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Facts
The assessee, Gujarat Industrial Investment Corporation Limited, appealed against an order by the PCIT under Section 263 for A.Y. 2018-19. The PCIT had held the assessment order erroneous regarding two issues: reversal of NPA provision and disallowance under Section 14A, directing adjustments to book profit for MAT. The PCIT noted that these issues were previously decided in the assessee's favor by the ITAT in preceding years, but still found the assessment erroneous because the Revenue had appealed the ITAT's orders to the High Court.
Held
The ITAT held that the PCIT's order passed under Section 263 was not sustainable in law. The Tribunal found that the PCIT, despite being aware that the issues were decided in the assessee's favor by the ITAT in prior years, had acted in gross disregard of judicial hierarchy and misused power by revising the assessment merely because the Revenue had appealed the ITAT orders to the High Court. Consequently, the PCIT's order was set aside.
Key Issues
Whether a PCIT can revise an assessment order under Section 263 on grounds where the issues have already been decided in the assessee's favor by the ITAT in previous assessment years, especially when the Revenue's appeals against those ITAT orders are pending before the High Court.
Sections Cited
263, 143(3), 115JB, 14A
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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
(िनधा�रण वष� / Assessment Year : 2018-19) बनाम Gujarat Industrial Pr. Commissioner of Investment Corporation Income tax / Ahmedabad-3 Limited Vs. Sixth Floor, Block 11 & 12, Udyog Bhavan, Gh Road, Gh-IV Circle, Gandhinagar, Gujarat - 382011 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AACG5304Q (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri Manish B Chaudhari, CFO ��यथ� क� ओर से/Respondent by : Shri Rignesh Das, CIT. DR Date of Hearing 17/07/2025 24/07/2025 Date of Pronouncement (आदेश)/ORDER
PER SMT. ANNAPURNA GUPTA, AM:
The present appeal has been filed by the assessee against the order of the Ld. Principal Commissioner of Income Tax, Ahmedabad-3, (hereinafter referred to as “PCIT”), dated 08.03.2024 passed under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2018-19 holding assessment order passed by the Assessing Officer u/s 143(3) of the Act in the present case to be erroneous causing prejudice to the Revenue.
Industrial Investment Corporation Limited vs. PCIT] A.Y. 2018-19 - 2 – 2. The grounds raised by the assessee are argumentative, but in essence, has challenged the order of the Ld. PCIT holding the assessment order passed in the case of the assessee to be erroneous causing prejudice to the Revenue.
A bare perusal of the order passed by the Ld. PCIT reveals that it is not sustainable in law itself, the reason being that the Ld.PCIT while finding the assessment order to be erroneous causing prejudice to the Revenue on issues identified in her order, also noted the fact that identical issues arose in the case of the assessee in preceding years and stood decided in favour of the assessee by the orders of the ITAT. The order of the Ld.PCIT reveals that despite noting so she still held the assessment order erroneous since she noted that Revenue had not accepted the orders of the ITAT and had preferred appeal against those orders before the Hon’ble High Court.
Considering the admitted fact that the issues identified by the Ld.PCIT on which she found the assessment order erroneous, were decided in favour of the assessee in preceding years, there is no case at all for holding the assessment orders erroneous on the said issues. And therefore, for this reason alone the order passed by the Ld. PCIT needs to be set aside without even mentioning the issues which were identified by the Ld.PCIT to have resulted in the assessment order to be erroneous. But to bring clarity on the facts of the issue, we record as a matter of fact that the Ld. PCIT held the assessment order erroneous and causing prejudice to the Industrial Investment Corporation Limited vs. PCIT] A.Y. 2018-19 - 3 – Revenue for not having made the following adjustments to the books profit of the assessee computed in terms of Section 115JB of the Act for the purposes of computing Minimum Alternate Tax (‘MAT’) payable thereon; i. The reversal of provision of NPA amounting to Rs.6,86,73,630/- which was added back while computing the income of the assessee under the normal provisions of the Act. ii. Disallowance of expenses u/s.14A of the Act amounting to Rs.31,30,987/- made by the AO while computing income as per normal provisions of the Act.
The Ld. PCIT at para 4 and 4.1 of her order categorically records the fact that with respect to both the issues ITAT had decided the issues in favour of the assessee in preceding years but the Department had challenged the said order of the ITAT before the Hon’ble Gujarat High Court where matters were pending. Therefore, at para 4.2 of her order, she holds that the AO having not made the impugned adjustment to the book profit of the assessee, the order passed by him in the case of the assessee was erroneous and causing prejudice to the Revenue and accordingly directed the AO to make the impugned adjustment to the book profit of the assessee and pass a fresh assessment order. Her findings in this regard are contained at para 10 of the order.
It is clear that when the impugned order u/s.263 of the Act was passed, the Ld. PCIT was aware of the fact that the issues on which she had found the assessment order be erroneous were Industrial Investment Corporation Limited vs. PCIT] A.Y. 2018-19 - 4 – actually not so, since the ITAT had decided these issues in favour of the assessee. Being aware of the said fact and still holding assessment order erroneous merely for the reason that the department had not accepted the orders of the ITAT is nothing but a gross disregard and dis-respect of judicial hierarchy. It is a gross misuse of the power by the Ld.PCIT, causing immeasurable harassment to assessee and only adding up to the huge pile of litigation. Such practices should be strictly avoided.
With the above observation, we set aside the order passed by the Ld. PCIT as not sustainable in law.
In the result, appeal filed by the assessee is allowed.
This Order pronounced on 24/07/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 24/07/2025 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. 2. ��यथ� / The Respondent. संबंिधत आयकर आयु� / Concerned CIT 3. 4. आयकर आयु�(अपील) / The CIT(A)- �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,