TMI Blog1999 (1) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 1989-90 on 23-5-1990 declaring an income of Rs. 32,361. While processing the return under section 143(1)(a) the Assessing Officer allowed a deduction of Rs. 7,14,694 under section 80HHC as against the claim of the assessee of Rs. 8,85,690. While computing the profit under section 115J. This claim was also supported by report under section 80HHC(4) of the Income-tax Act, 1961 in Form No. 10CCAC dated 29-12-1989 issued by the auditors M/s. K.S. Jagannathan Company as under: ---- "We certify that the deduction to be claimed by the assessee under sub-section (1) of section 80HHC of the Income-tax Act, 1961 in respect of the assessment year 1989-90 is Rs. 7,14,694 which has been determined on the basis of the sale pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that instead of considering the above sum of Rs. 8,85,690 for deduction under section 80HHC to arrive at the adjusted profits for taxation under section 115J, the Officer adopted a sum of Rs. 7,14,694, which was based not on book profits but on gross adjusted income under business, which was a mistake for rectification under section 154. In response to this application under section 154 the Assessing Officer observed that there was no mistake for rectification as it was based on the certificate in Form 10CCAC issued by the assessee's auditors and hence dismissed the petition under section 154. 4. Aggrieved, the assessee went in appeal before the Commissioner (Appeals), who also confirmed the Assessing Officer's decision in dismissing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, computing the deduction, however, in the manner specified under section 80HHC(3) or (3A) or 80HHD(3)." The teamed representative for the assessee pleaded that the Appellate Officer ought to have adjusted the correct deduction under section 80HHC in accordance with the explanation (iii) of section 115J(1A) based on the book profit is only Rs. 8,85,690 and rejected the relief of Rs. 7,14,694 since this relief was based on the profits attributable to business as per the provisions of section 80HHC. He further contended that the Commissioner (Appeals) had ignored the instructions issued by the CBDT in their circular No. 680 dated 21-2-1994 which had been brought to his notice for compliance. According to him the circular had clearly laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uditors themselves had computed the quantum of deduction under section 80HHC at Rs. 7,14,694, which was allowed by the Assessing Officer. While making adjustments, the Assessing Officer had to take into account the documents accompanying the return of income and that was what the Assessing Officer had exactly done. Hence according to the Commissioner (Appeals) the rejection of application under section 154 by the Assessing Officer was correct. In this regard we would like to refer to the Supreme Court decision in the case of Maharana Mills (P.) Ltd. v. ITO [1959] 36 ITR 350, wherein it was held as follows:---- "record" includes the entire proceedings. The 'record' referred to in section 154 does not mean only the order of assessment but i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the net profit as shown in the profit and loss account for the relevant previous year by the adjustments referred to in clauses (a) to (f) and (i) and (ii) of the said explanation should be allowed as deduction, computing the deduction, however, in the manner specified under section 80HHC(3) or (3A) or 80HHD(3). It is, therefore, clear that it is only the manner of computation specified in sections 80HHC(3) or (3A) or 80HHD and not the amounts themselves, that should be imported into explanation (iii) under section 115J. Accordingly the deduction contemplated under explanation (iii) to Section 115J should be computed according to the following steps : (i) It should be first decided whether the assessee carries on a business the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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