2008 (5) TMI 316 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer under section 154 of the Act.
2. Consideration of DEPB sale proceeds as income for deduction under section 80HHC.
3. Retrospective application of amendments by the Taxation Laws (Amendment) Act, 2005.
4. Rectification of mistakes apparent from the record.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer under section 154 of the Act:
The assessee contended that the Assessing Officer erred in law and facts by invoking section 154 of the Act to rectify the assessment order, arguing that the issue was debatable and beyond the powers of section 154. The Tribunal examined whether the Assessing Officer had the jurisdiction to rectify the order under section 154, which allows rectification of any mistake apparent from the record. The Tribunal noted that the rectification was based on the retrospective amendment by the Taxation Laws (Amendment) Act, 2005, and found that the Assessing Officer had the jurisdiction to rectify the mistake as it was apparent from the record due to the retrospective amendment.

2. Consideration of DEPB sale proceeds as income for deduction under section 80HHC:
The assessee argued that only the profit element of DEPB sale proceeds should be considered for deduction under section 80HHC, not the entire sale proceeds. The Tribunal analyzed the amendment which introduced clause (iiid) to section 28, stating that "any profit on the transfer of the DEPB Scheme" should be considered as income. The Tribunal found that the entire sale proceeds of DEPB, which the assessee initially treated as profit, should be considered for the purpose of deduction under section 80HHC. The Tribunal rejected the assessee's contention that only the profit element should be considered, as the amendment clearly included the entire sale proceeds as income.

3. Retrospective application of amendments by the Taxation Laws (Amendment) Act, 2005:
The Tribunal noted that the amendments to section 80HHC and section 28 by the Taxation Laws (Amendment) Act, 2005, were made with retrospective effect from 1-4-1998. The Tribunal held that the retrospective amendments were applicable to the assessment year in question and that the Assessing Officer was correct in applying the amended provisions to rectify the assessment order. The Tribunal cited several Supreme Court judgments supporting the application of retrospective amendments to rectify mistakes apparent from the record.

4. Rectification of mistakes apparent from the record:
The Tribunal examined whether the issue was debatable and thus outside the scope of section 154. The Tribunal found that the issue was not debatable as the retrospective amendment clearly defined the treatment of DEPB sale proceeds. The Tribunal held that the Assessing Officer correctly identified and rectified the mistake apparent from the record by applying the retrospective amendment. The Tribunal concluded that the Assessing Officer's action under section 154 was justified and within the legal framework.

Conclusion:
The Tribunal allowed the assessee's appeal, setting aside the order of the learned CIT(A) and holding that the Assessing Officer's rectification under section 154 was within jurisdiction and justified based on the retrospective amendments. The entire sale proceeds of DEPB were to be considered as income for the purpose of deduction under section 80HHC, and the retrospective amendments were applicable to the assessment year in question.