ITAT Delhi in its recent ruling in the case of M/s. Avisha Credit Capital Ltd has held that rectification proceedings cannot be invoked by Assessing Officer (AO) in case of debatable issue.
Facts of the Case:
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.
Order of ITAT: Deliberation and Ruling
ITAT noted that undisputedly, the loss from sale of shares was debited to profit and loss account as trading loss. While completing the assessment under section 143(3) of the Act, the Assessing Officer obviously has accepted the claim. The Assessing Officer has initiated proceeding under section 154 of the Act qua the claim of loss on the ground that the shares were held as investment and not as stock in trade. It is observed, in reply to show-cause notice issued under section 154 of the Act, the assessee has clearly and categorically submitted that the shares were held as stock in trade and the issue was examined in course of scrutiny assessment.
ITAT held that 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.
In view of above the ITAT deleted the addition of Rs.6,00,000/- and Ground raised was allowed.
READ / DOWNLOAD ORDER:
*****
Don’t miss the next Tax Update / Article / Judicial pronouncement
Subscribe to our newsletter for FREE to stay updated on GST Law
Resolve your GST queries from national level experts on GST free of cost
Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
