19.07.2023 but none attended for the assessee, though Ld. DR was present on all the dates of hearing. We, therefore, proceeded to decide the appeal of the Revenue without the presence of an authorised representative for the assessee.
We heard the Ld. DR who relied on the order of the Ld. AO. We considered the submission of the Ld. DR and perused the records. The rectificatory order is silent on facts. However, the facts found by the Ld. CIT(A) as stated by him in para 3 of his appellate order are reproduced herein under:
“3. Facts in brief as culled out from record are that the appellant is a Branch of a Singapore company engaged in sale of software and hardware products and rendering service relating to maintenance of software. It filed return of income declaring Nil income. The case was taken up for scrutiny. The assessment was finalized u/s 143(3) of the Act determining the total income of Rs. 54,91,720/- after making addition of Rs.50,09,429/- by treating the payment made by the appellant to its head office for purchase of software as royalty and disallowance of Rs.4,82,290/- being cost mark up on call centre charges. The appellant went for appeal against the additions made. The Ld. CIT(A)-42, Delhi in his order dated 11.09.2017 deleted both the additions and allowed the appeal. Thereafter, the AO issued a notice u/s 154 on 22.04.2021 stating that justification of head office expense of Rs. 2,25,29,243/- has not been taken on record which shows that receipts to the tune of Rs. 2,25,29,243/- have not been declared by the appellant. As no reply was filed by the appellant, the AO made the rectification vide order date 06.07.2021 by adding Rs. 2,25,29,243/- to the total income.”
It is thus obvious that the assessment was made under section 143(3) r.w.s. 144C(3) on 06.12.2016 of the Act determining the total income of the assessee at Rs. 54,91,720/- after making addition and disallowance against the income declared at nil. The rectificatory order under section 154 of the Act has been passed to bring to tax the alleged undeclared income of Rs. 2,25,29,243/- pointed out by the Audit. By no stretch of imagination, the impugned rectificatory order can be said to be with a view to rectifying ‘any mistake apparent from the record’ which is a condition precedent for taking resort to the provisions of section 154 of the Act. Further, the notice for rectification was issued on 22.04.2021 and reply was sought by 23.04.2021 which clearly violates the requirement of giving reasonable opportunity to the assessee of being heard enshrined in sub-section (3) of section 154 of the Act.
On perusal of the order of the Ld. CIT(A), we find that he has given a clear finding that the sum of Rs. 2,25,29,243/- represents the allowable expense of the assessee and not its alleged ‘undeclared income’. This finding of the Ld. CIT(A) remained uncontroverted before us. We concur with the findings of the Ld. CIT(A). Further, the issue of allowability of the said expense was the subject matter of consideration in quantum appeal and therefore the Ld. CIT(A) has rightly not considered it in rectificatory proceeding. For the reasons set out above, we do not find any substance in the appeal of the Revenue which we reject.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 18th September, 2023.
sd/-
(G.S. PANNU) PRESIDENT
(ASTHA CHANDRA) JUDICIAL MEMBER
Dated: 18/09/2023
Veena
ASSISTANT REGISTRAR ITAT, New Delhi
Date of dictation
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Income Tax Appeal: Rectification of Expense Claim for FCS Computer Systems S Pte Ltd
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