CLR Editorial Note: The assessee had credited an amount of Rs. 1,24,312/- as Duty Entitlement Pass Book (DEPB in short) in its Profit & Loss Account (P&L A/c) and had also claimed deduction u/s 80IB on this amount. Initially, the Assessing Officer allowed this claim u/s 80IB qua DEPB amount while completing assessment u/s 143 (3) of the Act.
Subsequently, he noticed that such claim is not allowable as per the verdict of Hon™ble Apex Court as rendered in the case of Liberty India vs CIT [2009] 317 ITR 218. Therefore, the AO treated this action as a mistake which was rectifiable u/s 154 of the IT Act. The AO initiated the proceedings u/s 154 of the Act by issuing notice proposing withdrawal of deduction as 30th Sep 2009. The assessee-firm vide reply dated 10th Nov 2009 objected to this action of the AO and stated that this provision of Section 28 has since been amended with retrospective effect with a view to neutralize the effect of Liberty India which has been aptly discussed in the case of Saraf Seasoning Udyog v. ITO [2008] 174 (Raj.). So, based on the view of Liberty India, the order cannot be subjected to Section 154 proceedings. The Assessing Officer did not agree to this justification and withdrew the deduction earlier allowed u/s 80IB qua the DEPB amount, vide his order dated 08th Feb 2010.
It is a settled position of law that where any issue is debatable, it cannot be corrected u/s 154 of the Act. In this regard, the Hon™ble Apex Court in the case of T.S. Balaram ITO v. Volkart Bros. [1971] 82 ITR 50 is relevant wherein an action taken by Assessing Officer u/s 154 of the Act was found to be illegal.
It was found that the allowance of deduction is not a glaring, obvious, patent and apparent from record. Hence, it cannot be rectified, in view of our above discussion.. Accordingly, we accept the appeal of the assessee and set aside the finding of the ld. CIT(A) by reversing the same and allow this appeal.
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