COMMISSIONER OF INCOME TAX CHENNAI Vs. ASMA EXPORTS

JUDGEMENT

(1.) THE above tax case appeals are directed against the common order of the Income-tax Appellate Tribunal dated 11.2.2005 made in ITA Nos.346 and 347/Mds/1999 for the assessment years 1995-96 and 1996-97 respectively.

(2.) THE Revenue is the appellant. THE relevant assessment years are 1995-96 and 1996-97. THE assessee is an exporter of readymade garments. THE assessee claimed deduction under Section 80HHC for both the assessment years 1995-96 and 1996-97. THE Assessing Officer while making the prima facie adjustment under Section 143(1)(a) of the Act, set off the business loss arrived under Section 80HHC(3) and accordingly by assessment orders dated 30.10.1996 restricted the deductions to Rs.11,29,091/- and Rs.5,03,209/- for the assessment years 1995-96 and 1996-97 respectively. Against the said assessment orders dated 30.10.1996, the assessee preferred appeals before the Commissioner of Income-Tax (Appeals), who by common order dated 24.11.1998, allowed the appeals accepting the contention of the assessee that the Assessing Officer while exercising the power under Section 143(1)(a) ought not to have set off the business loss arrived under Section 80HHC(3) and restricted the deduction to Rs.11,29,091/- and Rs.5,03,209/- for the assessment years 1995-96 and 1996-97 respectively even without giving an opportunity to the assessee and calling for the evidence and objections from the assessee as contemplated under Section 143(2)(i) and (ii) and that the Assessing Officer ought not to have deducted the notional loss from the export profit and accordingly the Commissioner held that the prima facie adjustment is not warranted for both the assessment years and directed the Assessing Officer to allow the deduction under Section 80HHC as claimed by the assessee. Against the said order dated 24.11.1998, the Revenue preferred further appeals before the Income-tax Appellate Tribunal. THE Appellate Tribunal by common order dated 11.2.2005 confirmed the view of the Commissioner of Income-tax (Appeals) and dismissed the appeals.

(3.) IT is settled law that even though losses should be deducted from the profit available for the purpose of computation of relief under Section 80HHC, since the question of relief under Section 80HHC is a debatable issue, which does not fall within the purview of prima facie adjustment under Section 143(1)(a) and the same could be taken up only in regular assessment under Section 143(3) of the Act, the action of the Revenue invoking Section 154 of the Act to rectify the intimation under Section 143(1)(a) of the Act was not valid, vide Commissioner of Income-tax v. Nameel Leathers and Uppers 273 ITR 350.