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2012 (9) TMI 839 - SC - Income TaxRectification - Deduction u/s 80IA - notice u/s 154 as claim of deduction allowed inadvertently before setting off the earlier years losses from the profits and gains of the industrial undertaking - Held that - Section 154 is not applicable in this case as that the provisions of Chapter VIA dealing with quantification of deductions have been amended at least eleven times. Moreover, even Section 80IA, was earlier preceded by Sections 80HH and 80I, which has resulted in plethora of cases. In fact, some of the amendments have been enacted even after the judgment of this Court in the case of Kotagiri Industrial Co-operative Tea Factory Ltd. (1997 (3) TMI 1 - SUPREME COURT) delivered on 5.3.1997 relying on which claim was dismissed. In the circumstances the view that one cannot say that this is a case of a patent mistake. The assessee followed the judgment of the Madhya Pradesh High Court in K. N. Oil Industries (1996 (7) TMI 101 - MADHYA PRADESH HIGH COURT)wherein the High Court held that losses of earlier years were not deductible from the total income for purposes of computation of special deduction under Sections 80HH and 80I. Hence, the assessee is right in submitting that the issue involved a moot question of law, particularly at the relevant time (assessment year 1997-98) - in favour of assessee.
Issues:
Assessment year 1997-98 - Claim of deduction under Section 80IA - Mistake in Assessment Order - Applicability of Section 154 of the Income Tax Act. Analysis: The civil appeal pertains to the assessment year 1997-98 and involves the claim of deduction under Section 80IA by an industrial undertaking engaged in the manufacture of steel products. The appellant filed a return of income disclosing an amount and claimed a deduction under Section 80IA. However, the Assessing Officer (AO) issued a notice under Section 154 of the Income Tax Act, contending that the deduction was allowed erroneously before setting off earlier years' losses. The appellant objected to this proposal, citing a judgment of the Madhya Pradesh High Court and contending that Section 154 was not applicable as there was no patent error in the original order under Section 143(1)(a). The AO rejected these contentions, and subsequent appeals to the CIT(A) and ITAT were also dismissed based on precedents and the interpretation of Section 72 of the Act. The Tribunal upheld the decision, citing settled law from the Supreme Court, leading to the filing of a civil appeal by the assessee. The Supreme Court analyzed the case, emphasizing the frequent amendments in the provisions of Chapter VIA and the evolution from Sections 80HH and 80I to Section 80IA. The Court noted that the issue involved a significant legal question, especially considering the relevant time frame. The Court concluded that Section 154 was not applicable in this case, as the appellant had relied on a High Court judgment and the issue was not a clear-cut mistake. Therefore, the impugned judgment of the High Court was set aside, and the civil appeal was allowed in favor of the assessee. In summary, the judgment clarifies the applicability of Section 154 in cases involving deductions under Section 80IA and highlights the importance of legal interpretations and precedents in determining tax liabilities. The Court's decision underscores the complexity of tax laws and the need for a nuanced understanding of evolving legal provisions in tax assessments.
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