DIGJAM LIMITED,JAMNAGAR vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX, JAMNAGAR, JAMNAGAR

ITA 349/RJT/2025Status: DisposedITAT Rajkot12 October 2026AY 2021-227 pages
AI SummaryDismissed

What were the facts?

The assessee, Digjam Limited, filed its return of income for Assessment Year 2021-22 declaring Nil income. The assessment under section 143(3) read with section 144B was completed by the NFAC, Delhi, accepting the returned income. The Principal Commissioner of Income Tax (PCIT), Jamnagar, issued a notice under section 263 proposing revision, citing the failure to disallow capital expenditure of Rs. 4,611.27 lakhs relating to land impairment while computing business income and book profit under section 115JB. The PCIT passed an order setting aside the assessment order to this extent and directing the Assessing Officer to reframe the assessment. The assessee appealed this order.

What did the Tribunal hold?

The Tribunal held that for invoking jurisdiction under section 263, the assessment order must be erroneous and prejudicial to the revenue. The PCIT identified issues regarding the disallowance of capital expenditure of Rs. 4,611.27 lakhs related to land impairment. While the assessee contended it was an actual write-off, not a provision, and cited judicial precedents supporting this distinction for section 115JB(2)(i), the Tribunal noted that the mere nomenclature or debit to the P&L account was insufficient. It was necessary to examine the actual entries, the basis of impairment computation, supporting material, and valuation methodology. The Tribunal found that the assessment order could be considered erroneous and prejudicial to the revenue on the issues identified by the PCIT. Therefore, the assumption of jurisdiction under section 263 was sustainable, and the impugned order of the PCIT was affirmed. The appeal was dismissed.

What were the issues?

1. Whether the order passed by the PCIT under section 263 is bad in law? 2. Whether the assessment order passed by the AO under section 143(3) read with section 144B was erroneous and prejudicial to the interest of the revenue, making the provisions of section 263 applicable? 3. Whether the PCIT erred in setting aside the assessment order to examine the applicability of section 37(1) concerning the disallowance of capital expenditure of Rs. 4,611.27 lakhs, given that the assessee had suo motu disallowed it and the AO had examined it? Assessee's contentions: The amount of Rs. 4,611.27 lakhs was suo motu disallowed as an actual write-off, not a mere provision. It was debited to the Profit and Loss Account and reduced from the balance sheet value of land. Reliance was placed on Gujarat High Court decisions in CIT-IV vs. Vodafone Essar Gujarat Ltd. and PCIT vs. Torrent (P.) Ltd., and the Supreme Court decision in Apollo Tyres Ltd. vs. CIT, for the proposition that an actual write-off is not added back under section 115JB(2)(i). Revenue's contentions: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144B,Section 263,Section 37(1),Section 115JB,Section 115JB(2)(i)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAJKOT “DB” BENCH, RAJKOT

Before: DR. B.R.R. KUMAR, VICE-SHRI SONJOY SARMA

For Appellant: Shri Vimal Desai, AR
For Respondent: Shri R V Arun Prasad, CIT-DR
Hearing: 28.07.2026Pronounced: 12.10.2026

PER DR. B.R.R. KUMAR, VICE-PRESIDENT:

- The captioned appeal has been filed by the assessee against the order passed by the Ld. Principal Commissioner of Income Tax, (hereinafter referred to as “the Ld. PCIT”), Jamnagar vide order dated 28.03.2025 relevant to Assessment Year 2021-22. 2. The assessee has raised the following grounds of appeal:

1.

The order u/s. 263 is bad in law.

2.

The learned Principal CIT has erred in law as well as on facts in not considering the submission of the appellant that the order passed by the A.O. u/s. 143(3) r.w.s. 144B was neither erroneous nor prejudicial to the interest of revenue and provisions of Section 263 of the Act were not applicable to the case of the

The order continues below.

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