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2017 (2) TMI 274 - ITAT KOLKATA

2017 (2) TMI 274 - ITAT KOLKATA - TMI - Scope of rectification of mistake orders - Disallowance made u/s. 40(a)(ia) in the proceedings u/s. 154 - Held that:- We find that the AO had merely sought to investigate in detail the basic facts as to whether the assessee had indulged in making purchase of printing material for the purpose of its business or had engaged contractors and have the printing job done in tune with its requirements in the proceedings initiated u/s. 154 of the Act. We hold that .....

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nt from record. Mistake, if any, which has to be discovered by a long drawn process or reasoning or examination of arguments on points where there may conceivably be two opinions cannot be said to be mistake or error apparent from record.We also appreciate the circular of CBDT No. 715 is binding only on the tax authorities and not on the assessee as admittedly the circular cannot detract from the provisions of the Act. - Addition made on account of closing stock - Held that:- Necessity of m .....

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Respondent: Shri D. K. Bandyopadhyay, FCA ORDER Per Shri M. Balaganesh, AM: This appeal by revenue is arising out of order of CIT(A)-XIX, Kolkata vide appeal No. 349/CIT(A)-XIX/Ward-41(2)/Kol/12-13 dated 10.01.2014. Assessment was framed by ITO, Wd-41(2), Kolkata u/s. 143(3) r.w.s. 154(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2006-07 vide his order dated 26.05.2011. 2. The first primary issue to be decided in this appeal is as to whether the Ld. CI .....

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ade certain payments towards printing charges in the sum of ₹ 26,52,754/- without deducting tax at source and hence, the provisions of section 40(a)(ia) of the Act get attracted thereon. Similarly, the AO also noted that the assessee had reflected a sum of ₹ 7,39,511/- in its closing stock as on 31.03.2006 in the stock statement submitted to the bank in respect of cash credit limits availed from the bank, whereas there was no closing stock as on 31.03.2006 reflected in the P&L Ac .....

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,73,462/- Shree Krishna Plastics ₹ 2,75,252/- Golden Computer Forms Pvt. Ltd. ₹ 2,66,090/- Sign-N-Graph ₹ 5,57,112/- V-Tech Work Pvt. Ltd. ₹ 63,060/- Rs.21,34,976/- The assessee also filed details of payment of Vinyle printing charges to B. K. Enterprise amounting to ₹ 5,17,778/-. The total of these two sums i.e. ₹ 21,34,976/- and ₹ 5,17,778/- works out to ₹ 26,52,754/- which the AO thought was paid without deduction of tax at source. In response, .....

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n the said payment. The AO, however, by placing reliance on the CBDT Circular No. 715 dated 08.08.2995 proceeded to hold that the printed material was done as per the prescribed specification of the assessee and to suit the requirement of the assessee and accordingly, concluded that the same would fall under the ambit of provisions of section 194C of the Act and consequently disallowance u/s. 40(a)(ia) of the Act is to be made thereon. 4. The Ld. CIT(A), however, went into the preliminary issue .....

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ebatable issue and also requires detailed investigation of facts. Accordingly, he concluded that the same cannot be construed as a mistake apparent from the face of the record which would warrant initiation of rectification proceedings u/s. 154 of the Act. In support of this, the Ld. CIT(A) adjudicated various decisions of High courts and Supreme court in that regard. Similarly, in respect of closing stock filed by the assessee in the stock statement submitted to the bank in connection with the .....

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djudicated in the proceedings u/s. 154 of the Act. Aggrieved, the revenue is in appeal before us on the following grounds: 1. That on the fact and in the circumstances of the case the Ld. CIT(A) erred both in law and facts in holding that the rectification order passed by the A.O. as ultra vires order ignoring the facts that a glaring mistake occurred in the assessment order made u/s. 143(3) of the Income tax Act. 2. That on the facts and circumstances of the case the Ld. CIT(A) erred in holding .....

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e Tax Act, 1961. 4. That on the facts and circumstances of the case Ld. CIT(A) erred in law in not dealing in the issue regarding addition on account of difference in closing stock on the ground that the order u/s. 154 was ultra vires order and therefore the ground become infructuous. 5. The Ld. DR reiterated the findings of the AO and vehemently argued that there were apparent mistake on the face of the record and accordingly, the order of the AO by making these two additions in 154 proceedings .....

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carried out by the independent parties and any payment made pursuant to such execution of work would fall within the ambit of works contract as defined in section 194C of the Act. Accordingly, disallowance u/s. 40(a)(ia) of the Act made thereon is justified. With regard to closing stock addition in the sum of ₹ 7,39,511/- he argued that the assessee has shown closing stock in its Balance Sheet as Rs. Nil whereas he has reflected a sum of ₹ 7,39,511/- as closing stock submitted to the .....

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the Circular No. 715 is not applicable as the same is binding only on the tax authorities and not on the assessee. With regard to the addition made towards closing stock, he stated that the ld. CIT(A) had rightly relied on various decisions of the Hon ble High Courts wherein no addition could be based on stock statement submitted to the bank without finding any defects in the books of account. He argued that this again cannot fall within the purview of section 154 of the Act and accordingly, veh .....

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d have the printing job done in tune with its requirements in the proceedings initiated u/s. 154 of the Act. We hold that the same ought to have been carried out by the AO only in the assessment proceedings u/s. 143(3) of the Act or if necessary, avenues open to the revenue are by either resorting to section 263 of the Act (revision proceedings) by the Ld. CIT or by reopening the assessment u/s. 147 of the Act. We hold that the issue being squarely debatable cannot be carried out u/s. 154 of the .....

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vably be two opinions. A decision on a debatable point of law is not a mistake apparent from record. The power of rectification u/s 154 of the Act cannot be understood to review, revise or re-consider the substantial decisions, taken after due consideration of law and facts. In a nut-shell, mistake apparent from record, u/s. 154 of the Act must be self evident, obvious and patent mistake of facts or law which is floating on the surface of the record and not the mistake which can be discovered or .....

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