APRAAVA RENEWABLE ENERGY PRIVATE LIMITED,MUMBAI vs. THE PR.CIT, AHMEDABAD-1, AHMEDABAD

Perusal of both the orders of the Ld. PCIT reveal that he assumed juri iction u/s.263 of the Act in both the years finding the assessment order passed to be erroneous causing prejudice to the Revenue: (a) on account of excess claim of depreciation allowed by the AO without making proper enquiry / no enquiry in A.Y. 2020-21 & 2021-22 & (b) on account of claim of deduction u/s.43B of the Act, which as per the Ld. PCIT, the facts revealed had been wrongly allowed by the AO. Therefore, there is a common issue on account of which the assessment order passed in the case of the assessee in the impugned two years was found to be erroneous and for the said reason, both the appeals were taken up for hearing and are being disposed of by the consolidated order.

We have heard both the parties and have gone through the order of the Ld. PCIT for both the years and we have no hesitation in holding that there is no finding of error by the Ld. PCIT in his order passed on the issues noted above in both the years. The order, therefore, passed by the Ld. PCIT u/s.263 of the Act, we hold is not sustainable in both the years. Our detailed reason for arriving at this conclusion is as follows:

1 As stated above, the assessment orders for both the years were found to be erroneous on the common issue of excess claim of depreciation allowed to the assessee by the AO without making any enquiry on the matter. The reasons noted by the Ld. PCIT for ITA Nos. 693 & 694/Ahd/2025 [Apraava Renewable Energy Private Limited vs. PCIT] A.Ys. 2020-21 & 2021-22 - 3 –

2 On the basis of this fact noted from the records the Ld. PCIT assumed revisionary juri iction u/s.263 of the Act and issued show cause notice to the assessee. The order of the Ld.PCIT reveals the assessee to have submitted its reply to the said show cause notice stating that there was no error in the claim of depreciation made by the assessee, pointing out that the rate of depreciation pertained to the Straight Line Method (‘SLM’) rate of depreciation, which was applied on the original cost of asset purchased and not on the written down value of the asset done by the Ld. PCIT. This fact stands recorded at para 4 of the order of the Ld. PCIT in A.Y. 2020-21 and para 4.2 of the order of the Ld. PCIT in A.Y. 2021-22. During the course of hearing before

3 The Ld. PCIT, however, we have noted, held the assessment order to be erroneous stating that the impugned details and explanations were not submitted to the AO and, therefore, he considered it appropriate that the matter to be re-considered at the level of AO and accordingly, remitted the issue of depreciation to the file of the AO for the limited purpose of verification. This finding of the Ld. PCIT is contained at para 5.2.1 of his order for A.Y. 2021-22 and 5.1.1 of his order for A.Y. 2020-21. ITA Nos. 693 & 694/Ahd/2025 [Apraava Renewable Energy Private Limited vs. PCIT] A.Ys. 2020-21 & 2021-22 - 5 –

4 It is evidently clear from the above that the Ld.PCIT did not apply any mind at all to the explanation furnished by the assessee regarding the correctness of its claim of depreciation. He has not found any fault in the explanation furnished by the assessee. It is not the case of the Ld.PCIT that the assessee’s stand of having claimed depreciation, by adopting the SLM of rate of depreciation on the actual cost of the asset, was not as per law or there was any incorrectness in the same. Without pointing out any incorrectness or falsity in the explanation of the assessee, the Ld. PCIT has simply restored the matter for verification purposes to the AO. There is no doubt, therefore, we hold, that there is no finding of error by the Ld. PCIT in the order of the AO vis a vis claim of depreciation and it is settled law that for a valid exercise of revisionary juri iction, the twin conditions of there being an error in the order of the AO, causing prejudice to the Revenue is to be established. In the present case, the Ld. PCIT has not arrived at any finding of error in the order of the AO, but, in fact, has exercised this power of revision for verification of the explanation of the assessee, which is clearly beyond the scope of his powers. Therefore, as far as the issue of depreciation is concerned in both the years the power exercised by the Ld. PCIT u/s.263 of the Act fails miserably for non-fulfillment of the condition of finding any error in the order of the AO by the Ld. PCIT.

5 Taking up the next issue of allowance of claim u/s.43B of the Act wrongly allowed to the assessee. The said issue arises only in A.Y. 2021-22 and the order of the Ld. PCIT reveals that while the ITA Nos. 693 & 694/Ahd/2025 [Apraava Renewable Energy Private Limited vs. PCIT] A.Ys. 2020-21 & 2021-22 - 6 –

6 The order of the Ld. PCIT reveals at para 5.1, the assessee to have explained that the amount not disallowed by the assessee in the impugned year pertained to liabilities of preceding years in which years the same had been disallowed by the assessee. The Ld. PCIT, however, in this case also noted the explanation of the assessee but restored it to the AO for verification, again without pointing out any infirmity/incorrectness in the explanation of the assessee.

7 For the reasons stated above on the issue of depreciation, we hold that the Ld. PCITs exercise of revisionary power u/s.263 of the Act on the issue of alleged excess claim of deduction u/s.43B of the Act for verification purposes, is beyond his powers in the absence of any finding of error in the order of the AO.

In the light of the above, it is patently clear that on all the issues, in both the years on which the Ld. PCIT exercised his revisionary juri iction there was no finding of error by the Ld. PCIT on the said issues. On all the issues, the Ld. PCIT has ITA Nos. 693 & 694/Ahd/2025 [Apraava Renewable Energy Private Limited vs. PCIT] A.Ys. 2020-21 & 2021-22 - 7 –

In the light of the above, we hold that the orders passed by the Ld. PCIT in both the years u/s.263 of the Act is not sustainable in law.

In the result, both the appeals filed by the assessee are allowed.

अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंिधत आयकर आयुƠ / Concerned CIT 4. आयकर आयुƠ(अपील) / The CIT(A)- 5. ǒवभागीय Ĥितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file.