TMI Blog2013 (1) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... of income tax, claimed deduction under Section 80IA at Rs. 12.01 crores and Section 80HHC at Rs. 5.75 crores and declared the total income of Rs. 82.47 lacs. The AO allowed the deduction under Section 80IA to the tune of Rs. 14.04 crores and deduction under Section 80HHC to the tune of Rs. 2.42 crores. The CIT on perusal of the assessment order found the assessment order to be both erroneous and prejudicial to the interest of Revenue and rightly so as deduction under Section 80HHC was allowed on eligible profits of business without reducing the profits of business on which deduction under Section 80IA had been allowed. There was, thus, contravention of Section 80IA(9), which clearly indicates the extent of restriction to which the deduction under other provision of Chapter VI-A of IT Act can be allowed in cases where relief has been given on the profits and gains under Section 80IA. As decided in Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME COURT] an incorrect assumption of facts or an 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -A. Section 80HHC also falls in Chapter VI-A, therefore, deduction u/s 80HHC is not to be computed on profits gains of an industrial undertaking on which deduction u/s 80IA has been allowed. 4. It was also found that due to non-application of correct law, deduction under Section 80HHC has been allowed in excess, which has resulted into lesser taxable income and thus the order is prejudicial to the interest of revenue. To this extent the order of AO was set aside and it was directed to compute the deduction under Section 80HHC after giving due opportunity of being heard to the assessee. 5. The ITAT allowed appeal of the assessee-respondent thus concluding that:- 17. The issue raised in the present appeal is identical to the issue raised before the Hon'ble Delhi High Court in CIT Vs. Honda Siel Power Products Ltd. in ITA Nos. 1376/09 1382/09, judgment dated 5th July, 2010. In the facts of the present case before us and elaborated by us in the paras hereinabove, the Assessing Officer had allowed the deduction u/s 80IA 80HHC of the Act without resorting to the provisions of Section 80IA(9) of the Act. Merely because the issue does not find mention in the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is M/s Friends Castings (P) Ltd. Vs. Commissioner of Income Tax, ITA No. 456 of 2010, decided on 20.09.2010. The Tribunal in that case had held that the issue was squarely covered by the decision of ITAT Special Bench 'C', New Delhi in favour of the revenue and against the assessee in the case of ACIT, Range II, Moradabad v. M/s Hindustan Mint. Agro Products Pvt. Ltd. Chandausi, passed in ITA No. 1537, 1538 and 1539 (DEL)/2007 for the assessment years 2001-02, 2003-04, 2004-05 dated 23.06.2009. This Court agreed with the view of the Tribunal and dismissed the appeal of assessee. The aforesaid view was followed by this Court in Asian Exim International v. Commissioner of Income Tax, Jalandhar, Punjab, ITA No. 469 of 2010, decided on 18.04.2011 and Commissioner of Income Tax (Central), Ludhiana v. M/s Davinder Exports, Guru Nanak Dev Nagar, Rahon Road, Ludhiana, ITA No. 371 of 2007, decided on 21.04.2011. 9. The respondent's counsel on the other hand vehemently contended that there was a consistent contrary view of different Benches of the Income Tax Tribunals and also the High Courts and since the view taken by AO was one of the possible views, the revisional powers could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons cited by the learned counsel for the Revenue, wherein assessment orders were found to be erroneous for want of an enquiry or proper enquiry, would have no application to the present appeals. It is also true that the validity of an order under s. 263 has to be tested with regard to the position of law as it exists on the date on which such an order is made by the CIT. From the narration of facts in the Tribunal's order, it is clear that on the date when the CIT passed his orders under s. 263, the view taken by the AO was in consonance with the views taken by several Benches of the Tribunals. Therefore, the conclusion of the Tribunal that the CIT could not have invoked his jurisdiction under s. 263 of the said Act was correct. As a result, we answer the question against the Revenue and in favour of the assessee by holding that the Tribunal was correct in law in cancelling the order passed by the CIT under s. 263 and in restoring the order of the AO by holding that the AO had taken a possible view at the relevant point of time. The appeals are accordingly dismissed........... 10. The Department filed Special Leave to Appeal against the above judgment of Delhi High Court, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no ambiguity on this aspect. We are therefore of the opinion that relief under Section 80-IA should be deducted from the profits and gains of the business before computing relief under Section 80HHC of the Act. 13. We are, further, of the firm view that nothing should be left at the whims and fancies of the AO while making assessment of income tax on the questions purely of law. Otherwise, it will bring ridicule to the system of assessment and end up with dangerous results. If for example one AO takes a particular view point, out of the two possible views while interpreting the provisions and the AO of another area takes the other possible view, that would lead to anomalous situations. The Tribunal has held in this case that the AO adopted one of the two possible views and therefore, there was nothing wrong. What restrained the Tribunal to discuss and determine the scope of plain meaning of the provisions of Section 80IA(9) ? The decision of ITAT was always subject to challenge either by the department or the assessee before the higher forums. 14. In Commissioner of Income Tax v. Max India Ltd., (2007) 295 ITR 282 (SC), it was observed that on the date when CIT passed the revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct assumption of facts or an 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 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 interests of the revenue....... The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. On the facts of that case, the matter was decided by Hon'ble Supreme Court in favour of the revenue observing as under:- The Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant-company was not pla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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