2010 (8) TMI 85 - HC - Income Tax

Erroneous Decision - Revision u/s 263 - The return was processed under Section 143 (1) (a) of the Act and the assessment was completed under Section 143 (3) of the Act on 27th March, 2002 at an amount of ₹ 3,96,46,565/- under the normal provisions and at ₹ 5,56,85,482/- as per the provisions of Section 115JA of the Act. - CIT expressed a prima facie opinion that the order of assessment was erroneous and prejudicial to the interest of the revenue and revised u/s 263 - CIT revised the order on the basis of (i) discloser in Form 3CD - (ii) It is seen that income from long term capital gains and income from other sources was also adjusted against Chapter VI-A deductions relating to Section 80-IA, 80HHC and 80-O, which were to be restricted to the extent of profits and gains of business - (iii) AO omitted to disallow depreciation on the additions made to plant & machinery on account of loss due to fluctuation - Held that - When we find that the twin conditions for exercise of the power under Section 263 of the Act were satisfied viz.(i) the order of the Assessing Officer was erroneous, and (ii) it was prejudicial to the interest to the revenue as well, the exercise of power by the Commissioner under Section 263 of the Act cannot be faulted with

Summary

Issues:
1. Correctness of assessment order under Section 115JA of the Income Tax Act for the assessment year 1999-2000.
2. Commissioner's notice under Section 263 (1) of the Act alleging errors in the assessment order.
3. Acceptance of assessee's explanation by the Commissioner on one ground and revision on other grounds.
4. Tribunal's decision on the Commissioner's revision regarding deductions under Chapter VI-A of the Act.
5. Appellant's argument regarding the plausibility of Assessing Officer's view.
6. Satisfaction of twin conditions for exercise of power under Section 263 of the Act.
7. Tribunal's decision and directions regarding the claim of deductions under Section 80IA, 80HHC, and 80-O of the Act.

Analysis:

1. The appellant filed a return for the assessment year 1999-2000, showing "Nil" income and income at Rs. 48,00,408/- based on books profit under Section 115JA of the Income Tax Act. The assessment was completed under Section 143 (3) of the Act, but the Commissioner issued a notice under Section 263 (1) of the Act, alleging errors in the assessment order, including incorrect allowance of deductions and omission to disallow depreciation.

2. After receiving the assessee's reply and conducting a hearing, the Commissioner revised the assessment order on certain grounds. The assessee appealed to the Income Tax Appellate Tribunal (ITAT), which partly allowed the appeal. The Tribunal accepted the assessee's explanation on one ground but remanded the matter back to the Assessing Officer on another ground related to deductions under Chapter VI-A of the Act.

3. The Tribunal agreed with the Commissioner that the Assessing Officer incorrectly allowed deductions under Chapter VI-A without restricting them to the profits and gains of the business. The Tribunal modified the Commissioner's directions and remitted the matter back to the Assessing Officer to reconsider the claim of deductions under Section 80IA, 80HHC, and 80-O of the Act in respect of other income.

4. The appellant argued that the Assessing Officer's view was plausible, citing a judgment of the Apex Court. However, the Court found that the twin conditions for the exercise of power under Section 263 of the Act were satisfied, making the Commissioner's actions justified.

5. Ultimately, the Court upheld the Tribunal's decision and directions, stating that they were in conformity with the law. It was held that no substantial question of law arose, and the appeal was dismissed accordingly.