1999 (4) TMI 145 - AT - Income Tax

Summary

Issues Involved:
1. Prima facie adjustments under section 143(1)(a) regarding the claim of deduction under section 80HHC.
2. Interpretation and application of section 80HHC concerning the computation of profits from export of manufactured goods and trading goods.
3. Validity of issuing an intimation under section 143(1)(a) after issuing a notice under section 143(2).

Issue-wise Detailed Analysis:

1. Prima facie adjustments under section 143(1)(a) regarding the claim of deduction under section 80HHC:

The assessee filed a return claiming a deduction under section 80HHC, which was initially accepted without adjustments. A revised return was later filed, altering the deduction amount. The Assessing Officer (AO) issued an intimation under section 143(1)(a), denying the deduction. The CIT(A) upheld the AO's action, relying on the Supreme Court's decision in Cambay Electric Supply Industrial Co. Ltd. v. CIT.

The assessee argued that the deduction claimed under section 80HHC was prima facie admissible and that any disallowance must be glaring and patent. The assessee cited the Bombay High Court's decision in Tanna Exports, which held that recalculating relief under section 80HHC is not permissible under section 143(1)(a) if more than one view is conceivable. The Tribunal agreed with the assessee, stating that the issue was debatable and outside the purview of section 143(1)(a). The Tribunal also noted that the CIT(A)'s reliance on the Cambay Electric case was misplaced as it pertained to a different section and context.

2. Interpretation and application of section 80HHC concerning the computation of profits from export of manufactured goods and trading goods:

The assessee contended that profits from the export of manufactured goods and trading goods should be computed separately and independently under section 80HHC. The loss from one stream should not offset the profit from the other. The assessee argued that the text of section 80HHC did not mandate such an adjustment and that the computation mechanism for each stream was distinct.

The Tribunal supported the assessee's view, noting that the computation methods for profits from manufactured and traded goods are distinct and that any loss in one stream should not affect the deduction for the other. The Tribunal referred to decisions in A.M. Moosa and Avon Cycles Ltd., which supported the assessee's interpretation. The Tribunal concluded that the issue was debatable and that the AO's adjustment under section 143(1)(a) was unjustified.

3. Validity of issuing an intimation under section 143(1)(a) after issuing a notice under section 143(2):

The assessee argued that the AO could not issue an intimation under section 143(1)(a) after issuing a notice under section 143(2), citing the Calcutta High Court's decision in Modern Fibotex India Ltd. The Departmental Representative (DR) disagreed, citing various Tribunal decisions and the Delhi High Court's decision in Apogee International Ltd., which allowed such an intimation.

The Tribunal found merit in the assessee's contention, noting that the grounds of appeal were broad enough to include this plea. The Tribunal also referenced the Supreme Court's decision in National Thermal Power Co. Ltd. v. CIT, which allowed new grounds to be raised if they had a bearing on the tax liability. The Tribunal preferred the Calcutta High Court's decision over the Tribunal decisions and the Delhi High Court's decision, following the principle that where two views are possible, the one in favor of the assessee should be taken, as established in CIT v. Vegetable Products Ltd.

Conclusion:

The Tribunal concluded that the issue of prima facie adjustments under section 143(1)(a) was debatable and outside the scope of the proviso to section 143(1)(a). The Tribunal also held that the AO's action of issuing an intimation under section 143(1)(a) after issuing a notice under section 143(2) was invalid. The appeal was allowed in favor of the assessee.