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Facts
The assessee filed a revised return declaring a total income of Rs.1,20,54,68,920/-. The AO completed the assessment determining total income at Rs.122,32,40,620/-. The PCIT initiated proceedings u/s 263, holding that the assessee claimed excess depreciation on a subsidy received for fixed assets. The AO made an addition of Rs.72,02,700/-.
Held
The CIT(A) deleted the addition, relying on a previous ITAT order that had quashed the revision proceedings initiated by the PCIT. The Tribunal upheld the CIT(A)'s order, stating that the revision proceedings were invalid as the AO had examined the issue and taken a plausible view.
Key Issues
Whether the revision proceedings u/s 263 were validly initiated, and if the excess depreciation claimed on a subsidy was allowable.
Sections Cited
143(3), 14A, 8D, 154, 43(1), 263, 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
This appeal filed by the Revenue is directed against the order dated 10.06.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2013-14.
Facts of the case, in brief, are that the assesse filed its revised return of income on 31.03.2015 declaring total income of Rs.1,20,54,68,920/-. The Assessing Officer completed the assessment u/s 143(3) of the Act determining the total income at Rs.122,32,40,620/- by making disallowance of Rs.1,05,69,000/- u/s 14A r.w.s. 8D of the IT Rules. Subsequently, the Assessing Officer passed an order u/s 154 of the Act on account of mismatch in prepaid taxes and interest.
Subsequently, the PCIT noticed that the assessee company received incentive from the Government of Maharashtra under the Package Scheme Incentives-2007 amounting to Rs.4,80,18,000/-. The assessee company has not given effect of the same as per provisions of section 43(1) Explanation 10 of the Act i.e. the assessee has shown the subsidy amount in financial statement under the head ‘Incomes’ and in computation of income made deduction. Therefore, the PCIT invoked jurisdiction u/s 263 of the Act on the ground that the assessee has claimed excess depreciation on prorata basis. The Assessing Officer in the order passed u/s 143(3) r.w.s. 263 of the Act made addition of Rs.72,02,700/- by observing as under: “5. The explanation of the assessee as mentioned hereinabove is duly considered in the light of relevant provisions of the Act and judicial pronouncements, etc. However not acceptable. Perusal of case records, etc. it is seen that the assessee company has received the incentives from the Government of Maharashtra under the Package Scheme Incentives, 2007. The Directorate of Industries, Government of Maharashtra has issued an Eligibility Certificate for Industrial Promotional subsidy No. 95 dtd. 13th May, 2011. Perusal of IPS-2007, it is seen the subsidy in question was exclusively for Fixed capital assets, indirectly under the PSI Scheme, Incentive is given for establishing unit in backward region and establishment of unit is nothing but a fixed asset structure primarily. In present case, the assessee has recognized the incentive so received i.e. Rs.4,80,18,000/- in its book under the head of other incomes as per companies Act, 2013. However it has reduced the same amount from computation of income for tax purpose. As the incentive was only for fixed assets and hence the assessee was required to reduce the same from the cost of assets for the purpose of calculating depreciation in the light of provisions of section 43(1). However it had not done so. Considering the facts and circumstances of the case, the assessee has excess claimed depreciation on P&M by Rs.72,02,700/- and the same is hereby disallowed and made to the total income of the assessee. As the assessee has not shown particulars of income correctly in its return for the year under consideration, reasons as mentioned hereinabove,
penalty proceedings is being initiated u/s. 271(1)(c) of the Act for furnishing of inaccurate particulars of income. [Addition: Rs.72,02,700/-]”
In appeal, the Ld. CIT(A) / NFAC deleted the addition on the ground that the Tribunal has quashed the re-assessment proceedings. The relevant part of the Ld. CIT(A) / NFAC at para 5 of the order reads as under: “5. Decision I have carefully gone through the facts of the case, assessment order, ITAT Order, ground of appeal
s and materials on record. Judgements and decisions of relevant judicial authorities relied on by the appellant have also been referred to. PCIT-I, Aurangabad in this case had ordered re-assessment u/s 263 of IT Act, 1961, consequent to a finding that the Assessing Officer had failed to consider the taxability of subsidy while assessing the Appellant's return. The appellant, aggrieved by the revision order, had preferred an appeal before the Hon'ble ITAT, Pune. Perusal of the order of the Hon'ble ITAT, Pune dated 04.01.2023 clarifies that the central issue of the appeal is regarding jurisdiction of the Pr. CIT to exercise his revisionary power u/s 263 of the IT Act. The Hon'ble ITAT ultimately concluded that the revision order directing re-assessment was invalid and the original order of the AO was upheld. Para 12 of the said ITAT Order sets out the clear position of Law regarding computation of cost subsidy under the Govt. of Maharashtra under the Package Scheme Incentives-2007 referred has been made to the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT, 243 ITR 83(SC) & in the case of CIT Vs. Max India Ltd., 295 ITR 282(SC) wherein it has been established that the cost subsidy is not deducted from the depreciation claimed. Since the revision order was declared as invalid, therefore, no changes must be made to the original Assessment Order passed by the AO."
6. In the result, appeal of the assessee is allowed.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds:
1. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition of Rs.72,02,700/- i.e. excess claim of depreciation on P&M by Rs.72,02,700/-.
2. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in allowing the claim of depreciation of Rs.72,02,700/- [Rs.4,80,18,000/- 15%] without considering that the assessee had recognized the incentive of Rs.4,80,18,000/- from Government of Maharashtra under the Package Scheme Incentive-2007, and has not reduced the same amount from the cost of assets or from the opening WDV as per provisions of explanation 10 to sub section of section 43(1) of the Income Tax Act, 1961.
3. The order of the Assessing Officer may be restored and that of the CIT(A), NFAC, Delhi be vacated. 4. The appellant craves leave to add, amend or alter all or any of the grounds of appeal.
6. After hearing both sides, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. Admittedly the Tribunal vide & 858/PUN/2019 order dated 04.01.2023 for assessment years 2013-14 & 2014-15 has quashed the revision proceedings invoked by the PCIT u/s 263 by observing as under: “11. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the validity of assumption of jurisdiction u/s 263 by the ld. PCIT. The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) and in the case of CIT vs. Max India Ltd., 295 ITR 282 (SC). The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer examined the claim took one of the plausible views, the assessment order cannot be termed as an “erroneous”.
In the present case, the ld. AR had demonstrated before us the issue sought to be revised by the ld. PCIT in exercise the power vested with him u/s 263, was examined by the Assessing Officer and took a plausible view during the course of assessment proceedings. No doubt the assessment order is silent on this point. But,
generally, the issues which are acceptable to the Assessing Officer do not find mention in the assessment order and it cannot be said that the Assessing Officer had not applied his mind as observed by the Hon’ble Punjab & Haryana High Court in the case of Hari Iron Trading Co. vs. CIT, 263 ITR 437 (P&H) and the Hon’ble Delhi High Court in the case of CIT vs. Eicher Ltd., 294 ITR 310 (Delhi). Therefore, it cannot be said that the Assessing Officer had failed to make an enquiry, no further enquiry is necessary and all the facts were before the Assessing Officer. Consequently, we are of the considered opinion that the proposition that the assessment order is erroneous for want of an enquiry or proper enquiry would have no application to the facts of the present appeal. Therefore, the ld. PCIT cannot invoke the jurisdiction u/s 263 of the Act in respect of this issue. Accordingly, we set-aside the order of revision u/s 263 on this point.”
Since the Tribunal has quashed the revision proceedings, therefore, in absence of any contrary material brought to our notice by Ld. DR the order of the Ld. CIT(A) / NFAC deleting the addition made by the Assessing Officer passed u/s 143(3) r.w.s. 263 of the Act is upheld. The grounds raised by the Revenue are accordingly dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on 31st July, 2025.