2009 (3) TMI 472 - HC - Income Tax

Rectification of mistake- The assessee was assessed for the assessment year 1994-95 under section 143(3) of the Act. The Assessing officer found that the claim of the deduction under section 80-IA included a sum representing the export incentive received by the assessee. A notice under section 154 of the Act for rectification of mistake was issued and disallowed the deduction. The Commissioner (Appeals) set aside the order passed under section 154 of the Act. The Tribunal affirmed this holding that the controversy decided by the Assessing Officer in rectification proceedings was a debatable issue. Held that- the Assessing Officer allowed the deduction at the time of passing the order under section 143(1A) of the Act and also at the time of passing the order under section 143(3) of the Act it was clearly a case of change of opinion. This could not be said to be a mistake apparent from the record and therefore the provisions of section 154 of the Act could not be invoked. The question as to whether the assessee was entitled for deduction or not was a matter to be decided on the merit and could not be said to be an error apparent on record.

Summary

Issues Involved:
Challenge to concurrent findings of Commissioner of Income tax (Appeals) and Income-tax Appellate Tribunal regarding the deduction under section 80-IA for export incentive received by the assessee.

Analysis:

Issue 1:
The Revenue challenged the findings of the Commissioner of Income tax (Appeals) and the Income-tax Appellate Tribunal regarding the deduction under section 80-IA for an export incentive received by the assessee. The Revenue contended that the export incentive should not be included in the profit for computation under section 80-IA. The Revenue argued that there was no debatable issue regarding the eligibility of the export incentive for deduction under section 80-IA, as it was a scheme by the Central Government to encourage exports and not income earned by the assessee. The Revenue sought to set aside the orders based on this argument.

Issue 2:
The assessee's counsel argued that the eligibility of the export incentive for deduction under section 80-IA was a highly debatable matter and did not fall under the purview of rectification under section 154 of the Act. The counsel contended that the deduction had been allowed during the assessment process and any change would be a case of a change of opinion, not a mistake apparent on record. Citing relevant case law, the counsel emphasized that the question of eligibility for deduction was a matter for substantive consideration and not a clear error on record.

Court's Decision:
The High Court considered the arguments presented by both parties. The Court noted that the eligibility of the export incentive for deduction under section 80-IA was indeed a debatable matter, supported by conflicting judgments on the issue. The Court held that the question of eligibility was not a mistake apparent on record but rather a substantive issue requiring a decision on merits. Referring to relevant case law, the Court emphasized the need for a clear error beyond debate to invoke rectification under section 154 of the Act. Consequently, the Court affirmed the findings of the Commissioner of Income tax (Appeals) and the Income-tax Appellate Tribunal, dismissing the appeal raised by the Revenue.

In conclusion, the Court upheld the concurrent findings of the lower authorities and answered the substantial questions of law in the affirmative and negative, respectively. The appeal by the Revenue challenging the eligibility of the export incentive for deduction under section 80-IA was dismissed based on the debatable nature of the issue and the absence of a clear error apparent on record.