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2012 (9) TMI 806 - SC - Income TaxPlea against rectification order passed u/s 154 - application u/s 154 moved by assessee to carry forward and set off unabsorbed depreciation and losses of earlier AYs - DCIT while determining the taxable income, reduced the deduction admissible u/s 80HHC allowed in the original assessment order by reducing the unabsorbed depreciation and brought forward losses for the earlier AYs from current year s business profits for determining profits of the business - assessee contesting the re-computation of deduction u/s 80HHC(3) Held that - Section 154 finds place in Chapter XIV which deals with PROCEDURE FOR ASSESSMENT. If one examines the scheme of Chapter XIV, it becomes clear that the said Chapter not only deals with assessment and re-assessment, it also deals with re- computation. The object of re-computation is to assess (quantify) the correct taxable income. Such re-computation of a correct taxable income is a matter of procedure. In order to arrive at a correct amount of taxable income, DCIT had to compute deduction u/s 80HHC(3) which had to be deducted from the gross total income - Decided against assessee
Issues:
Assessment of taxable income for the year 1996-97, computation of deduction under Section 80HHC, rectification of mistake apparent from the record under Section 154 of the Income Tax Act, 1961. Analysis: The civil appeal before the Supreme Court involved the assessment of taxable income for the year 1996-97, specifically regarding the computation of deduction under Section 80HHC. The assessee, a company engaged in manufacturing picture tubes, filed its return of income at NIL, which was later scrutinized by the Assessing Officer (AO). The AO computed the income of the assessee at Rs. 5,49,45,200/- and allowed a deduction under Section 80HHC at Rs. 1,14,45,297/-. Subsequently, the assessee became entitled to carry forward and set off losses/unabsorbed depreciation from earlier years, resulting in a reduced taxable income for the year in question. The Dy. C.I.T. allowed the carry forward and set off, but reduced the deduction under Section 80HHC to Rs. 40,08,528/- instead of the initial amount. An important aspect of the case was the application of Section 154 for rectification of the computation of deduction under Section 80HHC. The Tribunal had canceled the rectification order dated 28.7.2002 passed by the Dy. C.I.T., leading to the Revenue filing an appeal before the High Court. The High Court held in favor of the Revenue, prompting the assessee to file a civil appeal before the Supreme Court. The Supreme Court analyzed the contentions raised by the assessee's counsel, emphasizing that the application for rectification was moved by the assessee and not the department. The Court highlighted the procedural aspect of rectification under Section 154, which aims to compute the correct taxable income. The Court reiterated the entitlement of the assessee to carry forward and set off losses/unabsorbed depreciation as per Section 32(2) and Section 72 of the Act. The Court emphasized that the Dy. C.I.T. had to compute the deduction under Section 80HHC to arrive at the correct taxable income, considering the orders passed by the Appellate Authority for earlier years. Ultimately, the Supreme Court found no merit in the contentions raised by the assessee, dismissing the civil appeal and upholding the rectification order passed by the Dy. C.I.T. The Court emphasized the necessity of consequential adjustments in computing the deduction under Section 80HHC to arrive at the correct taxable income, ensuring that there is no escapement of income. The appeal was dismissed with no order as to costs, bringing the matter to a conclusion.
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