ITAT Deletes ₹206 Crore Expense Disallowance: Contradictory AO Approach Invalidates Sec 154 Jurisdiction

The ITAT deleted a massive ₹206 crore disallowance made in the income tax assessment of a real estate developer. The Assessing Officer (AO) had invoked Section 154 for rectification, claiming incorrect expense claims, but the Tribunal found the AO’s approach contradictory and beyond the scope of “mistake apparent from record.” The order clarified that Section 154 cannot be used to reopen debatable issues or reappraise factual determinations. Since the AO simultaneously recognized and denied the same expenses, the ITAT held the action arbitrary. This decision reiterates judicial safeguards against arbitrary tax administration, protecting taxpayers from unjustified disallowances. It underscores that rectification powers must be narrowly construed, preventing authorities from stretching jurisdiction to reassess contested matters under the guise of rectification.