Revenue appeals dismissed: s.263 revision invalid where AO took possible view on deductions under ss.80HHC, 80IB(13), 80IA(9)

HC dismissed revenue's appeals, holding the CIT erred in invoking s.263 to cancel the AO's assessment. The ITAT correctly restored the AO's order because the AO had taken a possible view on deductions under ss.80HHC and 80IB(13) read with 80IA(9), applied his mind, and no additional enquiry or facts were required. As the AO's approach was consistent with contemporaneous tribunal precedents, the HC upheld the ITAT's finding that the Commissioner could not exercise revisionary jurisdiction; appeals by revenue dismissed with no order as to costs.

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Issues Involved:
1. Whether the Income Tax Appellate Tribunal was correct in law in canceling the order passed by the Commissioner of Income Tax under Section 263 and in restoring the order of the Assessing Officer by holding that the Assessing Officer had taken a possible view at the relevant point of time.

Detailed Analysis:

1. Background and Context:
The appeals were heard together as they involved an identical question of law and virtually identical circumstances. The question of law was whether the Income Tax Appellate Tribunal (ITAT) was correct in canceling the orders passed by the Commissioner of Income Tax (CIT) under Section 263 and restoring the orders of the Assessing Officer (AO) by holding that the AO had taken a possible view at the relevant time.

2. Case Details:
- ITA 1376/2009: Pertained to the assessment year 2001-02, directed against the ITAT's order dated 12.09.2008, which arose from the CIT's order dated 07.03.2006 under Section 263.
- ITA 1382/2009: Pertained to the assessment year 2002-03, directed against the ITAT's order dated 30.01.2009, which followed the Tribunal's earlier order for the assessment year 2001-02.

3. CIT's Order under Section 263:
The CIT viewed the AO's assessment as erroneous and prejudicial to the interests of the revenue because the AO allowed deductions under Section 80HHC without reducing the profits by the deduction already allowed under Section 80IB. The CIT directed the AO to re-calculate the allowable deduction under Section 80HHC.

4. ITAT's Decision:
The ITAT set aside the CIT's order, holding that the AO's view was a possible view supported by various decisions of different benches of the Tribunal. The ITAT referred to several decisions prior to and after 17.03.2006, which were in favor of the assessee, indicating that the AO's view was in consonance with prevailing decisions at the relevant time.

5. Arguments by Revenue:
The revenue argued that the AO made no reference to two possible views and ignored the provisions of Section 80IB(13) read with Section 80IA(9), indicating non-application of mind. The revenue relied on several decisions, including Gee Vee Enterprises and Malabar Industrial Company Ltd, to support the contention that failure to make an inquiry or non-application of mind renders the AO's order erroneous and prejudicial to revenue.

6. Arguments by Assessee:
The assessee contended that the AO had taken a plausible view based on various Tribunal decisions and that it was not a case of non-application of mind. The assessee argued that the CIT could not invoke Section 263 merely because the AO's order did not explicitly mention the provisions of Section 80IB(13) read with Section 80IA(9).

7. Court's Analysis:
The court examined several decisions cited by both parties. It noted that the expression "prejudicial to the interest of revenue" must be read in conjunction with "erroneous." The court reiterated that if the AO adopts one of the permissible courses in law and it results in a loss of revenue, it cannot be treated as erroneous or prejudicial to revenue. The court emphasized that the absence of discussion on certain provisions does not imply non-application of mind, especially when a regular assessment order under Section 143(3) is presumed to be passed upon an application of mind.

8. Conclusion:
The court concluded that the presumption of application of mind by the AO was not rebutted by the revenue. The AO's view was in line with several Tribunal decisions, and there was no material indicating non-application of mind. The court held that the ITAT was correct in canceling the CIT's order under Section 263 and restoring the AO's order. The appeals were dismissed, and the question was answered in favor of the assessee.

Judgment:
The Income Tax Appellate Tribunal was correct in law in canceling the order passed by the Commissioner of Income Tax under Section 263 and in restoring the order of the Assessing Officer by holding that the Assessing Officer had taken a possible view at the relevant point of time. The appeals were dismissed with no order as to costs.

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