2018 (7) TMI 932 - AT - Income Tax

Tribunal Upholds Decision on Disallowance under Section 80HHC, Emphasizes Correct Provision Selection

The Tribunal dismissed the Revenue's appeal and upheld the decision of the ld. Commissioner of Income Tax (Appeals) to delete the disallowance claimed ... Disallowance of deduction u/s.80HHC - rectification u/s.154 - Commissioner of Income Tax (Appeals) and later this Tribunal and the appellate authorities held the rectification u/s.154 to be void citing a reason that claim u/s.80HHC involved legal issues - Held that:- It is not disputed that disallowance of A2,10,754/- claimed by the assessee u/s.80HHC of the Act, was first attempted by the Revenue through a rectification order dated 24.04.2007. It is also not disputed that the rectification done by the Revenue was set aside by the appellate authorities, citing the reason that it involved legal issues. Thus, admittedly, there were parallel proceedings both u/s.154 as well as 147 of the Act. It might be true that order passed u/s.154 of the Act was overturned by the appellate authorities. There were two different proceedings u/s.147 and 154 of the Act on the same issue and this has not been disputed by the ld. Departmental Representative. Commissioner of Income Tax (Appeals) while holding in favour of the assessee had relied on the judgment of Hon’ble Jurisdictional High Court in the case of CIT vs. E.I.D Parry Limited, (1995 (3) TMI 65 - MADRAS HIGH COURT). Commissioner of Income Tax (Appeals) was justified in deleting the disallowance - Decided against revenue Issues:Disallowance of deduction claimed under section 80HHC of the Income Tax Act, 1961.Analysis:The appeal was filed by the Department against an order deleting a disallowance of deduction claimed by the assessee under section 80HHC of the Income Tax Act. The Department argued that the claim was not allowable and rectified the assessment through an order under Section 154 of the Act. However, the rectification was held void by appellate authorities, leading to the initiation of proceedings under Section 147. The ld. Commissioner of Income Tax (Appeals) deleted the disallowance, stating that there cannot be parallel proceedings under sections 147 and 154 on the same issue. The Departmental Representative cited the judgment of the Hon'ble Kerala High Court in support of their argument that re-assessment proceedings initiated after dropping proceedings under Section 154 could be valid. However, the Tribunal upheld the decision of the ld. Commissioner of Income Tax (Appeals) based on the judgment of the Hon'ble Jurisdictional High Court, emphasizing the importance of choosing the appropriate provision between sections 147 and 154 in cases of overlapping circumstances.The Tribunal noted that there were parallel proceedings under sections 147 and 154 of the Act regarding the disallowance claimed by the assessee. Although the rectification order under Section 154 was overturned by the appellate authorities, it was acknowledged that both proceedings existed simultaneously. The ld. Commissioner of Income Tax (Appeals) relied on the judgment of the Hon'ble Jurisdictional High Court in the case of CIT vs. E.I.D Parry Limited, which highlighted the necessity of having recourse to the appropriate provision based on the facts and circumstances of each case. The Tribunal, being bound by the judgments of the Jurisdictional High Court, affirmed the decision of the ld. Commissioner of Income Tax (Appeals) to delete the disallowance based on the principles outlined in the E.I.D. Parry Limited case. Consequently, the appeal of the Revenue was dismissed, upholding the order of the ld. Commissioner of Income Tax (Appeals).In conclusion, the Tribunal's judgment focused on the proper application of provisions under sections 147 and 154 of the Income Tax Act in cases involving overlapping circumstances. By emphasizing the importance of choosing the appropriate proceeding and respecting the decisions of the Jurisdictional High Court, the Tribunal upheld the deletion of the disallowance made by the ld. Commissioner of Income Tax (Appeals). The decision highlighted the need for careful consideration and adherence to legal principles in conducting tax assessments and rectifications.