TaxTMI 
TaxTMI 
2026 (9) TMI 1406
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....e Companies Act, 1956, engaged in manufacturing and exporting readymade garments from India. In the subject Appeals, as noted above, the dispute relates to the Assessment Years 2000-01 and 2001-02. The issue between the Assessee and the Revenue arises under Section 80HHC read with Sections 28(iiia) to (iiic) of the Income Tax Act, 1961 ("the Act, 1961"). However, the arguments have been confined to Section 263 of the Act, 1961. For convenience, we refer to the circumstances relating to A.Y. 2001-02. 3. The Assessee filed a Return on 31.10.2001 for AY 2001-02, declaring income of Rs.3,97,22,789/- (Rupees Three Crores Ninety-Seven Lakhs Twenty-Two Thousand Seven Hundred and Eighty-Nine). The Assessee claimed a deduction under Section 80HHC of the Act, 1961, amounting to Rs. 13,85,68,402/- (Rupees Thirteen Crores Eighty-Five Lakhs Sixty-Eight Thousand Four Hundred and Two). The audited Report under Section 80HHC(4) of the Act, 1961, filed by the Assessee, states that the Assessee received Rs. 73,49,341/- (Rupees Seventy-Three Lakhs Forty-Nine Thousand Three Hundred and Forty-One) as premium on the sale of export quota. The Assessee claims that the premium on the sale of export quot....
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.....02.2006, the AO passed a fresh Assessment Order, redetermining the taxable income at Rs.4,56,44,810/- (Rupees Four Crores Fifty-Six Lakhs Forty-Four Thousand Eight Hundred Ten), with ancillary and incidental levies. The Assessee carried the matter in Appeal before the C.I.T. Appeals-XVI, and on 31.07.2006, the Assessment Order dated 24.02.2006 was set aside. The Assessee, challenging the C.I.T. Order dated 01.02.2005, made under Section 263 of the Act, 1961, also initiated parallel proceedings by filing I.T.A. Nos. 2210-2211/Del/2005 for AYs 2000-01 and 2001-02 before the Income Tax Appellate Tribunal (ITAT). While matters stood thus, the Revenue filed I.T.A. Nos. 3204-3205/D/2006 before the ITAT, Delhi, challenging the Order dated 31.07.2006 of the C.I.T. On 07.09.2007, the ITAT allowed the Appeals in I.T.A. Nos. 2210-2211/Del/2005 filed by the Assessee, and on 15.10.2007, Appeals filed by the Revenue in I.T.A. Nos. 3204- 3205/D/2006 were dismissed, in view of the Tribunal's decision in the connected Appeals. 6. The Revenue carried the matters on appeal under Section 260A of the Act, 1961, before the High Court of Delhi. By the impugned Judgment, the High Court set aside t....
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.... extended by analogy to the CBDT O.M. E. On Revisional Jurisdiction of C.I.T.: C.I.T. correctly exercised its powers under Section 263 because the AO failed to conduct basic inquiries or apply the statutory criteria for export incentives, thereby rendering the Order erroneous and prejudicial to the interests of the Revenue within the meaning of Section 263 of the Act, 1961. 7. Hence, the Civil Appeals at the instance of the Assessee. 8. Learned Senior Counsel, Mr. Salil Aggarwal, has primarily submitted that the High Court failed to consider the view taken by the ITAT in concluding that the C.I.T. had erroneously exercised jurisdiction under Section 263 of the Act, 1961. With considerable force, the learned Senior Counsel argued that, in the case at hand, the assessment was completed under Section 143(3) of the Act, 1961. The CBDT O.M. is binding on the AO. There is a distinction between the discretion available to the AO in obeying the CBDT O.M. and the discretion exercised by the Courts of Law. To that end, the learned Senior Counsel submits that, in passing the Assessment Order dated 13.08.2003, the AO followed a binding Circular and gave due effect to the receipt....
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....e of jurisdiction by the C.I.T. under Section 263 of the Act, 1961, is justifiable and whether the impugned Judgment reversed the findings of the ITAT by recording its own view. 12. The jurisdiction of the Commissioner under Section 263 of the Act, 1961, is well-defined by a catena of decisions of this Court, and for continuity, we briefly summarise the same: A. C.I.T. v. Max Limited (supra): This Court examined the validity of a Commissioner's Revision Order passed under Section 263 of the Act, 1961. The power of revision under Section 263 requires that the phrase "prejudicial to the interest of the revenue" be read in conjunction with the expression "erroneous" order. Every loss of revenue resulting from a course adopted by an AO cannot automatically be treated as prejudicial to the interest of the Revenue. Where two views are possible and the AO has taken one with which the Commissioner disagrees, the Order cannot be treated as an erroneous Order prejudicial to the interest of the revenue. The only exception is if the view taken by the AO is entirely unsustainable in law. The validity of a Commissioner's revision order must be evaluated based on the position ....
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....dicial to its interests. 13. Let us revert to the circumstances of the case. The impugned Judgment first considered the issue arising under Sections 28(iiia) to 28(iiie) of the Act, 1961. The summary of the view taken by the High Court is noted by us in the preceding paragraphs and is not reiterated for brevity. The High Court referred to the substantial questions on which the Appeal has been admitted, as stated. In the impugned Judgment, the High Court considered a question regarding the correctness of the ITAT's view on the Commissioner's decision under Section 263 of the Act. The High Court relied on the decision in ITO v. D.G. Housing Projects Limited ITA No. 179 of 2011., dated 01.03.2012 and juxtaposed the view of the Commissioner and answered the issue in favour of the Revenue and against the Assessee. 14. The impugned Judgment has taken note of the binding nature of the CBDT O.M. for Revenue officers and of the limitations before a Court of Law. The consideration of the issue has proceeded on the expression in the CBDT Circular, namely, "technically, export quota premium can be equated with the items mentioned in Section 28(iiia) (profit on sale of import lice....