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2004 (11) TMI 280 - AT - Income TaxJurisdiction of CIT u/s 263 - Merger of assessment order with appellate order - Adjustment of loss against profit for deduction u/s 80HHC - Whether the CIT was justified in invoking the provisions of section 263 by considering the order of Assessing Officer as erroneous and prejudicial to the interest of revenue - HELD THAT - In the instant case at the time of claiming deduction u/s 80HHC of the Income-tax Act, 1961, the assessee ignored the loss while calculating the deduction and the figure relating to the profit from the business was adopted at Nil, since there was loss. It would be clear that the majority of the ITAT Benches had taken a view that when the computation was to be made u/s 80HHC, loss at any stage was required to be ignored. In other words, if the figures under clauses (a), (b) and (c) of sub-section (3) of section 80HHC are negative then the negative figure or loss worked out has to be ignored. In the instant case, the Assessing Officer has taken the view which has been supported by the aforesaid decisions of the various Benches of the Tribunal. Therefore, it can safely be held that the view taken by the Assessing Officer while allowing the claim of the assessee was one of the possible view. Now the question is - if the Assessing Officer has taken one of the possible view then whether the learned CIT was justified in exercising his revisionary powers u/s 263 of Income-tax Act, 1961 and to direct the Assessing Officer to take another possible view. We are of the opinion that the facts of the present case are similar to the facts involved in the case of Max India Ltd. 2004 (5) TMI 52 - PUNJAB AND HARYANA HIGH COURT . Therefore, in view of the judgment of Jurisdictional High Court, we are of the confirmed view that in the instant case the ld. Commissioner had no jurisdiction to interfere with the view taken by the Assessing Officer by exercising his powers u/s 263 of Income-tax Act, 1961 since the view expressed by the Assessing Officer was a possible view because majority of ITAT Benches had taken the same view. We are also fortified for our aforesaid view by the decisions of various High Courts. Thus, it is crystal clear that the view taken by the Assessing Officer was in conformity with the decisions of the various Benches of the Tribunal and thus, the view taken by the Assessing Officer which was the subject-matter of learned CIT's revision, was a reasonable view and, therefore, the ld. Commissioner was not justified in exercising his powers u/s 263 of Income-tax Act, 1961 to revise the order passed by the Assessing Officer. Accordingly, we set aside the impugned order of the learned CIT and the appeal is allowed. Since in the present case the issue involved is similar and even the rival contentions were also identical as were in the case of Nahar Export Ltd., therefore, our findings given in ITA No. 460/Chandi./1998 shall apply mutatis mutandis to this appeal also. In that view of the matter, we set aside the order of CIT. In the result, both the appeals of the assessee are allowed.
Issues Involved:
1. Jurisdiction u/s 263. 2. Recomputing deduction u/s 80HHC by reducing the loss on trading goods exported. 3. Ignoring the negative figure (loss) for the purpose of computing deduction u/s 80HHC. Summary: Issue 1: Jurisdiction u/s 263 The CIT(C) Ludhiana assumed jurisdiction u/s 263 when the matter had already been considered by CIT(A) Ludhiana. The assessee argued that the assessment order merged with the appellate order, and thus, CIT had no jurisdiction to pass the order u/s 263. The Tribunal found that the issue before CIT(A) was related to the interest income and not the loss adjustment, hence the CIT was justified in invoking section 263. Issue 2: Recomputing Deduction u/s 80HHC by Reducing the Loss on Trading Goods Exported The CIT directed the Assessing Officer to recompute the deduction u/s 80HHC by considering the loss on trading goods exported. The Tribunal noted that the Assessing Officer had allowed the deduction after proper verification and supported by auditor's certificate. Various case laws were cited, indicating that the view taken by the Assessing Officer was one of the possible views. The Tribunal held that the CIT was not justified in invoking section 263 as the view taken by the Assessing Officer was a possible view and not erroneous or prejudicial to the interest of revenue. Issue 3: Ignoring the Negative Figure (Loss) for the Purpose of Computing Deduction u/s 80HHC The assessee contended that the negative figure of loss on trading goods should be taken as Nil while computing the deduction u/s 80HHC. The Tribunal observed that majority of ITAT Benches had taken the view that losses should be ignored while computing the deduction u/s 80HHC. The Tribunal concluded that the view taken by the Assessing Officer was a possible view, supported by various decisions of ITAT Benches, and thus, the CIT's order u/s 263 was set aside. Conclusion: The Tribunal allowed both appeals of the assessee, holding that the CIT was not justified in invoking section 263 as the view taken by the Assessing Officer was a possible view and not erroneous or prejudicial to the interest of revenue.
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