Abdul Razack, Judicial Member - (1.) THE assessee has taken 13 effective grounds challenging the order dated November 20, 1992, of the Appellate Commissioner. THE sole dispute in this appeal is regarding the benefit under Section 80HHC being denied to the assessee through the order passed under Section 154 of the Act.
(2.) Briefly stated, the facts are as under : In this case; income was originally assessed at Rs. nil as per assessment order dated March 30, 1989. The assessee claimed a sum of Rs. 6,03,156 as allowable deduction under Section 80HHC in respect of export sales. The Assessing Officer restricted the deduction/allowance to the extent of Rs. 5,64,973 and after setting off of business losses for the assessment years 1984-85 to 1986-87 computed the income at Rs. nil. Subsequently, it was noticed by the Assessing Officer on verification of the assessment records that the assessee-company had not furnished an audit report under Section 44AB for which the relevant form was 10CCAC along with the return nor had created any reserve as required in terms of the proviso to Section 80HHC. It was also observed that the assessee was allowed felief under Section 80HHC amounting to Rs. 5,64,973 before the set off of business losses, whereas the deduction under Section 80HHC is to be allowed only after the set off of business losses of earlier years from the income determined in the year under reference. So, according to the Assessing Officer, the relief/deduction under Section 80HHC was wrongly allowed in the original assessment order made on March 30, 1989. He, therefore, resorted to the provisions of Section 154 and called for objections from the assessee in this regard, namely, to the withdrawal of allowance of Rs. 5,64,973 under Section 80HHC. The assessee resisted this proposed action of the Assessing Officer under Section 154, of the Act stating that the audit report under Section 44AB was enclosed, that since there were losses, no reserve was required to be created and the losses of earlier years have to be deducted after giving allowance under Section 80HHC. It was contended by the assessee before the Assessing Officer that all the issues were highly contentious issues and there can be two opinions in regard thereto and the matter was, therefore, outside the purview of Section 154 of the Act. The Assessing Officer did ndt concede any of the arguments and passed an order on March 30, 1992, under Section 154 of the Act withdrawing the allowance under Section 80HHC which was originally allowed in the assessment order dated March 30, 1989, and computed the taxable income in the said order of March 30, 1992, in a sum of Rs. 1,72,120. The assessee was unsuccessful before the Appellate Commissioner in the first appeal because the Appellate Commissioner did not agree with any of the contentions of the assessee. Being aggrieved, the order passed by the Appellate Commissioner on November 20, 1992, the present appeal has been filed before us.
(3.) THE assessee's counsel, Shri J. P. Shah, has filed a paper-book containing 44 pages and has also filed subsequently written submissions inclusive of copies of certain orders of various Benches of the Tribunal in regard to the controversy involved in the appeal. THE assessee's paper-book contains copies of the audit report under Section 44AB of the Act. A copy of the report of the chartered accountants under Section 80HHC(4) in Form No. 10CCAC has also been enclosed. A copy of the export profit reserve account, which is at page No. 44 of the paper-book, has also been enclosed. THE assessee's counsel at the threshold submitted that the order passed by the Assessing Officer on March 30, 1992, under Section 154 was not maintainable as the issues involved therein, namely, the filing of the report under Section 80HHC(4), the creation of the export profit reserve and allowance of the claim under Section 80HHC after the set off of business losses were highly contentious, debatable and conceivably having two opinions and, therefore, the same was outside the scope of Section 154 and the Appellate Commissioner ought to have cancelled the order passed by the Assessing Officer. Making further submissions, the assessee's counsel submitted that the provisions of Section 80HHC were not mandatory but directory though the word used has been "shall". In order to support this submission, the assessee's counsel relied on the following decisions : Sudha Sharma v. ITO [1993] 44 ITD 351 ; [19931 46 TTJ 276 (Delhi) ; Hemsons Industries v. ITO [1987] 23 ITD 364 (Hyd.) ; J.B. Industrial Corporation v. ITO; CIT v. Gujarat Oil and Allied Industries [1993] 201 ITR 325 (Guj) ; Bharat Khandasari Udyog v. Khandasari Inspector [1992] Suppl. 2 SCC 473.;