THE COMMISSIONER OF INCOME TAX-I, V. INOX INDIA LTD.

TAXAP/1411/2007

AI Insights

The case involves the Commissioner of Income Tax-I as the appellant and Intox India Ltd as the respondent, concerning tax appeals related to the assessment years 2000-01 and 2001-02. The core issue revolves around the deduction under section 80HHC of the Income Tax Act, 1961, and its interaction with section 80IA(9). The Assessing Officer (AO) initially rectified the deduction under section 80HHC by excluding the deduction under section 80IA, as mandated by section 80IA(9), through an order under section 154. This rectification was upheld by the CIT(A) but was later quashed by the ITAT on the grounds that the issue was debatable and thus not a mistake apparent from the record, which is a prerequisite for invoking section 154. The High Court found that the ITAT did not adequately demonstrate how the issue was debatable and remanded the case for a detailed examination.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 699828 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 26-12-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: S N SOPARKAR; SWATI SOPARKAR
• Assessee Lawyers: K M PARIKH
• Keywords: Assessment Order; Deduction; Income Tax; ITAT; Rectification
• Section: 143(3); 154; 80HHC; 80IA(9)

Judgement Text

"O/TAXAP/1410/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1410 of 2007 With TAX APPEAL NO. 1411 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE M.R. SHAH Sd/­ and HONOURABLE MR.JUSTICE R.P.DHOLARIA Sd/­ ============================================= 1. Whether Reporters of Local Papers may be allowed to see the judgment ? No 2. To be referred to the Reporter or not ? No 3. Whether their Lordships wish to see the fair copy of the judgment ? No 4. Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? No 5. Whether it is to be circulated to the civil judge ? No ============================================= THE COMMISSIONER OF INCOME TAX­I,....Appellant(s) Versus INTOX INDIA LTD.....Opponent(s) ============================================= Appearance: MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1 MR SN SOPARKAR, SR. ADVOCATE with MRS SWATI SOPARKAR, ADVOCATE for Opponent ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA Date : 26/12/2013 COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] As common question of law and facts arise in both these appeals and as such arisen out of the impugned common judgment and order passed by the learned Income Tax Appellate Tribunal, Ahmedabad [hereinafter referred to as “ITAT”] with respect to the same assessee but Page 1 of 4 O/TAXAP/1410/2007 JUDGMENT different assessment orders, both these appeals are decided and disposed of by this common judgment and order. [2.0] Feeling aggrieved and dissatisfied with the impugned common judgment and order dated 11.01.2007 passed by the learned ITAT in ITA Nos.2506/Ahd/2004 and 2507/Ahd/2004 for the assessment year 2000­ 01 and 2001­02 respectively, the Revenue has preferred the present tax appeals to consider the following common substantial question of law. “Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in quashing the order u/s 154 whereby the Assessing Officer rectified the order u/s 143(3) and recomputed the deduction u/s 80HHC by applying the mandatory provisions of section 80IA(9), which were not at all considered while computing deduction u/s 80HHC in the order u/s 143(3)?” [3.0] That the assessment orders were passed for AY 2000­01 and 2001­ 02 under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as “Act”]. On verification of record, it was found that the deduction under section 80HHC of the Act was allowed without considering the amount of deduction allowed under section 80IA as required under section 80IA(9) of the Act and therefore, a notice under section 154 of the Act was issued to the assessee submitting that there is a mistake apparent from the records. That the AO, in exercise of powers under section 154 of the Act, reduced the amount of deduction under section 80HHC by excluding the deduction under section 80IA from the profits of the business as per the mandate of section 80IA(9) of the Act. That on appeals the learned CIT(A) confirmed the orders passed under section 154 of the Act. On further appeal by the assessee before the learned ITAT, by impugned common judgment and order the learned ITAT has quashed the orders passed under section 154 of the Act by observing that as the issue was debatable and out of two views possible, AO while quashing the order under section 143(3) of the Act followed one opinion/view, the said order was not required to be reviewed under Page 2 of 4 O/TAXAP/1410/2007 JUDGMENT section 154 of the Act. [3.1] Feeling aggrieved and dissatisfied with the impugned common judgment and order, the revenue has preferred the present tax appeals to consider the following substantial question of law. “Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in quashing the order u/s 154 whereby the Assessing Officer rectified the order u/s 143(3) and recomputed the deduction u/s 80HHC by applying the mandatory provisions of section 80IA(9), which were not at all considered while computing deduction u/s 80HHC in the order u/s 143(3)?” [4.0] Number of submissions have been made by the learned advocate appearing on behalf of the respective parties on merits as well as whether the assessment order passed under section 143(3) of the Act would have been taken under suo motu revision in exercise of powers under section 154 of the Act or not, however, for the reasons stated hereinafter, we propose to remand the matters to the learned ITAT to consider the issue afresh keeping all the contentions, which may be available to the respective parties, open. We do not propose to enter into the larger question and/or question on merits. [4.1] At the outset it is required to be noted that as such by impugned judgment and order and while quashing and setting aside the order passed under section 154 of the Act, the learned ITAT has observed that the view that whether or not deduction under section 80IA should be reduced while computing the deduction under section 80HHC is an issue which was debatable and therefore, on a debatable issue when one possible view has been adopted, it cannot be said that there was a mistake apparent from record. Consequently, it is held that in such a situation the AO was not justified in exercising powers under section 154 of the Act. However, it is required to be noted that while holding so the learned ITAT has not stated anything and/or observed anything as to Page 3 of 4 O/TAXAP/1410/2007 JUDGMENT how such issue was debatable issue and/or which two views were possible. Merely by submitting that issue was debatable, issue would not become debatable. It was required to be demonstrated how the issue was debatable and/or two views were possible out of which one view was accepted by the AO. Even the learned ITAT was also required to discuss in detail how the issue was debatable and/or two different views were possible. Under the circumstances, on the aforesaid ground alone, the impugned common judgment and order passed by the learned ITAT deserves to be quashed and set aside and the matters are required to be restored to the file of the learned ITAT to consider the issue/question afresh in accordance with law and on merits, keeping all the contentions which may be available to the respective parties open to be considered and dealt with by the learned ITAT. [5.0] In view of the above and for the reasons stated above, both these appeals succeed in part. Impugned common judgment and order dated 11.01.2007 passed by the learned ITAT in ITA Nos.2506/Ahd/2004 and 2507/Ahd/2004 is quashed and set aside and the matters are remanded to the learned ITAT to consider the issue/question afresh in accordance with law and on merits. All the contentions which may be available to the respective parties are kept open to be considered and dealt with by the learned ITAT. Both these appeals are allowed to the aforesaid extent. No costs. Sd/­ (M.R. SHAH, J.) Sd/­ (R.P. DHOLARIA, J.) Ajay Page 4 of 4 "