2008 (9) TMI 986 - AT - Income Tax

Summary

Issues Involved:
1. Assumption of jurisdiction by the Commissioner u/s 263 of the Income-tax Act, 1961.
2. Validity of invoking section 263 by the Commissioner.
3. Quantum of exclusion under clause (iv) of the Explanation below section 115JB(2).

Summary:

Issue 1: Assumption of jurisdiction by the Commissioner u/s 263 of the Income-tax Act, 1961
The appeals pertain to the assumption of jurisdiction by the Commissioner u/s 263 of the Income-tax Act, 1961. The Commissioner issued a show-cause notice stating that the Assessing Officer (AO) wrongly reduced the total amount of export profits of business while computing Book Profits u/s 115JB, leading to an under-assessment of taxable income by Rs. 30,89,072.

Issue 2: Validity of invoking section 263 by the Commissioner
The assessee contended that the Commissioner failed to justify how the AO's order was erroneous and prejudicial to the interests of the revenue. The assessee referenced the judgments in Malabar Industrial Co. Ltd. v. CIT and CIT v. Gabriel India Ltd., arguing that the AO's order represented a possible view supported by judicial decisions. The Commissioner, however, did not provide any judicial order to support his contrary interpretation. The Tribunal found that the AO's view was a possible view and that the Commissioner's invocation of section 263 was unjustified.

Issue 3: Quantum of exclusion under clause (iv) of the Explanation below section 115JB(2)
The controversy centered on the amount to be reduced from the net profit shown in the Profit and Loss Account to compute 'Book Profits' u/s 115JB. The assessee excluded Rs. 61,78,144, which was accepted by the AO. The Commissioner argued that only 50% of the profits, as per section 80HHC(1B), should be excluded, amounting to Rs. 30,89,072. The Tribunal noted that the AO's computation was in line with the decisions in Dy. CIT v. Syncome Formulations (I) Ltd. and Asstt. CIT v. Ajanta Pharma Ltd., which supported the assessee's view.

Conclusion:
The Tribunal concluded that the Commissioner's assumption of jurisdiction u/s 263 was invalid as the AO's order was a possible view supported by judicial precedents. The order of the Commissioner was set aside, and the assessment framed by the AO was restored. The appeals of the assessee were allowed.