Court affirms rectification order adjusting unabsorbed depreciation against business income for deduction

The Court upheld the assessing officer's rectification order under section 154, adjusting unabsorbed depreciation against business income for deduction u/s 80HHC. The Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal affirmed the revision, citing the overriding effect of section 80AB. The Tribunal found the assessing officer's jurisdiction valid, rejecting the appellant's argument on debatability. Referring to precedent, the Court held that the assessing officer's order aligned with the law declared by the Supreme Court, constituting an apparent error. Consequently, the appeal was dismissed in favor of the Revenue.

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Issues:
Challenge to order by Income Tax Appellate Tribunal regarding adjusting unabsorbed depreciation loss against current year's business income for deduction u/s 80HHC.

Analysis:
The appellant, engaged in the business of manufacturing and sale of cotton yarn, cotton fabrics, and staple fibre yarn, filed its return for the assessment year 2001-02 admitting a total income of Rs. 3,98,17,147/-. After scrutiny, the assessment under section 143(3) was completed on 30.03.2004, determining total income at Rs. 4,69,55,518/-. Subsequently, the assessment was reopened, and a reassessment order was passed on 28.03.2006, adjusting unabsorbed depreciation of earlier years against the business income. The appellant challenged the adjustment made under section 154 regarding deduction u/s 80HHC. The assessing officer issued a notice under section 154, as an apparent mistake was found in the calculation of 80HHC deduction, which was allowed excessively due to an error in adjusted business profits. The assessing officer revised the assessment based on the decision in IPCA Laboratories Ltd. v. Deputy Commissioner of Income Tax, 266 ITR 521, stating that section 80AB would override other provisions.

The appellant appealed the rectification of assessment, but the Commissioner of Income Tax (Appeals) upheld the revision order under section 154, citing the overriding effect of section 80AB in computing total income. The appellant then appealed to the Income Tax Appellate Tribunal, which affirmed the order of the Appellate Authority, stating that the exercise of jurisdiction under section 154 was valid. The Tribunal referred to the decision in IPCA Laboratories Ltd., which held that section 80AB would override section 80HHC. The Tribunal found no error in the rectification order passed by the assessing officer.

The appellant contended that the issue was debatable when the assessing officer invoked section 154, citing a decision by the Hon'ble Supreme Court in Commissioner of Income Tax v. Shirke Construction Equipment Ltd. The Court noted that the decision in IPCA Laboratories Ltd. had already overruled the Bombay High Court decision, and it was delivered before the assessment order. The Court held that an order contrary to law declared by the Supreme Court constituted an error apparent on the face of the record. Therefore, the orders passed by the assessing officer, Appellate Authority, and Appellate Tribunal were upheld, dismissing the appeal in favor of the Revenue.

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