2004 (5) TMI 52 - HC - Income Tax

CIT observed that while working out the deduction u/s 80HHC there was a negative figure of profit at one stage which had been ignored by the AO and thereby excess deduction had been allowed - Accordingly he held that the order passed by AO was erroneous - Tribunal by allowing the appeal of the assessee against the order passed by the Commissioner u/s 263 has recorded a finding that the computation made by the AO was in accordance with the view expressed by various Benches of the ITAT which have been discussed in detail in the order itself. Thus it has been observed that since the view taken by the Assessing Officer was a possible view the Commissioner had no jurisdiction to exercise power u/s 263 and treat the order to be erroneous in any manner - no substantial question of law arises out of the order of the Tribunal

Summary

Issues:
Appeal against order of Income-tax Appellate Tribunal allowing deduction under section 80HHC, Commissioner's order under section 263 of the Income-tax Act, 1961, Jurisdiction of Commissioner to interfere with Assessing Officer's order, Possible view taken by Assessing Officer, Judicial pronouncement basis for view, Prejudicial to the interests of the Revenue, Supreme Court decision in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83.

Analysis:
The case involved an appeal against the order of the Income-tax Appellate Tribunal, which had allowed the deduction under section 80HHC claimed by the assessee. The Commissioner, under section 263 of the Income-tax Act, set aside the assessment by the Assessing Officer as he observed an excess deduction under section 80HHC due to a negative profit figure being ignored. The Tribunal found the computation by the Assessing Officer to be in line with previous Tribunal decisions, stating it was a possible view and hence the Commissioner had no jurisdiction to interfere.

The learned senior standing counsel for the Revenue argued that the Assessing Officer did not have the benefit of subsequent Tribunal decisions when making the assessment, thus the view taken could not be considered possible. However, the court rejected this argument, emphasizing that a view need not be based on a judicial pronouncement but on applicable law provisions to the case's facts. The court found the Assessing Officer's view to align with subsequent Tribunal decisions, supporting the Tribunal's decision that the view was possible, and hence the Commissioner had no authority to intervene under section 263.

Citing the Supreme Court decision in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the court reiterated that not every loss of revenue due to an Assessing Officer's order is prejudicial to Revenue's interests. Losses due to a permissible course of action or differing views between the Officer and Commissioner do not qualify unless the Officer's view is legally unsustainable. Consequently, the court concluded that no substantial question of law arose from the Tribunal's order and dismissed the appeal summarily.