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TMI Blog2008 (9) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... while computing the Book Profits chargeable to tax under section 115JB, of the Act the Assessing Officer reduced profits of export business at ₹ 61,78,144. According to the Commissioner in only eligible profits of business as computed in accordance with the provisions of section 80HHC(1B) i.e., 50 per cent of the profits, being ₹ 30,89,072, was alone to be reduced. The Commissioner, accordingly issued to show cause notice under section 263 of the Act dated 14-3-2008, whose operative portion reads as under : Perusal of the assessment order for assessment year 2003-04 dated 30-3-2006 passed under section 143(3) reveals that while computing Book Profit as per provisions of section 115JB, the total amount of export profits of business (i.e., ₹ 61,78,144) has wrongly been reduced whereas only the eligible profits of business as computed in accordance with the provisions of section 80HHC(1B) i.e., a 50 per cent of profits (as applicable for the assessment year in question) being ₹ 30,89,072 were to be reduced. The same has resulted in under assessment of taxable income by ₹ 30,89,072. In response, the assessee filed written submissions objecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in the case of Ajanta Pharma Ltd. (supra) held that the amount to be reduced in terms of clause (iv) of the Explanation to section 115B(2) is not governed by sub-section (1B) of the section 80HHC in the absence of any reference to it in clause (iv) of Explanation to section 115JB(2) of the Act. The Special Bench of the Tribunal in the case of Syncome Formulations (I) Ltd. (supra) also held that while computing the income under section 115JB of the Act, the same had to be reduced by the amount of deduction under section 80HHC computed with reference to the Book Profits and not the actual deduction computable under the provisions of the Act. The counsel for the assessee has submitted that in view of the aforesaid judgments of the Tribunal, it is evident that the view taken by the Assessing Officer was judicially acceptable and it represented a possible view and therefore, in terms of the reasoning laid down by the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra), the invoking of section 263 in the instant case was unjustified. In this regard, the counsel has also referred to a decision of the Chandigarh Bench of the Tribunal in the case of Malwa Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he net profit shown in the Profit and Loss Account in terms of clause (iv) of the Explanation below section 115JB(2) in order to compute the Book Profits . Clause (iv) of the Explanation below section 115JB(2) reads as under :- 115JB. (2)(iv) the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section. Admittedly the assessee is eligible for deduction under section 80HHC of the Act. In terms of the above clause the amount of profits eligible for deduction under section 80HHC are required to be excluded for the purpose of computing Book Profits chargeable to tax under section 115JB of the Act. The assessee considered a sum of ₹ 61,78,144 for exclusion in terms of clause (iv), the said sum being, the profit eligible for deduction under section 80HHC and accordingly the Book Profit chargeable under section 115JB was computed at ₹ 26,69,942. The Assessing Officer has also accepted such claim in the assessment framed under section 143(3) dated 30-3-2006. The Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ype of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase prejudicial to the interests of the revenue is not an expression of art and is not defined in the Act; Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of the revenue. The phrase prejudicial to the interests of the revenue has to be read in conjunction will an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the revenue, for exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions, though rendered subsequently, the same in our considered opinion does not enable the Commissioner to invoke section 263 in the face of the law laid down by the Hon ble Supreme Court in the case of Malabar industrial Co. Ltd. (supra). 12. In view of the aforesaid discussion, we find weight in the stand of the assessee that the assumption of jurisdiction by the Commissioner of income-tax by invoking section 263 not valid in the present case. 13. Before parting, we may also refer to the argument taken by the learned D.R. on the basis of judgment of the Hon ble Gujarat High Court in the case of M.M. Khambhatwala (supra) and the judgment of the Hon ble Punjab Haryana High Court in the case of Export House (supra). The decision of the Hon ble Gujarat High Court had been relied upon for the proposition that invoking of section 263 is justified even on debatable issue. On this aspect, as noted earlier, the view of the Assessing Officer is supported by the decision of the Tribunal and is a possible view. Therefore, in terms of the reasoning enunciated by the Hon ble Supreme Court in the case of Mahabar Industrial Co. Ltd. (supra), the invoking of section 263 has failed. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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