1. Rule. Returnable forthwith. The respondents waive service. By consent, the petition is taken up for final hearing.
2. By this writ petition, the petitioner/assessee seeks to challenge the order dated October 19, 2000 (exhibit G), as also order dated March 4, 2002 (exhibit I), passed by the revisional authority under section 264 of the Income-tax Act, 1961 (hereinafter referred to, for the sake of brevity, as “the said Act”).
Facts:
3. For the assessment year 1995–96, the assessee returned its net taxable income, after claiming deduction under section 80HHC, at Rs. 5,500. However, that was not the full deduction. The chartered accountants of the assessee did not include the receivable export incentives of Rs. 2,45,000 on two export bills dated May 26, 1994, and January 7, 1995, as the assessee failed to receive the export earnings during the assessment year 1995–96. The incentives were given to the assessee in the form of R.E.P licences. These licences were sold on January 18, 1996, and, therefore, the petitioner received export incentives of Rs. 2,45,000 only during the assessment year 1996–97 and not in the assessment year 1995–96. However, there were no export sales during the assessment year 1996–97.
4. The chartered accountants of the petitioner audited their books for the year ending March 31, 1996, and claimed deduction under section 80HHC of Rs. 2,04,832. This deduction was claimed under return of income for the assessment year 1996–97 declaring the assessee's income as “nil”. The said return was processed under section 143(1)(a). This was on November 17, 1998. The Assessing Officer rightly disallowed the petitioner's claim on the ground that during the assessment year 1996–97, there were no export sales and, therefore, the petitioner was not entitled to claim deduction of Rs. 2,04,832. Being aggrieved by the said order, the assessee went in appeal to the first appellate authority, who by its order dated February 2, 2000, confirmed the order passed by the Assessing Officer for the assessment year 1996–97. The assessee has accepted the validity of the order. Hence, the petitioner-assessee filed a rectification application under section 154 of the Act on December 7, 1998, with specific prayer that the incentive pertained to the earlier assessment year 1995–96 and the claim under section 80HHC be granted in the assessment year 1995–96. The assessee also got its accounts audited for the assessment years 1995–96 and 1996–97. This was on September 4, 1999. The assessee recomputed the deduction under section 80HHC for the assessment year 1995–96 at Rs. 5,85,113 as against Rs. 3,40,113 claimed in the earlier return. However, in the meantime, on March 1, 1999, the rectification application filed by the petitioner under section 154 of the Act came to be rejected. Being aggrieved, the petitioner filed a revision application under section 264 of the Income-tax Act before respondent No. 1. In this rectification application, the petitioner sought relief under section 80HHC on the ground that the export incentive of Rs. 2,45,000 had direct nexus with the export income for the assessment year 1995–96. The claim was supported by the fresh audited accounts correcting the mistake for the assessment year 1995–96. By the impugned order, respondent No. 1 has dismissed the revision application on October 19, 2000. Therefore, this writ petition.
Reasons:
5. The main issue which arose for consideration by the Commissioner was whether the export incentives received in subsequent assessment years can be allowed under section 80HHC even though such incentive has not been shown as income for the relevant year. This point arose before respondent No. 1. However, the revision petition filed by the petitioner came to be dismissed by the first respondent on the ground that for the assessment year 1995–96, the Assessing Officer had passed an assessment order under section 143(1)(a) accepting the claim of deduction under section 80HHC for Rs. 3,40,113 and, therefore, rectification did not arise. He further held that the claim of deduction under section 80HHC cannot be considered unless the assessee had included the amount in the income for the said year and as the assessee had not taken export incentives in its income for the assessment year 1995–96, it cannot be allowed by way of rectification. He has further held that the assessee cannot seek relief for the assessment year 1995–96 on the basis of application for rectification for the assessment year 1996–97.
6. Under section 264 of the Income-tax Act, the Commissioner may, on an application by the assessee for revision, call for the records of any proceedings and may make such enquiries as he thinks fit. This revisional power can be exercised to meet the ends of justice. This position is well settled in law. Now, in the present case, the assessee effected export sales during the assessment year 1995–96. The assessee received the incentives during the subsequent assessment year 1996–97. However, during the assessment year 1996–97, the assessee did not effect any export sales. Therefore, for the assessment year 1996–97, the assessee could not have claimed the deduction because, there were no export earnings during that year. The assessee could have claimed deduction under section 80HHC only during the earlier assessment year, i.e, 1995–96. It is submitted by the department that the revision was not maintainable because, the assessee had opted for appeal before the Commissioner of Income-tax (Appeals) for the assessment year 1996–97. This submission has no merit. The petitioner did claim relief for the assessment year 1996–97 on the ground that the incentives were received during that year. However, during the assessment year 1996–97, there were no export sales. Therefore, the petitioner could not have claimed the deduction for the assessment year 1996–97. Therefore, the only alternative left for the assessee was to move by way of rectification under section 154 of the Act for the assessment year 1995–96. It is true that for the assessment year 1995–96, the Income-tax Officer had passed an order under section 143(1)(a) accepting the returns filed by the assessee but, in those returns the assessee could not have claimed the full deduction because the above incentive was received in subsequent assessment year 1996–97 when there were no export sales. The Commissioner has correctly framed an issue. However, he has rejected the revision application on extraneous grounds. We are of the view that the revision application is maintainable under section 264 of the Act. We direct the Commissioner to decide the issue of law which he has framed in para. 4 of the impugned order (exhibit G), dated October 19, 2000, viz., “Whether export incentives received in subsequent assessment years can be allowed under section 80HHC even though not shown as income for the relevant year in view of the rectification application subsequently filed supported by the auditors report”. This issue needs to be decided by the Commissioner under section 264 of the Act.
7. Before concluding, we may mention that the order exhibit I is consequential to the impugned order exhibit G.
8. Accordingly, we set aside the orders of the Commissioner dated October 19, 2000 (exhibit G), and March 4, 2002 (exhibit I), and we remit the matter back to respondent No. 1 to decide the above issue in accordance with law.
9. Accordingly, the petition stands allowed. No order as to costs.