2009 (9) TMI 691 - AT - Income Tax

Summary

Issues involved:
The judgment involves the issue of correctness of passing an order under section 263 by the CIT and setting aside the order passed under section 143(3) of the Act regarding deduction under section 80HHC for an exporter.

Details of the judgment:

Issue 1: Correctness of CIT's order under section 263
The CIT set aside the order of the Assessing Officer under section 143(3) of the Act, directing a recomputation of deduction under section 80HHC by excluding sales tax refund and disallowing a donation from the net profit. The CIT found that the assessee should have been allowed a deduction of Rs. 6,73,580 instead of the claimed Rs. 8,18,638. The assessee argued that sales tax refund should not be considered in the deduction calculation as it is not equivalent to other receipts like brokerage or commission. The Tribunal held that the CIT's order was not justified as the Assessing Officer's order was correct and not prejudicial to revenue interests.

Issue 2: Interpretation of section 263 of IT Act
The Tribunal analyzed section 263 of the IT Act, which allows the Commissioner to revise orders if they are erroneous and prejudicial to revenue interests. The Tribunal emphasized that an order can only be termed erroneous if it deviates from the law, not simply because the Commissioner disagrees with the Assessing Officer's decision. The Tribunal clarified that the Commissioner cannot substitute their judgment for that of the Assessing Officer unless the decision is legally incorrect. In this case, the Tribunal found that the Assessing Officer's decision on the deduction under section 80HHC was in accordance with the law and not erroneous.

Conclusion:
The Tribunal allowed the appeal of the assessee, stating that the CIT's order under section 263 was not justified as the Assessing Officer's order regarding the deduction under section 80HHC was correct and not prejudicial to revenue interests. The Tribunal reinstated the Assessing Officer's order and set aside the CIT's order.

This judgment highlights the importance of adherence to legal principles and the requirement for orders to be in accordance with the law to avoid being deemed erroneous under section 263 of the IT Act.