JUDGEMENT
1. This appeal is important from a procedural stand point. The Commissioner has purported to rectify what he calls an "order under section 263 of the Income-tax Act, 1961" dropping the proceedings under that section. -
(1.)
(2.)The assessee had filed a return wherein he had claimed deduction of a sales-tax liability amounting to Rs. 43,811. The Income-tax Officer had allowed it. The Commissioner issued a notice under section 263 stating that this was a liability at the end of the accounting period in respect of sales-tax but not paid. According to him, the provisions of section 43B were applicable. The assessee replied that section 43B was not applicable because this amount was not payable to the State Government. He also relied upon the Tribunals decision in the case of Thakersy Babubhai, Ahmedabad Bench in IT Appeal No. 320/Ahd/1985. Thereafter, as stated above, the Commissioner has passed the above ode under section 263 of the Act dropping the proceedings under that section. Subsequently, the Commissioner issued what he calls a "notice under section 154 of the I. T. Act, 1961" stating that there was a mistake apparent from the record in view of the specific provisions of the section and addition of Rs. 43,811 should have been made. He therefore, proposed to "rectify the aforesaid mistake and to disallow the amount of Rs. 43,811 in place of Nil, proceedings being dropped". The assessee replied reiterating his earlier submissions and also adding that no deduction of that amount had been made or claimed by debiting the amount in the P&L Account in order to show any trading liability created by passing any hawala entries in the books. The Commissioner ultimately passed an order under section 263 rejecting the assessees contentions on the ground that the sales-tax collections were in the nature of revenue receipts and that section 43B was clearly applicable. He accordingly, directed the Income-tax Officer to make addition of the aforesaid amount of Rs. 43,811. This is the grievance of the assessee.
On behalf of the assessee copies of the assessees accounts were submitted which showed that the above sum of Rs. 43,811 was collected during the accounting period but was not included in the P&L Account. Copy of the sales-tax account was also submitted together with the copies of the sales-tax payment challans which showed that this amount was paid by the assessee in installments on 10-11-1983 and 9-12-1983.
(3.)THE assessees counsel submitted that the order under section 263 could not be rectified and that in any case it was a debatable matter because the revisional action had been started and then dropped. He also relied upon the Tribunals decision in the case of ITO v. K. S. Lokhandwala [1989] 31 ITD 305 (Ahd.). THE learned Departmental Representative on the other hand submitted that the Commissioners order under section 263 could be amended and that was not a debatable issue. According to him, the said amount of Rs. 43,811 was a part of the closing balance and if it was ignored earlier, correcting that mistake was within the power of rectification because it was an apparent mistake on the record.
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