A.Mohamed Ayub Alias Salim, Ootacamund vs Assessee

अपीलाथ क ओर से / Appellant by : Shri. J. Murali, C.A यथ क ओर से / Respondent by : Shri. A.V. Sreekanth, IRS, JCIT.

सन ु वाई क तार ख/Date of hearing : 21.05.2015 घोषणा क तार ख /Date of Pronouncement : 19.06.2015 आदे श / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER

The assessee has filed these two appeals against different

orders of the Commissioner of Income Tax (Appeals)-I, Coimbatore,

dated 29.04.2013 for the assessment year 2009-2010.

:- 2 -: I.T.A.Nos.1463 & 1464/Mds/2013

2. We take up ITA No.1463/Mds/2013 for adjudication. The

assessee has contested the addition of D5 lakhs by the CIT(A) which

was made by Assessing Officer in proceeding u/s.154 of the Act.

3. The brief facts of the case are that assessment was completed in

this case for the assessment year 2009-10 u/s.143(3) of the Act.

While framing assessment, addition of D15,00,000/- was made on the

reason that an amount of D10,00,000/- deposited in ICICI bank, Pricol

Branch, Coimbatore was not properly explained. Further, there was a

deposit of D10,00,000/- in the account with Punjab National Bank,

Ootacamund Branch, Coonoor. Though there was deposits of

D20,00,000/- in two bank accounts, the Assessing Officer considered

D10,00,000/- in PNB bank and D5,00,000/- in ICICI Bank, Pricol

Branch. Thus, the Assessing Officer made an addition of D15,00,000/-

as unexplained income. Later while proceedings u/s.154 dated

21.06.2012, the Assessing Officer rectified this mistake by making an

addition of D5,00,000/- as unexplained deposit in ICICI Bank, Pricol

Branch, Coimbatore. Against this, the assessee is in appeal before us.

4. We have heard both the parties and perused the material on

record. The Departmental Representative submitted that there is a :- 3 -: I.T.A.Nos.1463 & 1464/Mds/2013

mistake apparent from record so as to rectify the same u/s.154 of the

Act.

5. On the other hand ld. Authorised Representative for assessee

submitted that Assessing Officer discussed two deposits of

D10,00,000/- each in ICICI and PNB bank. However, while framing

assessment u/s.143(3), the Assessing Officer only added a sum of

D15,00,000/- instead of D20,00,000/-. As this is a mistake which is

apparent from record, he made further addition of D5,00,000/-, while

rectifying this mistake u/s. 154 of the Act. In our opinion, the

expression used in section 154 of the Income -tax Act regarding

mistake apparent from the record will have to be construed to be a

mistake which is very clear, distinct and apparent. The said mistake

should be a manifest and could be identified by a mere look and which

does not need a long drawn out process of reasoning. It is no doubt

true that a mere mistake by itself cannot be a ground to invoke section

154 of the Income Tax Act, 1961. It is also true that an issue which is

debatable also cannot be decided under section 154. However, when

the mistake is glaring and in a case where facts are not in dispute then

the said mistake being one apparent on the face of the record will

have to be rectified under section 154.

:- 4 -: I.T.A.Nos.1463 & 1464/Mds/2013

6. The jurisdictional High Court in the case of Express Newspapers

Limited vs. Deputy CIT 320 ITR 12, observed as under:-

"9.The scope and amplitude of section 254(2) and the analogous provision section 154 of the Act have been considered by catena of decisions of the apex Court and other High Courts. The uniform opinion of the Courts of superior jurisdiction is that a patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be corrected under section 254((2. An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to sec whether the judgment is correct or not. An error apparent on the record means an error which strikes one on mere looking and does not need a long drawn out process of reasoning on points on which there may be conceivably two opinions. The error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no Court would permit it to remain on record. If the view accepted by the Court in the original judgment is one of possible views, the case cannot be said to be covered by an error apparent on the face of the record. Sec. 254(2) specifically empowers the Tribunal to amend at any time within four years from the date of an order, any order passed by it under section 254(1) with a view to rectify any mistake apparent from the record either suo motu or on an application. In order to attract the application of section 254((2, the mistake must exist and the same must be apparent from the record. The expression 'mistake apparent from the records' contained in sections 154 and 254(2) has wider content than the expression "error apparent on the face of the record occurring in order 47 r. 1 of CPC. The restrictions on the power of review under order 47 r. 1 of CPC do not :- 5 -: I.T.A.Nos.1463 & 1464/Mds/2013

hold good in the cases of sections 254(2) and 154 of the Act. Sec. 254(2) does not confer power on the Tribunal to review its earlier order. Under the garb of rectification of mistake it is not possible for a party to take further chance of rearguing the appeal already decided. What can be rectified under section 254(2) is a mistake which is apparent and patent. The mistake has to be such for which no elaborate reasons or enquiry is necessary. Where two opinions are possible then it cannot be said to be a mistake apparent on the record. When prejudice resulting from an order is attributable to the Tribunal's mistake, Error or omission, it is its bounden duty to set it right. The purpose behind the enactment of section 254(2) of the Act to amend any order passed under sub-section (1), if any mistake apparent from the records is brought to the notice of the Tribunal, is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal.

This fundamental principle has nothing to do with the inherent power of the Tribunal. If prejudice is resulted to the party, which prejudice is attributable to the Tribunal's mistake, error or omission and which error is a manifest error, then the Tribunal would be justified in rectifying its mistake. Rectification can be made only when a glaring mistake of fact or law committed by the officer passing the order becomes apparent from the record. The rectification is not possible if the question is debatable. A point which was not examined on facts or in law cannot be dealt with as a mistake apparent from the record. No error can be said to be apparent on the face of the record if it is not manifest or self evident and requires an examination or argument to establish it. Where without any elaborate argument one could point to the error and say here is a substantial point of law which stares one in the face, and there could reasonably be no two opinions entertained about it, is a clear :- 6 -: I.T.A.Nos.1463 & 1464/Mds/2013

case of error apparent on the face of the record."

7. In this present case, it is observed that issue involved is not

being a debatable issue which is evident from the assessment order.

The Assessing Officer duly discussed deposits of D10,00,000/- each in

two bank accounts namely ICICI and PNB Bank. However, while

making addition, he made only D10,00,000/- in PNB bank and

D5,00,000/- in ICICI Bank towards deposits. Thus, there was error

while making the addition by Assessing Officer. The Assessing Officer

has brought on record the material facts relevant for the addition but

there was a lapse on his part while making the addition. In our

opinion, this cannot be said as a debatable issue so as to refrain from

correcting the same. As the records pertaining to the addition of

D5,00,000/- were available with the Assessing Officer in the form of

earlier proceedings. The contention of the ld. Authorised

Representative for assessee that the issue is debatable cannot be

accepted.

8. In the case of CIT VS M.R.M. PLANTATION 240 ITR 660 (Mad),

the Madras High Court observed as under:-

:- 7 -: I.T.A.Nos.1463 & 1464/Mds/2013

"Sec. 154 of the Act opens with the words 'with a view to rectifying any mistake apparent from the record...' The term 'record' as noticed earlier is not defined in the section or in the definition section of the Act. For determining the true scope of this provision and the meaning to be properly assigned to the term 'record' it is necessary to keep in view the object of the provision and the nature of the power conferred on the authorities under that provision. These are the criteria which the Supreme Court adopted while considering the scope and effect of section 263 of the Act and the meaning to be assigned to the word 'record' used in that provision, in the case of CIT Vs. Shree Manjunathesware Packing Products & Camphor Works (1997) 143 CTR (SC) 406 : (1998) 231 ITR 53 (SC). The object with which power is conferred by section 154 is as stated in the marginal heading 'rectification of mistake'. The principal condition for exercising the power under section 154 of the Act is the existence of a mistake in the record. The mistake is not to be a mistake which requires in-depth probing to discover, but is a mistake which is 'apparent' from the record. The power conferred by this provision is only to enable the authorities to rectify the 'apparent' mistakes in the record.

The record referred to is the record which the authorities are required to examine for the purpose of rectifying the mistakes in the orders mentioned in clauses (a), (b) and (c) of section 154(1) of the Act. The section does not either expressly or implicitly require that the authorities exercising power under this provision should limit their attention only to the order sought to be rectified.

The requirement that the mistake in the record be 'apparent' does not imply that no other relevant document should be looked into. If in the light of other legally valid orders it is found that the original order contains mistakes which are apparent, the rectification of such mistakes is not barred under section 154. The object of the provision is the rectification of mistakes in the record and that object is ill served if the authorities are compelled to :- 8 -: I.T.A.Nos.1463 & 1464/Mds/2013

preserve such mistakes in the order by asking them to wear blinkers and not look into relevant unimpeachable material such as the rectified order of assessment for the period preceding the assessment year in the light of which mistakes in the order sought to be rectified are apparent."

9. In view of this, we are inclined to confirm the addition of

D5,00,000/- made by Assessing Officer in proceeding u/s.154 of the

Act. Accordingly, the appeal of the assessee in ITA No.1463/Mds/2013

is dismissed.

10. In ITA No.1464/Mds/2013 the assessee contested levy of

penalty u/s.271(1)(c) of the Act. In this case, the Assessing Officer

invoked provisions of u/s.271(1)( c) of the Act in respect of addition

made by Assessing Officer at D22,40,000/-. The Assessing Officer

made an addition of D20,00,000/- as unexplained deposit in bank

account in ICICI and PNB bank as discussed earlier and D2,40,000/-

towards payment of rent without deducting TDS u/s.40(a)(ia) of the

Act. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). The Commissioner of

Income Tax (Appeals) confirmed the order of the Assessing Officer.

Against this, the assessee preferred an appeal before us.

:- 9 -: I.T.A.Nos.1463 & 1464/Mds/2013

11. The ld. Authorised Representative for assessee submitted that

the order of the Assessing Officer is against law, circumstances,

evidence and facts of the case. The Assessing Officer initially made

an addition of D15,00,000/- being the cash deposit in the IClCI Bank,

Pricol branch of Coimbatore and Punjab National Bank, Ootacamund

branch. The Assessing Officer has made this addition of D15,00,000/-

to the taxable income of the assessee as unexplained income. As

these two accounts were not

reflected in the books of account of the assessee, the same was

agreed by the assessee. The Assessing Officer further made an

addition of D2,40,000/- to the taxable income. The Assessing Officer

has mentioned in the order that the assessee has claimed

D.2,40,000/- as rent paid for the premises in which he runs a

restaurant and that as no TDS was deducted, the entire amount of

D2,40,OOO/- is disallowed u/s 40(a)(ia) for the non-deduction of TDS

and added to the total income of the assessee. As the assessee did

not deduct TDS towards the shop rent paid, this was also accepted by

the assessee. The Assessing Officer has made a revision u/s 154 of

the Income tax Act on 21.06.2012 and has made a further addition of

D5,00,000/-. He has mentioned that it was apparent from the records

that the cash deposit of D10,00,000/- in the IClCI Bank, Pricol, :- 10 -: I.T.A.Nos.1463 & 1464/Mds/2013

Coimbatore was not at all brought into the books of account and the

cash flow statement submitted on 15.12.2011 did not show any

inflow or outflow of funds from this bank He further states that hence

this amount of D5,00,000/-. is added to the taxable income. In this

regard, he has failed to notice that this amount of D5,00,000/-.relates

to the investment of D5,00,000/-.in IClCI Mutual fund. This

investment of D5,00,000/- is very much reflected in the balance sheet

as on 31.03.2012. Hence, it is wrong to say that this amount was not

reflected in the accounts. As this amount of D5,00,000/- is reflected in

the balance sheet as on 31.03.2012, this addition is not justified and

it was submitted that this addition of D5,00,000/- may be deleted.

The assessee has been regularly filing his returns for the past several

years and he has fully disclosed all the transactions in his returns. He

has never concealed any particulars or income these years. Neither

he has furnished any inaccurate particulars in his returns. There is no

willful default of intention to evade tax. He has given genuine details

in his returns and there is no intention to evade tax. But during the

assessment year 2009-10, there was genuine omission regarding the

transactions of deposits amounting to D5,00,000/- in his IClCI Bank

account and Rs.10 lacs in Punjab national Bank account. The

Assessing Officer has added Rs.20 lacs towards the taxable income.

:- 11 -: I.T.A.Nos.1463 & 1464/Mds/2013

In the order u/s 154 the Assessing Officer has made a further

addition of D5,00,000/-. But very clearly this amount relates to the

investment in IClCI Prudential policy which is appearing in the

balance sheet as on 31..03,2009 as follows:

Balance sheet as on 31.03.2009.

Assets ICICI Prudential Life Insurance 15,00,000/-

This amount includes D5,00,000/- invested during the previous year

and the balance represents the amounts invested during the previous

years. This amount was invested from the ICICI bank account and

hence there is no suppression of income in this case. In the IClCI

Bank account, the following entry is finding a place for the

investment of D5,00,000/- towards IClCI Prudent Life insurance policy.

Hence, it is very clear that the amount of D5,00,000/- is reflected in

the accounts and is appearing in the balance sheet as on 31.03.2009.

Hence, it was prayed that the penalty levied on this addition may be

deleted. The assessee reiterated that there was no willful intention to

evade tax. In this regard, it may be considered that the assessee is

running a restaurant in a rental building and it is with much difficulty

that he is carrying on his business and he has been regularly paying

his taxes and over the years there has been no default in the payment :- 12 -: I.T.A.Nos.1463 & 1464/Mds/2013

of taxes. Based upon the past records, it may be considered to drop

the additions made which are huge by his standards. As the assessee

has been law abiding all these years and as a genuine mistake has

been committed in not disclosing the bank accounts, it is prayed that

the penalty may be dropped as the assessee is in financial difficulties.

The assessee has been paying the taxes levied in some instalments

and he has made a genuine effort to pay the taxes levied inspite of his

financial difficulties and hence it is prayed again that a lenient view

may be taken to drop the penalty levied which will be a very heavy

burden on him.

12. On the other hand, the ld. Departmental Representative relied

on the order of the Commissioner of Income Tax (Appeals).

13. We have heard both the parties and perused the material on

record. In this case, penalty levied u/s.271(1) (c) towards

unexplained deposit of D10,00,000/- each in PNB Bank and ICICI Bank

and also considered disallowance u/s.40(a)(ia) of the Act of

D2,40,000/- for payment of rent without deducting TDS.

:- 13 -: I.T.A.Nos.1463 & 1464/Mds/2013

14. In our opinion, admittedly there was deposits of

D10,00,000/- each in ICICI Bank and PNB Bank. The assessee was

asked to explain the source thereof. The assessee failed to explain the

source for the same. Considering this, the Assessing Officer made an

addition of D20,00,000/- as unexplained income. The assessee has not

explained the sources for the said deposit and not able to lead any

evidence even before the Assessing Officer during the course of

penalty proceedings. The assessee furnished inaccurate particulars of

income and also concealed the income. The assessee was not able to

establish any inadvent mistake or omission on his part when the

Assessing Officer gave reasonable opportunity to explain the source.

When the assessee failed to explain the said source of bank deposits,

then to the extent of the amount which was treated as income to be

considered for levy of penalty u/s.271(1) (c) of the Act. The assessee

has not offered any explanation whatsoever towards source of deposit

at any stage before the lower authorities or even before us. We,

therefore hold that to the extent of deposit considered as income by

Assessing Officer is liable for levy of penalty. The assessee has

furnished inaccurate particulars income and the income of assessee

was found to be more than as admitted by the assessee. We, therefore :- 14 -: I.T.A.Nos.1463 & 1464/Mds/2013

do not find any infirmity in the order of the Commissioner of Income

Tax (Appeals) on this issue and the same is confirmed.

15. Regarding considering the disallowance of rent payment by

invoking provisions u/s.40(a)(ia) of the Act for non deduction of TDS,

this cannot be considered for levy of penalty u/s.271(1)(c) of the Act

in view of the fact that amount was already paid by the assessee

without deducting TDS and no amount was outstanding during the

end of the close of the financial year. In our opinion, the issue raised

by the assessee is squarely covered by the order of the Special Bench

of the Tribunal (Vizag) in the case of Merilyn Shipping and Transports

vs. ACIT (2012) 136 ITD 23 (Visakhapatnam) wherein it was held that

the provisions of section 40(a)(ia) are applicable only to the expenses

that are "payable" and outstanding at the end of the close of the year

relevant to the assessment year and not to the amount already paid.

The same view was taken by the High Court of Allahabad in the case

of CIT vs. M/s. Vector Shipping Services (P) Ltd in ITA No.122 of 2013

dated 09.7.2013 by holding that sec 40(a)(ia) is not applicable when

there is no outstanding balance at the end of the close of the year

relevant to the assessment year and SLP filed by the Revenue in

Supreme Court of India in CC No.8068/2014 dated 02.07.2014 is also :- 15 -: I.T.A.Nos.1463 & 1464/Mds/2013

dismissed. By respectfully following the decision of Allahabad High

Court, we are incline to delete the penalty levied in respect of this

addition. Being so, in respect of this disallowance u/s.40(a)(ia),

penalty u/s.271(1) (c) cannot be levied.

16. Accordingly, we direct the Assessing Officer to work out the

penalty in respect of sustained addition made towards unexplained

deposit of D20,00,000/-.

17. In the result, the appeal of the assessee in ITA

No.1463/Mds/2013 is dismissed and ITA No.1464/Mds/2013 is partly

allowed.

Order pronounced on Friday, the 19th of June, 2015, at Chennai.

Sd/- Sd/-

(वी. दग ु ा! राव) (चं पज ू ार ) V. DURGA RAO (CHANDRA POOJARI) या"यक सद य / JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER चे"नई/Chennai. #दनांक/Dated:19.06.2015. KV

आदे श क त&ल'प अ(े'षत/Copy to: 1. अपीलाथ /Appellant 2. यथ / Respondent 3. आयकर आय* ु त (अपील)/CIT(A) 4. आयकर आय* ु त/CIT 5. 'वभागीय त न-ध/DR 6. गाड फाईल/GF.

:- 16 -: I.T.A.Nos.1463 & 1464/Mds/2013