OCEAN SPARKLE LIMITED,HYDERABAD vs. DCIT., CIRCLE-5(1), HYDERABAD

Facts

The assessee, M/s. Ocean Sparkle Limited, engaged in port services, filed its return for AY 2020-21, which was subject to scrutiny assessment. The Assessing Officer (AO) accepted the assessee's explanations regarding the allocation of expenses, including provision for loss allowance, advances written-off, and investments written-off, between its Tonnage Tax and Non-Tonnage divisions. Subsequently, the PCIT initiated revisionary proceedings under Section 263, deeming the AO's order erroneous and prejudicial to the revenue due to alleged lack of proper inquiries into these expense claims.

Held

The Tribunal held that the AO had conducted due diligence, examined the assessee's submissions, and adopted a plausible view on the expense allocations, which had also been consistently followed by the assessee and not disputed by the Revenue in prior years. The Tribunal found that the PCIT erred in invoking Section 263 as the AO's order was neither erroneous nor prejudicial to the interests of the revenue. The PCIT cannot set aside an assessment order merely because a different view is possible, unless the AO's view is unsustainable in law.

Key Issues

1. Whether the PCIT validly exercised revisionary powers under Section 263 when the Assessing Officer had taken a plausible view on the allocation and allowability of expenses (provision for loss allowance, advances written-off, and investments written-off) between Tonnage Tax and Non-Tonnage divisions. 2. Whether the AO's order was erroneous and prejudicial to the revenue due to alleged lack of inquiry into these expense claims.