COMMISSIONER OF INCOME TAX Vs. JUMBO BAG LTD

JUDGEMENT

(1.) THE revenue is on appeal against the order of the Income Tax Appellate Tribunal, dated 4.07.2008 passed in ITA Nos.354 and 355 /Mds/2008 relating to the assessment years 2001-02 and 2002-03.

(2.) THE assessment in the case of the assessee for the assessment year 2001-02 was completed under section 143(3) r.w.147 of the I.T. Act on 31.1.2005 on the basis of computation book profit under Section 115JB Rs.77,57,105. THE original assessment for the assessment year 2002-03 was completed under Section 143(3) on 31.1.2005 determining the book profit under Section 115JB at Rs.81,23,508/- While completing the assessment the Assessing Officer had allowed deductions under Section 80HHC of Rs.9,19,200/- on the book profit under Section 115JB for the assessment year 2001-02 and Rs.18,71,525/- on the book profit under Section 115JB for the assessment year 2002-03. On perusal of the records relating to the above assessment years, the Commissioner of Income Tax found that when the taxable income was nil after setting off depreciation for the respective assessment years, no deduction under Section 80 HHC was allowable. Hence, a notice under Section 263 was issued calling upon the assessee to submit its explanation as to why the claim of deduction under Section 80HHC should not be withdrawn. THE assessee submitted its reply stating that when two views are possible and the assessing officer had followed one view the Commissioner of Income Tax could not hold that the assessment was erroneous and prejudicial to the interests of the revenue and take action under Section 263 of the Act. THE assessee placed reliance on the decision of the Gujarat High court in the case of Commissioner of Income Tax Vs.Arvind Jewellers (259 ITR 502). THE Commissioner of Income Tax did not accept the assessee's contention that the assessing officer had consciously followed a particular view. THE Commissioner of Income Tax has recorded a finding that the assessment order clearly showed that the assessing officer had not applied his mind to this issue at all. THE Commissioner of Income Tax also rejected the assessee's objection that when two views are possible the Commissioner of Income Tax could not invoke the jurisdiction under Section 263. Thus, the Commissioner of Income Tax set aside the assessments made by the assessing officer for the assessment years 2001-02 and 2002-03 with a direction to redo the assessment after withdrawing the deduction under section 80 HHC wrongly allowed while computing book profit under section 115JB. Aggrieved by the order of the Commissioner of Income-tax , the assessee filed appeals before the Income-tax Appellate Tribunal and the Tribunal allowed the appeals in favour of the assessee by following the decision of the Special Bench of Mumbai Tribunal in the case of Dcit Vs. Syncome Formulations (I) Ltd (2007)(106 ITD 193) and the decision of the Supreme court in the case of Malabar Industries Co. Ltd Vs. Commissioner Of Income Tax (243 ITR 83). Aggrieved by the same, the revenue has filed this appeal by formulating the following question of law:

(3.) THE Assessing Officer is not entitled to touch the profit and loss account prepared by the assessee as per the provisions contained in the Companies Act, while arriving at the book profit under Section 115J and the book profit so arrived at should be the basis for taxation and therefore, the computation under Section 80HHC should be limited to the case of profits of eligible category only. THE Tribunal has also come to the conclusion that in view of the non obstante clause available in Section 115JA it was clear that the provisions is a self-contained one and no other provision would have effect on it and thereby it was to be implemented as contained in the said provision. THE Tribunal has also further given a reason to the effect that section 80HHC is clear about this aspect that profit only is to be taken into account but not income and sub-section (3) of Section 115JA itself took care of the provisions relating to the adjustment of loss or depreciation and carry forward of the income. THE finding arrived at by the Tribunal is correct and followed the decision of the Supreme Court. We are of the view that the conclusion arrived at by the Tribunal cannot be complained of". 5. Hence, following the same, the question of law is answered against the revenue and the appeals are dismissed.