1988 (8) TMI 164 - AT - Income Tax

Issues Involved:
1. Rectification of business loss for the assessment year 1971-72.
2. Incorrect carry forward of unabsorbed 80J profits.
3. Withdrawal of deduction under section 80QQ for the assessment year 1978-79.
4. Jurisdiction of the Inspecting Assistant Commissioner (IAC) in rectifying the assessment.

Detailed Analysis:

1. Rectification of Business Loss for the Assessment Year 1971-72:
The Commissioner of Income-tax found that the business loss originally computed for the assessment year 1971-72 at Rs. 8,66,000 was overstated by Rs. 63,528 due to a rectification error, leading to an incorrect carry forward of Rs. 9,29,528. This error affected subsequent assessment years, including 1978-79. The IAC rectified this mistake in the assessment years 1971-72, 1974-75, 1977-78, and 1978-79, and the assessee did not contest these rectifications.

2. Incorrect Carry Forward of Unabsorbed 80J Profits:
The Commissioner also identified a mistake in allowing the carry forward of unabsorbed 80J profits from the assessment year 1969-70, as the 7-year time limit had expired by the assessment year 1976-77. Consequently, the unabsorbed 80J relief should not have been carried forward to 1977-78 and 1978-79. The IAC corrected this by disallowing the excess 80J relief set off in the assessment years 1977-78 and 1978-79, which the assessee did not dispute.

3. Withdrawal of Deduction Under Section 80QQ for the Assessment Year 1978-79:
The IAC withdrew the deduction of Rs. 64,118 under section 80QQ, stating that the net profit included items not attributable to the publication of books, such as rent received, interest, miscellaneous receipts, and profit on the sale of machinery. The assessee appealed to the CIT(A), arguing that the IAC exceeded his powers by withdrawing the deduction under section 80QQ, as the Commissioner's order under section 263 was limited to rectifying mistakes related to the carry forward of loss and 80J relief. The CIT(A) agreed with the assessee, ruling that the IAC's jurisdiction was limited to rectifying the specified mistakes.

4. Jurisdiction of the Inspecting Assistant Commissioner (IAC) in Rectifying the Assessment:
The Department argued that when the Commissioner set aside the assessment under section 263, the entire assessment stood set aside, allowing the IAC to rectify all mistakes, including the wrongful allowance of section 80QQ relief. The Department cited various High Court decisions to support this view. However, the Tribunal noted that the Commissioner's order specifically mentioned setting aside the assessments to rectify mistakes related to the carry forward of business loss and 80J profits. The Tribunal held that this constituted a limited setting aside, restricting the IAC's jurisdiction to those specific issues. The Tribunal concluded that the IAC exceeded his jurisdiction by withdrawing the deduction under section 80QQ, and thus, the relief of Rs. 64,118 was restored.

Conclusion:
The Tribunal upheld the CIT(A)'s decision that the IAC exceeded his jurisdiction by withdrawing the deduction under section 80QQ, as the Commissioner's order under section 263 was limited to rectifying specific mistakes. Consequently, the appeal of the department was dismissed, and the relief of Rs. 64,118 under section 80QQ was allowed to the assessee.

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