Commissioner of Income Tax vs P.N. Tewari, LIC of India

On an application filed u/s 256(1) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal, Jaipur, has referred the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the order of the learned Deputy Commissioner (Appeals) on the ground that the issue before him was debatable and hence could not be considered as a mistake apparent on record rectifiable u/s 154, despite the fact that when the Tribunal decided the appeal, the issue was no longer debatable as far as the State of Rajasthan was concerned, in view of the decision of the Hon''ble Rajasthan High Court in the case of CIT v. Shiv Raj Bhatia (DB IT Ref. No. 8/1992 dated 1-5-1996)?"

The assessee is a Development Officer of the LIC of India. In his income tax returns for both the years, the assessee had claimed deduction to the extent of 50 per cent from the incentive bonus received by him. The returns were processed u/s 143(1)(a) of the Income Tax Act, 1961. Thereafter, it came to the notice of the assessing officer that the assessee is not entitled for any deduction out of the amount of incentive bonus and issued the notice u/s 154 of the Income Tax Act, 1961. After hearing the assessee, he withdrew the allowance of deduction from the incentive bonus claimed by the assessee.

In appeal before the Deputy Commissioner (Appeals), the Deputy Commissioner (Appeals) allowed the claim of the assessee, holding that issue is debatable therefore, the deduction which has not been disallowed u/s 143(1)(a) cannot be withdrawn u/s 154 of the Income Tax Act, 1961.

None appeared for the assessee.

Heard Mr. Singhi, learned counsel for the revenue.

Mr. Singhi, learned counsel for the revenue, brought to our notice the decision on the issue involved in the case of H.M. Pareek v. CIT (DB IT Reference No. 18 of 1995 dated 5-7-2002) wherein this court has taken the view that the Development Officer of LIC is an employee of the LIC and he is not entitled for any deduction from the amount of incentive bonus paid by the LIC. He has also brought to our notice the decision of this court, in the case of Commissioner of Income Tax Vs. Shiv Raj Bhatia, wherein this court has taken the view that no deduction can be allowed out of the incentive bonus. Mr. Singhi, further submits that when issue has been decided by this court in case of Shiv Raj Bhatia (supra) and available to Tribunal on the date of its decision, Tribunal cannot say that issue is debatable.

The facts are not in dispute that in the returns, the assessee claimed the deduction from incentive bonus at the rate of 50 per cent and that has not been disallowed u/s 143(3) of the Income Tax Act, 1961. Thereafter that has been disallowed in order u/s 154 of the Act. The fact is also not in dispute that on the date of order of Tribunal decision of Rajasthan High Court in the case of Shiv Raj Bhatia (supra) was available to Tribunal, which is binding on the Tribunal. The decision of the Rajasthan High Court passed in 1996 and that should be treated the law for Rajasthan State for the purpose of order u/s 154 of the Act.

The mistake was apparent and in our view, the Income Tax Officer has rightly withdrawn the deduction wrongly allowed in an order u/s 143(1)(a) of the Income Tax Act, 1961.

In view of the admitted facts, the Tribunal, has committed an error in upholding the order of the Deputy Commissioner (Appeals).

In the result, we answer the question in negative, i.e., in favour of the revenue and against the assessee.