2007 (7) TMI 235 - HC - Income Tax

How to compute special deduction u/s 80HHC is issue in controversy and is a debatable issue - A decision on a debatable point of law cannot be regarded as a mistake apparent on the face of the record hence a debatable point cannot be a reason for rectification under Section 154 hence rectification sought by revenue on ground that deduction under section 80HHC was deducted from 30% of the book profit is not justified

Summary

Issues:
Rectification of assessment under Section 154 of the Income Tax Act - Deduction under Section 80HHC from profits or 30% of book profit - Mistake apparent on record - Debatable issue.

Analysis:
The case involves the appeal filed by the Revenue regarding the rectification of assessment under Section 154 of the Income Tax Act. The main issue was whether the deduction under Section 80HHC should be made from the profits or from 30% of the book profit. The Assessing Officer found a mistake apparent on the record and issued a notice for rectification. The assessee contended that there was no jurisdiction to revise the assessment under Section 154 as there was no mistake apparent on the face of the record. The Commissioner of Income Tax (Appeals) confirmed the assessment, leading the assessee to appeal further. The Income Tax Appellate Tribunal allowed the appeal, stating that a debatable issue cannot be rectified under Section 154. The Tribunal relied on previous Supreme Court decisions emphasizing that a decision on a debatable point of law is not a mistake apparent on the record. The Revenue argued that the mistake was glaring and could be rectified under Section 154.

Upon hearing both sides and examining the materials on record, the Court noted that the issue in controversy was indeed a debatable one. It was established that any erroneous assessment cannot be rectified under Section 154, and only errors that are apparent on the face of the record can be rectified through the appropriate legal procedures. A decision on a debatable point of law does not qualify as a mistake apparent on the record for rectification under Section 154. The Court referred to previous judgments, including those of the Supreme Court, to support this principle. Given that the issue had already been addressed in previous Supreme Court decisions, the Court concluded that there was no substantial question of law to entertain the appeal. Therefore, the Tax Case (appeal) was dismissed.