2015 (12) TMI 774 - HC - Income Tax

Rectification of adjustment made in intimation under section 143(1)(a) of the Income-tax Act, 1961, with regard to claim for deduction under section 80HHC - whether the Assessing Officer was justified in passing the order under Section 143(1)(a) with regard to the deduction under Section 80HHC? - Held that - It is to be noted that Section 143(1)(a) empowers the Assessing Officer to compute the total income or loss after making adjustments, namely, any arithmetical error in the return or an incorrect claim, if such incorrect claim is apparent from any information in the return . It is nobody s case that there was any arithmetical error in the return. Moreover, the claim, assuming to be incorrect was not apparent from the information in the return which could have been dealt by the Assessing Officer under Section 143(1)(a). Thus, the issue was a debatable one as correctly held by the Tribunal. If the Assessing Officer was of the view that there was reason to believe that the claim was inadmissible, he should have served notice on the assessee specifying the particulars of such claim or such loss or deduction or relief under Section 143(2) or if he had reason to believe that the income had escaped assessment should have served notice under section 148 of the Act. The Assessing Officer chose neither of the two avenues. Thus the judgment of the Supreme Court in IPCA Laboratory Ltd. (2004 (3) TMI 9 - SUPREME Court ), relied on by the appellant, wherein the question for consideration was whether the appellants were entitled to deduction under section 80HHC in respect of the sum of ₹ 3.78 crores by ignoring the loss of ₹ 6.86 crores is not applicable as it is not a case regarding the processing of a return under section 143. The judgment of the Bombay High Court in IPCA Laboratories Ltd. (2001 (7) TMI 100 - BOMBAY High Court ) does not support the case of the Appellant as therein notice was issued under Section 148 of the Act, unlike the case in hand, where no such notice was issued. Therefore, the submission on behalf of the appellant cannot be accepted. - Decided in favour of the assessee.

Summary

Issues:
1. Correctness of the rejection of application under section 154 for rectification of adjustment made in intimation under section 143(1)(a) regarding claim for deduction under section 80HHC.

Analysis:
The case involved an appeal related to the assessment year 1990-91 concerning the rejection of an application under section 154 for rectification of adjustment made in intimation under section 143(1)(a) regarding a claim for deduction under section 80HHC of the Income-tax Act, 1961. The assessee had initially claimed a deduction of &8377; 36,51,903 under section 80HHC, but the Assessing Officer computed the income at &8377; 10,20,000, considering the profit and loss in different divisions. The dispute arose as the Assessing Officer adjusted the deduction under section 80HHC based on the combined profit of both divisions, which the assessee contended was not permissible. The CIT (A) allowed the appeal, stating that the Assessing Officer was not entitled to make such adjustments under section 143(1)(a). The Revenue then appealed to the Income Tax Appellate Tribunal, which upheld the CIT (A) order, leading to the current appeal.

The primary contention revolved around whether the Assessing Officer was justified in passing the order under section 143(1)(a) concerning the deduction under section 80HHC. The Tribunal found that the issue was debatable and beyond the Assessing Officer's jurisdiction under section 143(1)(a) to reduce the deduction claimed under section 80HHC. If there were doubts about the claim's admissibility, the Income Tax Officer should have proceeded under sections 143(2) or 147. Since no notice was served under these sections, the Assessing Officer's adjustment was deemed incorrect. The Tribunal emphasized that the Assessing Officer should have rectified the adjustment under section 154 instead. The judgments cited by both parties were analyzed, with the conclusion that the Assessing Officer's actions were not justified under the circumstances.

In conclusion, the appeal was dismissed, affirming the decisions of the CIT (A) and the Tribunal. The judgment highlighted the procedural errors in the Assessing Officer's actions and emphasized the correct avenues for addressing disputed claims, ultimately ruling in favor of the assessee regarding the deduction under section 80HHC.