2003 (10) TMI 13 - HC - Income Tax

Whether the mistake pointed out by the Assessing Officer for invoking jurisdiction u/s 154 can be considered as a mistake apparent from the record which could confer jurisdiction to the Assessing Officer for initiating and making orders u/s 154 for the purpose of recomputing allowable deduction under sections 80-I and 80HHC? - These appeals are allowed in part. The order of the Tribunal in setting aside the rectification of recomputation of deduction under section 80-I is upheld. The order of recomputing the deduction under section 80HHC by rectification is set aside and the order passed by the Income-tax Officer in that regard is restored for the respective assessment years.

Summary

Issues:
Rectification of allowable deductions under sections 80-I and 80HHC of the Income-tax Act, 1961.

Analysis:

The judgment pertains to two appeals challenging the order passed by the Income-tax Appellate Tribunal related to assessment years 1986-87 and 1987-88. The primary issue revolves around whether the mistakes identified by the Assessing Officer for invoking jurisdiction under section 154 of the Income-tax Act constitute apparent errors justifying rectification of deductions under sections 80-I and 80HHC. The court framed a substantial question of law concerning the rectification in the original assessment order for computing permissible deductions under the aforementioned sections.

Regarding the rectification of allowable deduction under section 80-I, the court referred to a previous case and concluded that no rectification was necessary in the present case due to specific circumstances, such as the absence of carry forward deductions needing adjustment against the current year's income. However, concerning the recomputation of deductions under section 80HHC, the Assessing Officer identified errors in the calculation and deemed them apparent from the record, justifying the issuance of a notice under section 154 for rectification.

Upon appeal, both the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal found the issue debatable, particularly regarding the invocation of section 154 for rectifying deductions under section 80HHC. The court analyzed relevant provisions of the Income-tax Act, emphasizing the computation of total income and deductions under sections 80HHC and 80A. It clarified that the investment allowance should be considered for computing profits derived from export, and any errors in this regard are rectifiable under section 154.

The court held that the rectification concerning the recomputation of deductions under section 80HHC was valid and not open to debate, contrary to the previous decisions. It dismissed the argument that the carry forward of unabsorbed deductions under Chapter VI-A breached the maximum limit set by section 80A(2) and section 80VVA, stating that this issue was debatable and not framed as a substantial question of law in the appeal.

Conclusively, the court allowed the appeals in part, upholding the order regarding rectification of deductions under section 80-I while setting aside the rectification order for deductions under section 80HHC, restoring the Income-tax Officer's decision for the respective assessment years. No costs were awarded in the judgment.