2011 (1) TMI 1536 - AT - Income Tax

2018 (11) TMI 1243 - AT

Issues Involved:
1. Whether the order passed by the Assessing Officer (AO) under Section 154 of the Income Tax Act, 1961, was erroneous and prejudicial to the interest of the revenue.
2. Whether the Commissioner of Income Tax (CIT) exercised jurisdiction under Section 263 of the Income Tax Act, 1961, within the period of limitation.
3. Whether the deductions under Chapter VI-A of the Income Tax Act, 1961, should be restricted to the income under the head "Income from Business" as per Section 80AB of the Act.
4. Whether the CIT could invoke Section 263 when two views were possible on the issue.

Issue-wise Detailed Analysis:

1. Erroneous and Prejudicial Order by AO under Section 154:
The CIT argued that the AO's order dated 20.02.2007, which determined the deduction under Section 80-O of the Act at Rs. 2,47,19,924/-, was erroneous and prejudicial to the interest of the revenue. The CIT contended that the deductions under Sections 80-O and 80HHB should be restricted to the income under the head "Income from Business" as per Section 80AB. The Tribunal, however, found that the AO's order dated 20.02.2007 was not erroneous as it merely rectified the mistake in the earlier order dated 04.12.2006, which had incorrectly restricted the deduction under Section 80-O.

2. Jurisdiction under Section 263 and Limitation Period:
The Tribunal examined whether the CIT's invocation of Section 263 was within the period of limitation. The CIT's order dated 30.03.2009 sought to revise the AO's order dated 20.02.2007. The Tribunal noted that the period of limitation for revising an order under Section 263 is two years from the end of the financial year in which the order sought to be revised was passed. The Tribunal held that the CIT could not indirectly revise the AO's order dated 06.10.2003, which was beyond the limitation period, by revising the order dated 20.02.2007.

3. Deductions under Chapter VI-A and Section 80AB:
The CIT's view was that deductions under Sections 80-O and 80HHB should be restricted to the income under the head "Income from Business" as per Section 80AB. The Tribunal disagreed, stating that Section 80AB ensures that the deduction allowed under any section of Chapter VI-A does not exceed the net income under a particular source computed in accordance with the provisions of the Act. The Tribunal also referred to the Supreme Court's decision in Synco Industries Ltd. vs. AO, which clarified that deductions under Chapter VI-A should be based on the gross total income after adjusting intra-head and inter-head losses.

4. Two Possible Views on the Issue:
The Tribunal acknowledged that there could be two views on whether deductions under Chapter VI-A should be restricted to the income under the head "Income from Business" or only the overall ceiling of deduction under Section 80A(2) should be considered. The Tribunal held that when two views are possible, the CIT cannot exercise jurisdiction under Section 263 merely because he does not agree with the AO's view. The Tribunal concluded that the AO had taken one of the possible views, and therefore, the CIT's invocation of Section 263 was not justified.

Conclusion:
The Tribunal quashed the CIT's order under Section 263, holding that the AO's order dated 20.02.2007 was not erroneous and that the CIT's action was barred by limitation. The Tribunal also found that the CIT's interpretation of Section 80AB was incorrect and that the issue was debatable, making the invocation of Section 263 inappropriate. The appeal of the assessee was allowed.

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