1. This appeal is directed against the order of the CIT (A) confirming the tax levied by the Assessing Officer under the provisions of Section 115J of the IT Act.
2. The assessment in this case was originally completed on a total income of Rs. 19,30,154. Thereafter this order was revised by the Assessing Officer on 17-9-1991 determining the business income at nil after setting off the unabsorbed business loss and unabsorbed depreciation of the earlier years. Further the capital gains and income from other sources of the current year were also set off against the balance unabsorbed depreciation and investment allowance. There was no positive income on which tax was payable. The Assessing Officer again initiated proceedings under Section 154 and in this 154 order he determined the book profits of the assessee under Section 115J at Rs. 59,60,176 and on this amount a tax of Rs. 17,88,952 was levied. It is this order dated 8-1-1992 that has given rise to this appeal.
3. It is contended on behalf of the assessee that the order passed by the Assessing Officer under the provisions of Section 154 is without jurisdiction. The provisions of Section 154 are intended to rectify only mistakes which are apparent from the record. The term "mistake apparent from the record" has been explained by the Courts as mistake which is patent and obvious. A mistake which could be established by a long-drawn process of reasoning on a matter, where there could be conceivably more than one opinion, would cease to be a mistake apparent from the record. This, according to the assessee, is the refrain of all the decisions of the Courts including the Apex Court. The order passed by the Assessing Officer under Section 115J is an order, which cannot be termed as an order free from doubt as far as the issues raised in the order are concerned. It is further submitted that the book profits have been determined by the Assessing Officer without taking into consideration the eligible relief under Section 80HHC of the IT Act as required under Sub-clause (iii) of the Explanation to Section 115J(1A) of the IT Act. In this connection, it is further argued that Section 115J is a complete code by itself and that is intended to determine the tax liability of an assessee, whose assessed income is nil or a minus figure. In this connection, the assessee relies on the decision of the Special Bench of the Tribunal in the case of Sutlej Cotton Mills Ltd. v. Asstt. CIT  45 ITD 22 (Cal.) (AppellateTribunal Section). In the said case, the Tribunal has gone even to the extent of holding, after appreciating the reasons for making Section 115J as a part of the statute, that even capital gains have to be kept in wraps. When such is the position the fact that no deduction under Section 80HHC has been allowed to the assessee for want of gross total income cannot be relied upon by the Assessing Officer for levying the additional tax. A plain reading of Sub-clause (iii) of the Explanation to 115J(1A) would also indicate that the profits as determined under Parts II & III of Schedule VI of the Companies Act have to be reduced by an amount to which the assessee would otherwise be eligible for deduction in terms of the provisions of Section 80HHC. Elaborating further it is submitted that what is required to be done is to determine the eligible deduction under Section 80HHC de hors the availability of gross total income and thereafter deduct the same from the profits determined in accordance with the provisions of Part II and Part III of Schedule VI of the Companies Act. It is then submitted that whether 80HHC deduction has to be allowed before set off of brought forward losses or unabsorbed depreciation is a matter, which is not free from doubt in the world of accountants. Our attention in this connection is invited to the brochure titled "Provisions of Section 80HHC of the Income-tax Act, 1961 a Study" published by the Bombay Chartered Accountants Society. At page 27, according to the assessee, the issue has been discussed in detail. It is stated in the said brochure that unabsorbed business loss in earlier years which is set off under Section 72(1) after arriving at an income under all heads of income did not enter the computation of head-wise income and, therefore, did not abate the income under stipulated heads. This conclusion has been arrived at by the Study group appointed for this purpose after considering various decisions of the Apex Court and also all the other High Courts. For the Assessing Officer under the provisions of Section 154 to hold that since there was no gross total income and since no allowance under Section 80HHC has been allowed to the assessee, the eligible deduction, if there had been a gross total income, should not be adjusted for the purpose of determining the book profits would be totally unjustified, especially in an order passed by him under Section 154 of the Act. Our attention in this connection is also invited to the Circular No. 559 dated 4-5-1990 issued by the Central Board of Direct Taxes explaining the scope and effect of the newly inserted Sub-clause (HO of Explanation to Section 115J(1A) of the Act. After admitting that if an adjustment is not made that would result in dilution of the provisions of Section 80HHC, which have an important role to play in the promotion of exports, the Board has advised that the profits, which would be exempt under Sections 80HHC and 80HHD should be excluded from the purview of Section 115J of the IT Act. The Board also explained that the Sub-clause (iii) to the Explanation to Section 115J(1A) was inserted with this purpose in view. Any other view if taken would certainly defeat the purpose for which this Explanation has been inserted and would do violence to the legislative intent. Since there was no apparent mistake which required to be rectified, the order passed by the Assessing Officer so far as it led to the levy of an additional tax of Rs. 17,88,952 requires to be set aside.
4. The learned Departmental Representative, on the other hand, contends that the Assessing Officer by not levying the additional tax under the provisions of Section 115J of the Act in the original assessment has made a cardinal error and this was what he sought to rectify by initiating action under Section 154 of the Act. Sub-clause (iii) of Explanation to Section 115J(1A) speaks only of exclusion of the amount allowable by way of deduction computed in the manner specified in Sub-section (3) or Sub-section (3A) of Section 80HHC of the Act. The question of computing the deduction would arise when there is a gross total income. When the gross total income is not a positive figure there can be no deduction under Section 80HHC of the Act and in such circumstances the notional deduction as claimed by the assessee cannot be allowed.
5. We have heard the parties to the dispute and in our view the claim of the assessee is not tenable. We do agree with the assessee that Chapter XII-B dealing with the levy of tax under Section 115J is a complete code by itself and one does not have to go beyond that code for the purpose of determining the tax liability of an assessee and further what could be rectified under Section 154 is a glaring and patent mistake. However, the claim of the assessee that whether deductions under Section 80HHC have to be allowed before set off of unabsorbed depreciation and unabsorbed loss is not free from doubt has to be rejected. This issue stands squarely concluded by the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co.
Ltd. v. CIT  113 ITR 84 and a later decision in the case of Distributors (Baroda) (P.) Ltd. v. Union of India  155 ITR 120 : 22 Taxman 49. The Apex Court had held that a deduction under Chapter VIA of the IT Act could be allowed only if there is a gross total income and the gross total income having regard to the definition given to that expression in Chapter VIA would mean income computed in the manner laid down under the Act and that is after set off of unabsorbed depreciation and unabsorbed loss. Apart from this to oust the jurisdiction of the Assessing Officer under Section 154 there should be a really debatable issue. Mere complexity of the matter and that genuine arguments have to be advanced to establish a mistake cannot in any way oust the jurisdiction of the Assessing Officer if the mistake is otherwise patent or obvious. In this case, the assessment has resulted in a loss and no deduction under Section 80HHC was allowed to the assessee. What cannot be allowed in the regular assessment cannot be claimed as a deduction on a notional basis or otherwise from the income computed as per Part II or Part III of Schedule VI of the Companies Act. It cannot be the intention of the Legislature to abridge the levy by allowing a deduction, which in the normal event an assessee is not entitled to, as in this case because there was no more gross total income. It is true that the Board in their Circular referred to supra has explained the reasons for insertion of Sub-clause (iii) of Explanation to Section 115J(1 A) of the Act. The Board does not refer to a situation like this. It only says that the book profits should be adjusted by the amount of deduction admissible under Section 80HHC of the Act and computed in the manner laid down under Sub-section (3) or Sub-section (3A) of that section. There would be no justification to read something which has not been incorporated in the Circular, namely that what the Board intended was the exclusion of the amount eligible for deduction under Section 80HHC even though the same could not be allowed in the assessment made under any of the provisions of the Act.
It is inconceivable that where a deduction under Section 80HHC is not allowable to the assessee the same would have to be taken into consideration for reducing its liability under Section 115J of the Act.
Neither the Circular relied upon by the assessee nor the decisions adverted to in the course of arguments in any way advance the case of the assessee. The issue in this case is very simple. The original assessment was completed and the Assessing Officer in the said assessment even failed to examine the possibility of levy of tax under Section 115J. Thereafter he issued a notice of rectification. He inter alia rectified some other mistakes and thereafter proceeded to levy tax as contemplated under Section 115J. It would be wrong to contend that Section 154 would not apply because whether a tax could be levied under Section 115J or not on the facts is not a matter, which is not free from doubt. Merely because an untenable claim has been raised by the assessee it cannot be said that there was no mistake apparent from the record. We feel that having regard to the entire scheme of the Act and in particular the provisions of Section 115J, if 80HHC deduction could not be allowed in the regular assessment the same cannot be reduced from the profits computed for the purpose of Section 115J of the Act on the spacious plea that any such procedure would prove to be a disincentive to the Government's desire to promote exports. We in the circumstances hold that assumption of jurisdiction by the Assessing Officer under the provisions of Section 154 and the levy of tax under Section 115J is totally justified.