2012 (12) TMI 368 - AT - Income Tax

Validity of Order by CIT u/s 263 - Deduction u/s 80HHC - AO allowed deduction u/s 80HHC without setting off of carry forward loss CIT issue order on the basis of decision in case of IPCA Laboratories (2004 (3) TMI 9 - SUPREME COURT) Assessee contended that Hon ble Madras High Court granted an ad-interim stay on validity of retrospective amendment to Sec. 80HHC - Held that - As in the case of Avani Exports & Others v. CIT & Ors.(2012 (7) TMI 190 - GUJARAT HIGH COURT) holding that amendment to Sec 80HHC is prospective and could be given effect from the date of amendment and not in respect of earlier assessment years is also nothing to do with the ratio of the decision in case IPCA Laboratories (2004 (3) TMI 9 - SUPREME COURT). Therefore, CIT u/s 263 in directing the AO to allow deduction u/s 80HHC in accordance with law. Issue decides in favour of revenue

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Validity of the order passed under section 263 of the Income Tax Act.
3. Interpretation of the amendment to Section 80HHC and its applicability to the deduction calculation.
4. Impact of High Court's ad-interim stay on the Commissioner's order.
5. Revision of assessment under section 263 after completion under section 143(3) read with section 147.

Condonation of Delay:
The appeal was filed late by 92 days, and the assessee sought condonation of delay, attributing it to circumstances beyond their control. The Tribunal, after considering the facts, accepted the plea and condoned the delay, allowing the appeal for hearing.

Validity of Section 263 Order:
The Commissioner issued a notice under section 263, contending that the assessment order was erroneous and prejudicial to the Revenue's interest due to the deduction under Section 80HHC being allowed before setting off carry forward losses. The Tribunal upheld the Commissioner's order, directing the Assessing Officer to rework the deduction in line with the Supreme Court's decision in IPCA Laboratories Ltd. vs. DCIT.

Interpretation of Amendment to Section 80HHC:
The assessee challenged the retrospective amendment to Section 80HHC, arguing its constitutional validity and citing an ad-interim stay by the High Court. However, the Tribunal held that the amendment's applicability, as per the Gujarat High Court's decision, did not affect the Supreme Court's ruling in IPCA Laboratories case. The Tribunal dismissed the contention that the Commissioner's order was unjustified.

Impact of High Court's Stay on Commissioner's Order:
The assessee claimed that the High Court's stay prevented the Commissioner from directing the reworking of the deduction under Section 80HHC. However, the Tribunal found this argument irrelevant to the core issue of aligning the deduction calculation with the Supreme Court's decision, thereby upholding the Commissioner's directive.

Revision of Assessment under Section 263:
The Tribunal affirmed the Commissioner's decision under Section 263, emphasizing the necessity to adhere to the Supreme Court's ruling on deduction calculation under Section 80HHC. The Tribunal dismissed the grounds raised by the assessee, ultimately dismissing the appeal.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the Tribunal's decision on each aspect involved in the case.