Dr. Bharat Bhushan Parsoon, J .-These two appeals arise out of a joint order dated 30.10.2008 (Annexure A-1) passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as, the Tribunal) in ITA Nos.327 and 328 (Asr)/2008 pertaining to the assessment years 2001-02 and 2003-04.
2. Both the appeals have been taken up together as question of law involved therein is the same. For convenience and clarity, facts of appeal No.234 of 2009 are being referred to.
3. The appellant-assessee is engaged in the manufacture and export of fence fittings. Assessment for the assessment year 2001-02 was finalised under Section 143(3) of the Income Tax Act, 1961 (for short, the Act) by the Assessing Officer (for short, the AO) on 27.3.2006. The assessee had claimed deduction under Sections 80HHC and 80IB of the Act. The deduction under Section 80HHC of the Act was allowed at Rs. 1,48,94,112/- without reducing therefrom the deduction allowed under Section 80IB at Rs. 47,35,855/-.
The Commissioner of Income Tax, Jalandhar-1, Jalandhar (for short, the CIT) invoking the provisions of Section 263 of the Act issued notices dated 20.3.2008 and 25.3.2008 (Annexure A-5). Vide order dated 28.3.2008 (Annexure A-2), disagreeing with the stand taken in reply dated 27.3.2008 (Annexure A-4) by the assessee, the CIT directed the AO to recompute the total income of the assessee keeping in view the provisions of Section 80IB(13) read with Section 80IA(9) of the Act.
Aggrieved with this order, the assessee had approached the Tribunal where orders of the CIT were affirmed and appeals of the assessee, consequently, were dismissed.
4. In the present appeal, following substantial questions of law had been put forth for answer by the appellant/assessee:
(i) "That the ITAT was not justified on facts & in law in confirming the action of C.I.T. u/s 263 in holding the findings of the AO as erroneous in so far it is prejudicial to the interests of revenue and thereby setting aside the assessment in holding that the claim of deduction u/s 80HHC and its allowability by the AO without reducing there from the deduction u/s 80IB is bad in law, which is against the established principle of law pertaining to powers of CIT for Revision u/s 263, wherein it has been held that in case the AO has adopted one possible view, the order of the AO cannot be held to be erroneous as confirmed by Hon'ble Supreme Court of India in the case of Malabar Industrial Co Ltd. v. CIT [2000] 243 ITR 83."
(ii) "That the ITAT was not justified on facts & in law in confirming the action of C.I.T. u/s 263 in holding the findings of the AO as erroneous in so far it is prejudicial to the interests of revenue and thereby revising the assessment in holding that the claim of deduction u/s 80HHC and its allowability by the AO without reducing there from the deduction u/s 80IB is bad in law, without appreciating the established principles of law as so laid down by Hon'ble Supreme Court of India in the case of Jt. CITv. Madideep Eng. & Pkg. India. (P.) Ltd. [2007] 292 ITR 1 (SC), wherein it was held that "Deductions under various sections i.e., 80HH and 80I are independent."
(iii) "Whether on the facts and in the circumstances of the case the ITAT was justified in concurring with the action of the C.I.T. u/s 263 thereby wrongfully revising the assessment and directing the A.O. to recompute the total income of the assessee by keeping in view the provisions of Sections 80IB(13) r/w Section 80IA(9) as interpreted by the Special Bench of the ITAT in the case of Rogini Garments (supra) which is bad in law."
(iv) Whether the ITAT was justified in concurring with the orders of CIT in holding that the order of AO was erroneous by holding that the decision in the case of Scm Creations v. Asstt.CIT [2008] 10 DTR 247 (Mad.) as reported in part 176 pertains to deduction regarding 80HH and 80I which did not contain any provisions similar to Section 80IA(9A) which is factually incorrect as first of all there is no such provision like 80IA(9A) and even if ITAT meant 80IA(9) even then ITAT is not justified because the decision of the Hon'ble Madras High Court in SCM Creations (supra) was relating to deduction u/s 80IA and 80HHC and not regarding 80HH and 80I as so held by the ITAT. Thus meaning thereby Hon'ble Madras High Court has dealt with the provisions of Section 80IA which does include 80IA(9), so that the holdings of the ITAT while confirming the orders u/s 263 by the CIT is erroneous and needs interference by this Hon'ble Court.
(v) That the ITAT has erred in sustaining the order of CIT u/s 263 on altogether different ground which is unwarranted under any provisions of the Income Tax Act, 1961
(vi) That the orders of the Tribunal & CIT are legally unsustainable & bad in law and perverse.'
5. Assailing powers of the Commissioner of Income Tax (Appeals) of revision under Section 263 of the Income Tax Act, 1961, seeking support from Malabar Industrial Co. Ltd. v. CIT 243 ITR 83, it is claimed by the appellant-assessee that if order of the AO had incidentally resulted in loss to the revenue, it could not be said to be erroneous particularly when the Assessing Officer had adopted one of many possible views. It is claimed that merely because the Commissioner of Income Tax (Appeals) took recourse to another possible view, he could not have invoked Section 263 of the Act, as in addition to being prejudicial to the interests of the revenue, order of the Assessing Officer co-jointly was required to be adjudged erroneous as well. To buttress his argument, counsel for the appellant has referred to following extract from Malabar Industrial Co. Ltd. (supra):
“The phrase "prejudicial to the interest of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. ...'
6. It is further urged by learned counsel for the appellant-assessee that the Assessing Officer was not oblivious of the provisions of Section 80IB(13) and Section 80IA(9) of the Act as in notice dated 2.11.2005 (Annexure A-7), the Assessing Officer had made reference to these provisions. Para 3 of the notice repeatedly referred to by the assessee is reproduced as below:
"Further it is seen that deduction u/s 80IB and 80HHC have not been computed considering the provisions of sub section (13) of Section (9) of Section 80IA. Show cause why the amount of profits and gains claimed and allowed u/s 80IB be not allowed u/s 80 HHC."
7. Per contra, claim of the revenue is that the assessee was allowed deduction under Section 80HHC of the Act to the tune of Rs. 1,48,94,112/-without reducing therefrom deduction of Rs. 47,35,885/- allowed to it under Section 80IB of the Act. The CIT had come to the prima facie conclusion that the order of the AO was erroneous as also was prejudicial to the interest of the revenue. Thus, twin conditions i.e. erroneous nature of the order as also it being prejudicial to the interest of the revenue, had been satisfied by the CIT. Thus, proceedings of CIT under Section 263 of the Act were valid and the Tribunal had rightly upheld the same.
8. We have heard counsel for the parties, while going through the paper books.
9. To adjudicate the matter in controversy, not only provisions of Section 80HHC and 80IB are to be gone into but even provisions of Section 80IB(13) and of Section 80IA(9) are also to be appraised.
10. The AO framing the assessment under Section 143(3) of the Act vide order dated 27.3.2006 had allowed assessee's claim for deduction under Section 80HHC as also under Section 80IB without application of provisions of Section 80IB(13) read with Section 80IA(9) of the Act.
11. A perusal of the order of the Assessing Officer reveals that wittingly or unwittingly, consciously or unconsciously, this order does not refer to the provisions of Section 80IB(13) and Section 80IA(9) of the Act. It is strange that when the Assessing Officer had insight into the provisions of Section 80IB(13) and Section 80IA(9) as is reflected in notice (Annexure A-7), why no reference was made in the order (Annexure A-3), it is intriguing. It remains a fact that intentionally or unintentionally, no effect was given to the provisions of Section 80IB(13) and Section 80IA(9) of the Act. Because of omission of these provisions, order Annexure A-3 was rendered erroneous and undoubtedly was prejudicial to the interest of the revenue as well.
12. From a co-joint reading of show cause notice and order Annexure A-3, it transpires that the Assessing Officer knew it well that the only course available for allowing deductions, was on consideration of provisions of Section 80IB(13) and Section 80IA(9) of the Act along with Section 80HHC and 80IB, but leaving that course, the Assessing Officer simply allowed deductions under Section 80IB as also under Section 80HHC without even making reference to the provisions of Section 80IB(13) and Section 80IA(9) of the Act. Clearly enough, the view taken by the Assessing Officer is unsustainable in law.
13. Learned counsel for the appellant-assessee referring to JCIT v. Mandideep Eng. And Pkg. Ind. P. Ltd., 292 ITR 1 (SC) has claimed that both the provisions are independent and do not impinge upon domain and sweep of each other. When confronted with this issue by the revenue side, the appellant has conceded that in this authority provisions of Sections 80HHC and 80IB of the Act, muchless in correlation with Section 80IB(13) and Section 80IA(9) of the Act, were not in issue. Sequelly, the assessee has not been able to convince as to how Madideep Engg. & Pkg. India (P.) Ltd. (supra) comes to its rescue. Claim of the assessee that reasons for invoking provisions of Section 263 of the Act and justification provided for such invocation in the order of Income Tax Appellate Tribunal are different, also has no merit. When the reasons given for invocation of provisions of Section 263 in the context of show cause notice of 20.3.2008 (Annexure P5) are read in relation to detailed discussion made in the impugned order Annexure A-1, it transpires that there is no dichotomy inter-se. Relevant portion of show cause notice Annexure A-5 is reproduced as below:
"3. Examination of record further reveals that during the period relevant to the assessment year under consideration the assessee was allowed deduction u/s 80HHC amounting to Rs. 1,48,94,112/- without reducing from profit of the business the deduction u/s 80IB allowed to the extent of Rs. 47,35,885/-. The law requires that for computation of deduction u/s 80HHC, deduction allowed u/s 80IB is to be deducted from the profits and gains of business as required by the provisions of Section 80IA(9) of the I.Tax Act, 1961. ..."
14. Now reference to order Annexure A-I of ITAT would be of avail, relevant portion whereof, is appended as below:
"9. In Section 80-IA of the Act, deduction is allowable in respect of profits and gains from industrial undertaking or enterprises engaged in infrastructure development etc. equal to 100% of profits and gains derived from such business for 10 consecutive assessment years. Sub-section (9) provides for computation of procedure which clearly provides that deduction to the extent of such profits and gains shall not be allowed under other provisions of Chapter VIA on which the assessee has claimed and allowed deduction u/s 80IA. There does not exist any ambiguity in the mandate of the statute in the context of section 80IA(9). The prescription of section makes it very clear that where any amount of profits and gains is claimed and allowed u/s 80IA for any assessment year deduction to that extent of such profits and gains shall not be allowed under any other provisions of Chapter VIA."
15. It may be recapitulated that CIT vide order dated 28.3.2008 (Annexure A-2), has remitted the case to the Assessing Officer for recomputing the total income of the assessee keeping in view the provisions of Section 80IB(13) read with Section 80IA(9) in correlation with Sections 80HHC and 80IB. Reference to Rogni Garments of Special Bench of ITAT was merely illustrative. Merely because in order of ITAT while referring to Section 80IA(9) due to typographical error, it has been mentioned as Section 80IA(9A), the order does not become bad in law.
16. Sequelly, authority cited by the appellant reported as Commissioner of Income Tax. v. Jagadhri Electric Supply & Industrial Co., (1983)140 ITR 490 (P&H) does not support the case of the appellant as in the said authority, the Tribunal had upheld the action of the CIT on an altogether different ground than the ground taken by CIT while acting under Section 263 of the Act, unlike the position available in the present case, wherein there is no such dichotomy regarding the reasons cited by CIT while invoking Section 263, with the reasons given by the Tribunal while supporting the action of CIT.
17. At this stage, reference may be made to orders dated 18.4.2011 passed in ITA No.469 of 2010 (Axin Exim International v. Commissioner of Income Tax, Jalandhar) and 21.4.2011 passed in ITA No.371 of 2007 (Commissioner of Income Tax (Central), Ludhiana v. M/s Davinder Exports) and 20.9.2010 passed in ITA No.456 of 2010 M/s Friends Castings (P) Ltd. v. Commissioner of Income Tax), wherein there is consistent view of this High Court. Relevant portion of the judgment dated 20.9.2010 in M/s Friends Castings (P) Ltd.'s case reads as under:
"8. Learned counsel for the assessee was unable to point out that the approach of the authorities below was contrary to any statutory provision except to urge that the view taken by the Tribunal is erroneous as under Section 80-IA(9) which are also applicable in view of Section 80-IB(13), the only restriction is that deduction should not exceed the total profits and gains, and the restriction that deduction claimed and allowed under Section 80-IA or 80-IB could not be allowed under any other provision should be read in the light of condition of deduction not exceeding total profits and gains.
9. We are unable to accept the submission.
10. The restriction under Section 80-IA(9) is not only that the total deduction should not exceed profits and gains, there is a further restriction that deduction allowed under Section 80-IA or 80-IB will be a bar to claim deduction under any other provision of the Chapter."
18. More recently, this aspect has been dealt with at length in ITA No.312 of 2011 (Commissioner of Income Tax-I, Ludhiana v. M/s Abhishek Industries Limited) decided on 20.12.2012. In this judgment, authority cited as Commissioner of Income Tax v. Honda Siel Power Products Ltd., (2011) 333 ITR 547, cited by the assessee has also been referred to. Discussing Asstt. CIT Vs. Rogni Garments & Ors, (2007) 294 ITR 15 (Chennai), Commissioner of Income Tax v. Honda Siel Power Products Ltd (supra) as also Commissioner of Income Tax v. Max India Ltd., (2007) 295 ITR 282 (SC), Coordinate Bench of this Court had come to a firm finding that if an assessee has claimed deduction of profit or gains under Section 80IB, deduction under Section 80HHC is to be granted after reduction to the extent already allowed under Section 80IB.
19. Quoting Rogini Garment's case(supra), para 42 from the said judgment was reproduced which is also being appended here below:
"42 Section 80HHC is part of Chapter VI-A. Hon'ble jurisdictional High Court in the case of CIT v. Sharon Vancers(P.) Ltd. [T.C. (A) No. 62 of 2004 dt. 26.02.207], has made it clear that it is not correct to say that Section 80HHC of the Act is a self contained provision. The deduction cannot be allowed ignoring the restrictive clause contained in Section 80-IA(9). The restrictive clause in Section 80-IA makes it abundantly clear that wherever deduction under any other section of Chapter VI-A(C) is claimed, the computation will be subject to the restrictions laid down in Section 80-IA (9). It precludes 'pro tanto', all the deductions of such profits and gains claimed under Chapter VI-A(C). Section 80HHC is part of Chapter VI-A(C). It is not a self-contained provision. There is absolutely no ambiguity on this aspect. We are therefore of the opinion that relief under Section 80-IA should be deducted from the profits and gains of the business before computing relief under Section 80HHC of the Act."
20. Referring to various other authorities thereafter and taking note of facts of that particular case where disagreeing with CIT, the Tribunal had upheld order of the AO, allowing deductions under Sections 80IB as also 80 HHC of the Act, Coordinate Bench of this Court has held as under:
"13. We are, further, of the firm view that nothing should be left at the whims and fancies of the AO while making assessment of income tax on the questions purely of law. Otherwise, it will bring ridicule to the system of assessment and end up with dangerous results. If for example one AO takes a particular view point, out of the two possible views while interpreting the provisions and the AO of another area takes the other possible view, that would lead to anomalous situations. The Tribunal has held in this case that the AO adopted one of the two possible views and therefore, there was nothing wrong. What restrained the Tribunal to discuss and determine the scope of plain meaning of the provisions of Section 80IA(9)? The decision of ITAT was always subject to challenge either by the department or the assessee before the higher forums."
21. Sequelly, reversing order of the Tribunal, order of CIT was restored holding that deduction under Section 80HHC was to be reduced to the extent it had already been allowed under Section 80IB of the Act.
22. Summing up the entire controversy, in conclusion, it is held that when provisions of Section 80IB(13) are read in conjunction with Section 80IA(9) of the Act, it becomes clear that deduction under Section 80HHC of the Act is to be computed on the eligible business profits only after reducing therefrom the portion of profit on which deduction has already been availed by the assessee under this Section i.e. 80IB. In other words, if an assessee has claimed deduction of profit or gains under Section 80IB, deduction to that extent is not to be allowed under Section 80HHC.
23. From the discussion as made earlier, all the questions posed by the appellant are decided in favour of the revenue and against the assessee. Sequelly, in terms of orders of CIT (Annexure A-2), affirmed by ITAT (Annexure A-1), the Assessing Officer has been rightly directed to recompute the total income of the assessee keeping in view provisions of Section 80IB(13) read with Section 80IA(9) of the Act.
24. Dismissed accordingly.