2008 (2) TMI 419 - HC - Income Tax

Intimation u/s 143(1)(a), (1A) - Deduction u/s 80HHC whether additional tax under section 143(1A) of the Act can be levied on the assessee in rectification proceedings, which had not been made during the assessment year and that the prima facie adjustment and additional tax levied had been made in the original intimation itself? held that - The deduction u/s 80HHC can be permitted only if there is positive profit in the exports of both self-manufactured goods as well as in trading goods. If there is loss in either of the two, then that loss could be taken into account for the purposes of computing the profit yes, dditional tax under section 143(1A) of the Act can be levied on the assessee in rectification proceedings, which had not been made during the assessment year and that the prima facie adjustment and additional tax levied had been made in the original intimation itself

Summary

Issues:
Appeal against order passed by Income-tax Appellate Tribunal for assessment year 1995-96 under section 260A of the Income-tax Act, 1961. Substantial question of law regarding additional tax under section 143(1A) of the Act in rectification proceedings. Allowability of deduction claimed under section 80HHC of the Act.

Analysis:
The case involves an appeal by the Revenue against the order of the Income-tax Appellate Tribunal for the assessment year 1995-96 under section 260A of the Income-tax Act, 1961. The key issue revolves around the substantial question of law regarding the levy of additional tax under section 143(1A) of the Act in rectification proceedings. The court considered whether the appellate authorities were correct in holding that no additional tax could be levied on the assessee in rectification proceedings, which had not been made during the assessment year. The court examined the provisions of sub-section (1A) of section 143 of the Act, as amended by the Finance Act, 1993, and its retrospective application to the case at hand.

The facts of the case are centered around an assessee engaged in export business who claimed deduction under section 80HHC of the Act for the assessment year 1995-96. The Assessing Officer found that the deduction was not admissible as the gross total income of the assessee was negative. Consequently, the Assessing Officer made a prima facie adjustment and levied additional tax on the assessee. The matter was taken to the Commissioner of Income-tax (Appeals) who held that no additional tax was warranted. Subsequently, the Revenue appealed to the Tribunal, which also dismissed the appeal, leading to the current appeal before the High Court.

The court referred to a similar issue addressed by the Supreme Court in a previous case, highlighting the applicability of the provisions of sub-section (1A) of section 143 of the Act even when the loss declared by the assessee had been reduced due to adjustments made under sub-section (1)(a). Additionally, the court cited judgments of the Supreme Court in other cases related to the allowability of deductions claimed under section 80HHC of the Act, emphasizing that the word "profit" in the relevant sections signifies positive profit from exports of self-manufactured goods and trading goods.

In conclusion, the High Court found that the appeal of the Revenue deserved to be allowed based on the legal provisions and precedents cited. The court ruled in favor of the Revenue and against the assessee, upholding the levy of additional tax under section 143(1A) of the Act and settling the legal issue regarding the deduction claimed under section 80HHC of the Act in favor of the Revenue.