- (1.) THIS appeal has been preferred by the Revenue under Section 260A of the IT Act, 1961 (for short, the Act) against the order of Tribunal, Chandigarh Bench 'A' against the asst. yr. 1995 -96 in ITA No. 731/Chd/1999. The substantial question of law sought to be raised is as under : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the AO was not justified in exercising the power under Section 154 adjusting the loss suffered from export of trading goods against the deduction admissible under Section 80HHC being a debatable issue without appreciating the facts that the subsequent decision of the Hon'ble Bombay High Court in the case of IPCA Laboratories Ltd v. Dy. CIT : [2001]251ITR401(Bom) and its endorsement by the Hon'ble Supreme Court does not bring it within the ambit of an apparent mistake of law rectifiable under Section 154 of the IT Act ? However, after hearing counsel for the parties, we are of the view that following substantial question of law arises for determination by this Court: Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the AO was not justified in exercising the power under Section 154 adjusting the loss suffered from export of trading goods against the deduction admissible under Section 80HHC of the IT Act ? With the consent of learned counsel for the parties, we have finally heard the appeal at the stage of admission itself.
(2.) ASSESSMENT for asst. yr. 1995 -96 was made vide order dt. 31st March, 1998. In the said order, deduction of Rs. 68,69,374 was allowed under Section 80HHC of the Act, without adjusting loss from export of trading goods amounting to Rs. 42,91,630. The AO gave notice for rectification dt. 20th April, 1998 indicating error in calculation. Thereafter, notice dt. 30th Sept., 1998 for rectification was given indicating that deduction under Section 80HHC was wrongly calculated at Rs. 68,69,374 instead of Rs. 14,51,472 as element of loss was not taken into account. Another notice dt. 6th Feb., 1999 was also given for rectification indicating that deduction was admissible at Rs. 7,21,090 under Section 80HHC of the Act. The assessee contested the notice, inter alia, on the ground that 'even scope of proceedings under Sections 154/155 is very limited to rectify only those mistakes either on law or on facts which require no discussion or argument.' The AO proceeded to rectify the mistake vide order dt. 3rd March, 1999 with the observation that vide order dt. 25th Jan., 1999, for the asst. yr. 1996 -97 it was held that if there was loss from the export of trading goods, deduction for loss was not admissible. The assessee preferred an appeal, relying upon decision of the Tribunal, Chandigarh Bench, Chandigarh in the case of M/s Avon Cycles Ltd. to the effect that loss suffered from trading is to be ignored. The appeal of the assessee was accepted. This view has been affirmed by the Tribunal on the ground that since two views were possible, the rectification was not justified, as held by the Hon'ble Supreme Court in T.S. Balaram, ITO v. Volkart Brothers and Ors. : [1971]82ITR50(SC) and CIT v. Hero Cycles (P) Ltd. Etc. : [1997]228ITR463(SC) .
(3.) ORDER of rectification shows that the basis for rectification was decision taken by the AO for the next year on 25th Jan., 1999. Extract from the notice dt. 3rd Feb., 1999 and relevant discussion in the order of rectification, are as under : Extract from the notice dt. 3rd Feb., 1999 '4. This is to give an other opportunity of being heard under Section 154 to justify the following claims (i) Please justify the claim for credit of Rs. 13.40 lakhs declared under VDIS. (ii) You have claimed the deduction of Rs. 42,91,630 which was the loss from export of trading goods. The deduction for this loss cannot be allowed as there is no such procedure in the proviso to Section 80HHC(1).;