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Facts
The appeal was filed against an order passed by the Principal CIT (PCIT) setting aside an assessment order and directing a de-novo assessment. The PCIT found the original assessment order erroneous due to alleged excess claims of depreciation and disallowance under Section 14A, and improper deduction under Section 80G for CSR expenses.
Held
The Tribunal held that the PCIT had erred in invoking Section 263 of the Act. The issues raised by the PCIT were already examined and verified by the Assessing Officer during the original assessment. The PCIT's order was considered a 'second opinion', which is not permissible under Section 263.
Key Issues
Whether the PCIT was justified in invoking Section 263 against the assessment order when the issues raised were already verified by the Assessing Officer, constituting a 'second opinion' not permissible under the law.
Sections Cited
14A, 80G, 263, 143(3), 144B, 37(1), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
Date of hearing : 24-09-2025 Date of pronouncement : 12-12-2025 आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 31-03- 2025 passed by PCIT, Ahmedabad-3 for assessment year 2020-21. 2. The grounds of appeal are as under:-
1. The grounds of appeal mentioned hereunder are without prejudice to one another.
2. The order passed by ld. Commissioner of Income-tax, Ahmedatsad-3, Ahmedabad (hereinafter referred as to the "PCIT"] is bad in law, invalid and requires to be quashed, the same may kindly be quashed.
The Ld. PCIT erred in law AMD on facts in arriving at a conclusion to the effect that the assessment order passed by the AO was erroneous as well as prejudicial to the interest of the revenue on the ground that the order has been passed by the AO without making enquiries/verification, which should have been made in respect of alleged (i) excess claim of depreciation on residential building of Rs. 2,47,260/- (ii) excess claim of depreciation on plant & machinery of Rs.5,87,427/- (iii) disallowance u/s, 14A r.w.s. 8D for exempt income earned by the appellant during the year (iv) allowability of deduction claimed u/s 80G of the Act in respect of CSR Expense. The order passed by PCIT requires to be quashed AMD may kindly be quashed.
The learned Pr. CIT erred on facts as also in law in setting aside the assessment order dated 20.09.2022 passed u/s, 143(3) of the Income Tax Act, 1961 directing the AO to pass a fresh assessment order. The order passed u/s 263 of the Act by the learned Pr. CIT is totally unjustified on facts as also in law therefore the same may kindly be quashed.
Your Honour's appellant craves leave to add, to amend, alter, OR withdraw any OR more grounds of appeal on OR before the hearing of appeal.”
3. The assessee company filed original return of income on 14-02-2021 declaring total income at Rs. 17,32,75,190/- . The scrutiny assessment u/s. 143(3) r.w.s. 144B of the Act was completed in assessee’s company case on 20-09- 2008 assessing total income at Rs. 17,61,63,250/- by making disallowance of Rs. 28,88,059/- u/s. 37(1) of the Act.
4. The Pr. CIT observed that the assessee company had invested by partnership firm which amounted to 5,95, 84,650/- as on 31-03-2019 and Rs. 17,38,4,097/- as on 31- 03-2020. In the profit and loss account, various expenses had been debited. However, while estimating income, 2 disallowance u/s. 14A r.w.r. 8D was not made. 1% of the average value of investment i.e. Rs. 11,66,944/- was required to be disallowed u/s. 14A r.w.s. 8D of the Income Tax Rules. Further, the Pr. CIT observed that the company claimed depreciation on four types on buildings i.e. factory, building, plant building, office building and residential building. The depreciation has been claimed @ 10% on all four types, whereas the allowable depreciation in the residential building is 5% only. This has resulted in excess claim of depreciation amounting to Rs. 2,47,260/-. The Assessing Officer was required to disallow the same which has not been done in the assessment order. The Pr. CIT further observed that additional depreciation of Rs. 39,16,177/- during the year relating to immediately preceding year on assets put to use for less than 180 days. Normal depreciation has been claimed at 15% on the written down value on the first day of the previous year i.e. Rs. 27,37,27,065/-. However, this opening written down value was required to be reduced by the amount of Rs. 39,16,177/- being 50% additional depreciation relating to present year. Non-reduction of the same has resulted in excess amounting to Rs. 5,87,427/-. The Pr. CIT further observed that company has added back the expenditure shown under CSR expenditure and donation and 50% of the expenditure i.e. Rs. 72,50,000/- out of such expenditure of Rs. 1,45,00,000/- was claimed as deduction u/s. 80G of the Act. CSR is mandated to be income by company and is an application of income and cannot be allowed as business expenditure. At the same time, this amount cannot be used to plain benefit u/s. 80G of the Act otherwise it would defeat purpose of CSR expenditure. All these accounts, the Pr. CIT issued the notice u/s. 263 of the Act for which the assessee filed rely from time to time. After considering the same, the Pr. CIT passed the order u/s. 263 dated 31-03-2025 thereby setting aside the order u/s. 143(3) r.w.s. section 144B of the Income tax Act, 1961 dated 20-09-2022 and directed the Assessing Officer to pass de-novo assessment order.
Being aggrieved by the order u/s. 263 of the Income Tax Act, the assessee filed appeal before us.
The ld. A.R. submitted that the Pr. CIT erred in law on arriving at the facts and the conclusion to the effect that the Assessment order passed by the Assessing Officer was erroneous as well as prejudicial to the interest of the Revenue on the ground that the order passed by the Assessing Officer was done through various inquiries and verification. The relevant point i.e. excess claim of depreciation of residential building, excess plan of depreciation on plant and machinery, disallowance u/s. 14A r.w.s. section 8D for exempt income earned by the assessee during the year and allowability of deduction claimed u/s. 80G of the Act in respect of CSR expenses, the assessee has already given explanation to the Assessing Officer. At the time of assessment order, the ld. A.R. further submitted that the in assessee’s own case of assessment year 2018-19 the same issues were taken into account by the Pr. CIT u/s. 263 and the same was decided by the Tribunal in favour of the assessee thereby quashing the order u/s. 263 of the Act. (ITA No. 1017/Ahd/2024) order dated 21-07-2025.
The ld. D.R. relied upon the order passed u/s. 263 by the Pr. CIT.
We have heard both the parties and perused all the relevant material available on record. Ground no. 3 of the assessment year 2018-19, order passed by the Tribunal in assessee’s own case is identical to that of preceding assessment year i.e. 2017-18 except related to the allowability of deduction claim u/s. 80G of the Act in respect of CSR expenses. After taking about the cognizance of the records, it can be seen that in respect of excess claim of depreciation of residential building, plant and machinery and disallowance u/s. 14A r.w.s. 8D was categorically verified by the Assessing Officer and are identical to that of assessment year 2018-19 and therefore the Pr. CIT has not rightly invoked section 263 and it only amounts to second opinion which is not permissible as per the purview of section 263 of the Act. As regards allowability of deduction claimed u/s. 80G of the Act in respect of CSR expenses, the assessee has categorically mentioned that the 80G claim is justifiable and on the part of the assessee as the assessee is eligible for deduction @ 100% or 50% dependent upon the entity to which the same is paid. The Ld. A.R. point out that this issue was called upon at the time of assessment proceedings, was answered by the assessee during assessment proceedings. The observation of the PCIT that the Assessing Officer has not gone further to make any 5 observation in the said issue in absence of the answer to the query raised vide notice dated 18-01-2021 u/s. 142(1) of the Act. The contention of the Ld. A.R. that this issue was answered by assessee and the PCIT has given his second opinion which is not permissible under the provisions of sec.263 of the Act. Thus, the Pr. CIT was not rightly invoked Section 263 of the Act in this issue as well. Therefore, the appeal of the assessee is allowed.