CIT v. Aspentech India (P) Ltd.

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The Tax Publishers2012 TaxPub(DT) 0977 (Del-HC) : (2012) 044 (I) ITCL 0484 INCOME TAX ACT, 1961 --Rectification--Mistake apparentAO made disallowance under section 43B in respect of commission payments made to employees for services rendered--The assessee had claimed commission expenses of Rs. 61,27,865, which was disallowed by the AO on the ground that it was inadmissible expense under section 43B of the Act for the year in question. Subsequently, the assessee filed an application under section 154 for rectification. It was pointed out that an amount of Rs. 2,17,913 out of the aforesaid amount of Rs. 61,27,865 was paid by the assessee to their employees on 31-7-2003. The assessing officer had rejected the said application without discussing the factual aspects and whether or not the said details/vouchers were already on record. He simply stated that contention of the assessee was not correct. On appeal, the CIT(A) examined the said aspect and had recorded that the assessee had repeatedly filed rectification applications. CIT(A) allowed assessee's appeal. On appeal preferred by revenue, the Tribunal dismissed the same. Held: When the assessing officer had passed the original order disallowing commission expenses as being inadmissible expenses under section 43B, though payment voucher was already on record; and this being an error/mistake apparent on record, subsequent rejection of application under section 154 without giving reasons was not proper. Therefore, in view of the findings recorded by CIT(A), the Tribunal was justified in dismissing the appeal preferred by revenue. The Tribunal in view of the findings recorded by the CIT(A) did not find any merit in the appeal preferred by the revenue and had rightly dismissed the same by the impugned order. The respondent-assessee vide letter dt. 27-10-2006 had stated that the commission was claimed on accrual basis due to oversight and same was offered for taxation. The statement may had been made but it did not prevent the assessee from filing an application for rectification, if the ledger account of commission payment was on record and a factually wrong statement/concession had been made. The CIT(A) had examined the said aspect in detail as was clear from his order. The application dated 11-7-2008 was rejected on 5-8-2008 without giving reasons and by simply stating that the respondent-assessee was not correct. This was not the proper way of rejecting an application under section 154. The assessing officer did not examine the records and state that the ledger account was not on record and no error/mistake was apparent. The assessing officer had not dealt with the circular issued by the Board, which had been referred to and quoted above and mentioned in the order of the CIT(A). Appeal is accordingly dismissed. Income Tax Act, 1961 Section 154 Income Tax Act, 1961 Section 43B IN THE DELHI HIGH COURT SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0977 (Del-HC) : (2012) 044 (I) ITCL 0484

INCOME TAX ACT, 1961

--Rectification--Mistake apparentAO made disallowance under section 43B in respect of commission payments made to employees for services rendered--The assessee had claimed commission expenses of Rs. 61,27,865, which was disallowed by the AO on the ground that it was inadmissible expense under section 43B of the Act for the year in question. Subsequently, the assessee filed an application under section 154 for rectification. It was pointed out that an amount of Rs. 2,17,913 out of the aforesaid amount of Rs. 61,27,865 was paid by the assessee to their employees on 31-7-2003. The assessing officer had rejected the said application without discussing the factual aspects and whether or not the said details/vouchers were already on record. He simply stated that contention of the assessee was not correct. On appeal, the CIT(A) examined the said aspect and had recorded that the assessee had repeatedly filed rectification applications. CIT(A) allowed assessee's appeal. On appeal preferred by revenue, the Tribunal dismissed the same. Held: When the assessing officer had passed the original order disallowing commission expenses as being inadmissible expenses under section 43B, though payment voucher was already on record; and this being an error/mistake apparent on record, subsequent rejection of application under section 154 without giving reasons was not proper. Therefore, in view of the findings recorded by CIT(A), the Tribunal was justified in dismissing the appeal preferred by revenue.

The Tribunal in view of the findings recorded by the CIT(A) did not find any merit in the appeal preferred by the revenue and had rightly dismissed the same by the impugned order. The respondent-assessee vide letter dt. 27-10-2006 had stated that the commission was claimed on accrual basis due to oversight and same was offered for taxation. The statement may had been made but it did not prevent the assessee from filing an application for rectification, if the ledger account of commission payment was on record and a factually wrong statement/concession had been made. The CIT(A) had examined the said aspect in detail as was clear from his order. The application dated 11-7-2008 was rejected on 5-8-2008 without giving reasons and by simply stating that the respondent-assessee was not correct. This was not the proper way of rejecting an application under section 154. The assessing officer did not examine the records and state that the ledger account was not on record and no error/mistake was apparent. The assessing officer had not dealt with the circular issued by the Board, which had been referred to and quoted above and mentioned in the order of the CIT(A). Appeal is accordingly dismissed.

Income Tax Act, 1961 Section 154

Income Tax Act, 1961 Section 43B

IN THE DELHI HIGH COURT