INCOME TAX ACT, 1961

Section 154

Rectification - Under section 154 - No mistake apparent - Change of opinion by AO as regards nature of of loss on account of assets written-off

Original assessment had been made under section 143(3). Subsequently, AO issued show-cause notice under section 154 mentioning that in profit & loss account assessee had debited Rs. 8 lakhs on account of assets written-off which being a capital loss was required to be disallowed and added back to taxable income as same is not allowable under section 37. Held:All the points had been considered in original assessment and there was no failure on part of assessee to disclose any details sought.Thus, it was apparent that AO changed its opinion on the issue after completion of assessment under section 143(3). In view of the fact that issue of expenditure claimed in profit & loss account being of revenue or capital nature being one which could only be established by a long drawn process of reasoning on points after examining true nature of expenditure in the surrounding circumstances, irrespective of description given to it by assessee in its books of account or other documents, so as to arrive at the decision regarding true nature of the transaction from commercial point of view. Therefore, allowance as revenue loss was not a mistake/error apparent from record and action of AO in proceeding with rectification order under section 154 on this issue was uncalled for and not justified.

REFERRED :

FAVOUR : in assessee's favour

A.Y. : 2014-15

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