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2014 (6) TMI 769 - AT - Income TaxRevision u/s 263 of the Act Computation for deduction u/s 80HHC and 80IA of the Act Held that - Following COMMISSIONER OF INCOME-TAX Versus MAX INDIA LTD. 2007 (11) TMI 12 - Supreme Court of India - deduction u/s.80HHC has to be computed after reducing the deduction allowed u/s.80IB/80IA - the assessment was originally completed u/s. 143(3) of the Act on 28.10.2005 wherein the assessee was allowed deduction u/s. 80IB at Rs 32,77,522/- and section 80HHC at Rs 53,82,417/-. While allowing deduction u/s. 80HHC, the Assessing Officer has not reduced the amount which was allowed as deduction u/s. 80IA from the profits and gains of business or profession - the AO initiated proceedings u/s 147 of the Act and the assessee objected against the initiation of reassessment proceedings and submitted that deduction u/s 80IB and 80HHC allowed in the original assessment. The assessment was originally completed u/s 143(3) of the Act, the assessee was allowed deduction u/s. 80IB and section 80HHC - the CIT was not justified in setting aside the order and directing for investigating the facts afresh without pointing out any specific fact which required further investigation - the CIT could not point out how the view adopted by the Assessing Officer was not a possible view the order of the CIT were contrary decisions of the High Court - It is an established position of law that when two views were possible in respect of an issue and the Assessing Officer has adopted one of the possible views, such an order of the Assessing Officer cannot be deemed as erroneous as well as prejudicial to the interest of the Revenue thus, the order of the CIT is set aside Decided in favour of Assessee.
Issues Involved:
1. Initiation of proceedings under section 263 of the Income Tax Act, 1961. 2. Computation of deduction under section 80HHC and 80IB of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Initiation of proceedings under section 263 of the Income Tax Act, 1961: The appellant contended that the Commissioner of Income Tax (CIT) erred in law and on facts by initiating proceedings under section 263 of the Income Tax Act, 1961. The appellant argued that the Assessing Officers (AOs) had already considered all relevant facts in their separate assessment orders passed under section 143(3) and 143(3) read with section 147 of the Act. The appellant asserted that the initiation of proceedings under section 263 was incorrect and should be canceled. The CIT observed that the AO allowed deduction under section 80HHC without reducing the profit of the business which was allowed under section 80IB, relying on decisions that were not applicable in this context. The CIT concluded that the AO's order was erroneous and prejudicial to the interest of revenue, warranting the initiation of proceedings under section 263. 2. Computation of deduction under section 80HHC and 80IB of the Income Tax Act, 1961: The brief facts of the case are that the AO completed the assessment under section 143(3) on 28.10.2005, accepting the returned income. Later, a reassessment order was passed on 24.12.2008 under section 143(3) read with section 147, allowing the claim of deduction under sections 80HHC and 80IB as claimed by the assessee. The CIT observed that the AO allowed deduction under section 80HHC without reducing the profit of the business allowed under section 80IB, which was contrary to the provisions of section 80IA(9). The CIT relied on the decision of the ITAT, Chennai Bench in the case of ACIT vs. Rogini Garments, which held that relief under section 80IA should be deducted from the profits and gains of business before computing relief under section 80HHC. The CIT concluded that the AO wrongly computed the deduction under section 80HHC without reducing the profit of the undertaking allowed as a deduction under section 80IB, making the AO's order erroneous and prejudicial to the interest of revenue. The CIT issued a show cause notice under section 263 to the assessee. After considering the assessee's written submission, the CIT held that the AO's reliance on certain Supreme Court and High Court decisions was misplaced as they were given in the context of sections 80HH and 80I, not sections 80HHC and 80IB. The CIT cited several judicial decisions supporting the view that deduction under section 80HHC should be computed after reducing the deduction allowed under section 80IB/80IA. The ITAT noted that the issue involved was whether deduction under section 80HHC is allowable with reference to business income arrived at after reducing deduction allowed under section 80IB. The ITAT found that the Commissioner of Income Tax could not point out how the AO's view was not a possible view, especially given the decision of the Bombay High Court in the case of Associated Capsules (P) Ltd. vs. DCIT, which supported the AO's view. The ITAT observed that there were contrary decisions from different High Courts on the issue, and none of them was from the jurisdictional High Court. It is an established position of law that when two views are possible and the AO adopts one, such an order cannot be deemed erroneous and prejudicial to the interest of the Revenue. The ITAT relied on the Supreme Court decision in CIT vs. Max India Limited to support this view. Conclusion: The ITAT set aside the order of the Commissioner of Income Tax passed under section 263 and allowed the appeal of the assessee. The ITAT concluded that the AO's order was a possible view supported by judicial precedent, and the CIT was not justified in setting aside the AO's order and directing a fresh investigation into the facts.
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