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Issues involved:
1. Interpretation of section 263(1) of the Income-tax Act, 1961 regarding the correctness of the assessment order. 2. Validity of withdrawing approval under section 35CCA of the Income-tax Act, 1961 retrospectively. 3. Justification of canceling the order under section 263 of the Income-tax Act, 1961 by the Tribunal. Analysis: 1. The case involved a dispute regarding the correctness of the assessment order under section 263(1) of the Income-tax Act, 1961. The Commissioner of Income-tax contended that the deduction allowed under section 35CCA was erroneous as the approval for the society had been withdrawn retrospectively. The Tribunal, considering various judgments, including the Bombay High Court's decision in Seksaria Biswan Sugar Factory Ltd. v. IAC, held that the order of the Assessing Officer was justified, restoring the deduction allowed. The Tribunal's decision was supported by the principle that retrospective amendments should not prejudice the assessee's rights. 2. The issue of withdrawing approval under section 35CCA retrospectively was crucial in this case. The Commissioner argued that the withdrawal of approval justified the cancellation of the assessment order under section 263. However, the assessee contended, citing the decision in CIT v. Ethelbari Tea Co. (1931) Ltd., that as long as the approval existed at the time of payment and assessment, the assessee should be entitled to the deduction. The court emphasized that the assessee should not suffer due to the Department's mistake in retrospectively withdrawing approval, as it would be unjust to penalize the assessee for the Department's error. 3. The Tribunal's decision to cancel the order under section 263 of the Income-tax Act was challenged by the Revenue. The Revenue relied on the decision in CIT v. Bankam Investment Ltd., arguing that the withdrawal of approval justified the Commissioner's action. However, the court, considering precedents like B.P. Agarwalla and Sons Ltd. v. CIT, held that the withdrawal of approval with retrospective effect should not render the assessment order erroneous if the donation was genuine and made to an approved society. The court emphasized that the assessee's right to deduction should not be affected by the Department's retrospective actions. In conclusion, the High Court of CALCUTTA upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue on all three issues. The court emphasized the importance of protecting the assessee's rights when approvals are withdrawn retrospectively, ensuring that genuine deductions are not denied due to Departmental errors.
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