2008 (9) TMI 499 - HC - Income Tax

Tribunal upholds AO's possible view; condition precedent for invoking section 263 absent, s.263 order set aside, appeal dismissed

HC held that the Tribunal correctly found the Assessing Officer's (AO) view to be a possible view, so the condition precedent for invoking jurisdiction ... Revision - Power of Commissioner - condition precedent for invoking jurisdiction under section 263 - Held that:- The Tribunal is correct in its view that the view taken by the Assessing Officer was a possible view and that the condition precedent for invoking jurisdiction under section 263 by the Commissioner of Income-tax did not exist. In view of the above, we hold that the Income-tax Appellate Tribunal was justified in upsetting the order passed by Commissioner of Income-tax under section 263 of the Income-tax Act, 1961. Therefore, answer the question of law raised in this appeal in favour of the assessee and against the Revenue. The above appeal, therefore, stands dismissed. Issues:1. Appeal by Revenue against order of Income-tax Appellate Tribunal.2. Substantial question of law regarding justification of Tribunal's decision under section 263 of Income-tax Act.3. Dispute over deduction under section 80HHC for assessment year 1995-96.4. Commissioner of Income-tax's order recalculating deductions.5. Appellate Tribunal's decision in favor of the assessee.6. Revenue's appeal against Tribunal's decision.7. Argument over application of mind by Assessing Officer for deduction under section 80HHC.Analysis:1. The High Court heard an appeal by the Revenue challenging the order of the Income-tax Appellate Tribunal regarding the assessment year 1995-96. The substantial question of law raised was whether the Tribunal was justified in overturning the Commissioner of Income-tax's order under section 263 of the Income-tax Act.2. The case involved a dispute over the deduction under section 80HHC for the assessee, engaged in both export and domestic sales. The Commissioner of Income-tax recalculated the deductions, disagreeing with the Assessing Officer's decision to allow the entire net profit of the export business as a deduction.3. The Appellate Tribunal, in its decision, found that the Assessing Officer's view was a possible one and not erroneous or prejudicial to the Revenue. The Tribunal emphasized that section 263 is meant to correct distortions and prejudices, not just to increase revenue.4. The Revenue appealed against the Tribunal's decision, arguing that the Assessing Officer did not provide reasons for allowing the full deduction under section 80HHC. The Revenue contended that the order lacked application of mind, but conceded that the Assessing Officer's view was a possible one.5. The advocate for the assessee argued that the Assessing Officer had considered all relevant particulars before allowing the deduction. They cited a previous court decision to support their position that the order cannot be deemed erroneous simply because it lacked elaborate discussion.6. The High Court analyzed the arguments presented by both sides and upheld the Tribunal's decision. It found that the Assessing Officer had indeed applied his mind, considered all details, and made a possible decision regarding the deduction under section 80HHC. The Court rejected the Revenue's claim of lack of application of mind.7. Ultimately, the High Court ruled in favor of the assessee, affirming the Tribunal's decision to overturn the Commissioner of Income-tax's order under section 263. The appeal by the Revenue was dismissed, and no costs were awarded in the matter.