Export deduction claim under s. 80HHC raised only in revision, despite accepted return; rejection quashed, case remanded for merits.

The dominant issue was whether the revisional authority could reject a revision seeking deduction under s. 80HHC merely because the assessee's returned income had been accepted by the AO and the deduction was not claimed before the AO. The HC held that the revisional authority acted on an erroneous technical premise by treating acceptance of the return under ss. 143(1)(a)/143(3) as conclusive and by refusing to examine the merits of the s. 80HHC claim; a revision must be decided on the substantive entitlement raised before the revisional forum. The impugned revisional order was quashed and the matter remanded for fresh adjudication on merits after hearing the assessee.

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Issues involved:
The petitioner-assessee claimed deductions under section 80HHC of the Income Tax Act for the assessment years 1996-97 and 1997-98. The revision application was rejected by the respondent, leading the assessee to approach the High Court with a grievance.

Details of the Judgment:

Issue 1: Eligibility for Deductions under Section 80HHC
The petitioner-assessee filed returns for the relevant assessment years but did not claim certain deductions under section 80HHC initially. The revision application was submitted later to request the deductions, which was rejected by the respondent. The High Court noted that the revisional authority did not consider the merits of the deductions claimed and rejected the application solely based on the fact that the deductions were not claimed before the Assessing Officer (AO).

Issue 2: Jurisdiction of Revisional Authority
The High Court emphasized that the revisional authority has the jurisdiction to consider deductions claimed by the assessee, even if not initially mentioned in the returns. Citing previous judgments, the Court clarified that if an assessee becomes aware of mistakes or additional deductions after the assessment, they can approach the revisional authority under section 264 of the Act. The Court criticized the revisional authority for not exercising its jurisdiction in this case.

Issue 3: Treatment of Interest Income
The petitioner-assessee earned interest on advances given to a commercial concern and on fixed deposits made for bank guarantees. The assessee argued that the interest earned was eligible for deduction under section 80HHC. The Court refrained from delving into the specifics of the interest transactions but directed the revisional authority to thoroughly examine all claims made by the assessee during reconsideration.

Conclusion:
The High Court quashed the order of the revisional authority and directed a reevaluation of the revision application on its merits after giving the assessee an opportunity to present their case. The impugned order was set aside, and the petition was disposed of accordingly, with no costs imposed.

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