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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
The present appeal arises from order dated 18.08.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”) by Ld. Addl./JCIT(Appeals)-Kolkata. In this case, the Ld. AO noted certain mistakes in the said assessment order and proceeded to rectify the same u/s 154 of the Act. To this extent the Ld. AO disallowed interest expenses of Rs.20,42,25,361/- u/s 40(a) of the Act on the ground that the expenditure of interest on debentures and loan was not allowable due to non-deposit of TDS within the statutory time limit. In this regard, the relevant findings of Ld. Addl./JCIT(A) deserves to be extracted: -
“5.3After analyzing the issue involved, the observation made by the Assessing Officer in the impugned order u/s 154 and appellant’s detailed submission, I am of the opinion that the issue of non deduction and non deposit of TDS towards interest paid on debentures and loan was a contentious and debatable issue where different interpretations can be made. Moreover, there is no dispute about the fact that the AO had accepted appellant’s explanation on the impugned issue in original assessment u/s 143(3). Courts and Tribunals have consistently held that provisions of section 154 can be invoked only where there is a patent, obvious, and indisputable mistake apparent form the record. It cannot involve debatable or controversial issues, or any issue that requires interpretation, investigation or long reasoning. The issues involved in the present case are certainly not containing something which can be termed to be patent, obvious, and indisputable mistake but require investigation and long reasoning as already discussed, supra, so as to warrant invoking the provisions of section 154 of the I.T. Act. Without going into the merits of the issue involved and without examining in detail as to whether claim of expense on account of interest paid on loan and debentures was correct or not, I hold the application of section 154 against the original assessment u/s 143(3) on the relevant issue of non deduction/non deposit of TDS as unjustified and bad in law. It is therefore directed that the addition of Rs.20,42,25,361/- made in the impugned order u/s 154 r.w.s. 143(3) dated 13.03.2020 be deleted. Since the appellant has claimed that the original assessment order u/s 143(3) was also appealed against and relief was granted by CIT(A), the jurisdictional AO should ascertain whether the assessment order has reached finality or not (i.e. whether further appeal was moved by either appellant or department) and restore the assessed income to such final determination of taxable income. The appeal is therefore allowed.”
The Revenue is aggrieved with the action of first appellate authority and has approached the ITAT with the following grounds: -
1.“Whether on the facts and circumstances of the case Ld. CIT(A) erred in allowing the assessee’s appeal against the order passed by the Assessing Officer u/s 154 of the Income Tax Act, 1961, without appreciating that the Assessing Officer had correctly invoked section 154 to rectify a mistake apparent from record.
2.Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in holding that the interest expenses capitalized to work-in-progress (WIP) were liable for disallowance under section 40(a)(ia), without appreciating that such expenditure was revenue in nature.
3.The appellant craves to be allowed to add any fresh ground(s) of appeal and or deleted or amend any of the ground(s) of appeal.”
On the last date of hearing, none attended on behalf of the assessee but it was decided to proceed ahead with the adjudication with the help of Ld. DR. The Ld. DR stated that a genuine mistake was brought to the notice of the Ld. AO who on his own accord initiated proceedings u/s 154 of the Act and set right the mistake. It was argued that the mistake was apparent from record and did not require any long drawn process of reasoning. The Ld. DR supported the order of Ld. AO.
We have carefully considered the submissions of Ld. DR and have gone through the records before us. A careful reading of para 5.2 of the impugned order and thereafter para 5.3 (supra) clearly reveals that the action of Ld. AO was certainly not possible under the provisions of section 154 of the Act. It is clear that the impugned adjustment made by the Ld. AO is not an arithmetical mistake or any mistake which is apparent in black and white. Accordingly, we find no fault in the order of Ld. Addl./JCIT(Appeals) and we uphold the same.
In the result, appeal of the Revenue is dismissed.