2023 (10) TMI 775 - AT - Income Tax

Revision u/s 263 by CIT - assessee has purchased fixed asset and claimed depreciation and additional depreciation during the year - 'GST input credit lapse' claimed as business expenditure - disallowance u/s 43B - HELD THAT - As regarding first issue of depreciation, we note that AO had the knowledge on the basis of information available at the time of assessment proceeding for the depreciation claimed by the assessee bank. The AO had on the basis of above information has asked for the explanation for the profit on sale of assets on depreciable asset. Therefore, it cannot be said that the AO has not made inquiry, or the assessee has not furnished any explanation in respect of depreciation claimed on the new asset purchased by the assessee. About GST credit, we note that these amounts of GST credits are related to the expenses incurred by the assessee bank during the year under consideration. The assessee bank has reduced the GST Credit from the related expenses and claimed the expenses after reducing the 100% GST Credit on such expenses. As per the Section 17(4) of the CGST Act 2017, the assesses bank has availed 50% of total GST Credit in its GST Return, and 50% have been debited to the Profit and Loss Account and claimed as expenses of the current year which is allowable expense because it is reduced from expenses and now once again debited in Profit and Loss Account as per section 17(4) of The GST Act, 2017. The said GST Credit lapse is not a provision made by the assessee bank. If said credit is not taken then also it will allowable expense as a part and parcel of respective expense. At the time of the assessment proceeding, the learned AO has opined that the GST Credit lapse is an eligible expense and hence he has allowed the same and had not made further inquiry because it is apparent and obvious that the GST Credit lapse is an allowable expense. Disallowance u/s 43B of the Act, the assessee bank has already disallowed the said amount in its return of income filed. During the assessment proceeding the A.O. has asked for the computation of income and the assessee bank has already submitted the copy of computation of income in which it is clearly reflected that the amount has been already disallowed u/s 43B. Therefore, from above documents and explanation it is clear that Depreciation and GST Credit lapse both are allowable expenses. Disallowance was already made u/s 43B during the filing of return of income. Therefore, we note that order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue. When the AO adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the AO is unsustainable in law . Therefore, we are of the considered opinion that AO s order cannot be termed as erroneous as well as prejudicial to the interest of the revenue and therefore, jurisdictional condition precedent as prescribed by statute for invoking revisional jurisdiction is absent and therefore, we are inclined to quash the impugned order of the ld. PCIT. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Invocation of Section 263 by the Principal Commissioner of Income Tax (PCIT).
2. Non-verification of depreciation on new assets.
3. Non-verification of GST input credit lapse.
4. Discrepancy in disallowance under Section 43B.

Summary:

1. Invocation of Section 263 by the Principal Commissioner of Income Tax (PCIT):
The assessee, a Cooperative Bank, challenged the correctness of the order dated 23.03.2023, passed by the Learned Principal Commissioner of Income Tax, Surat-1, under section 263 of the Income Tax Act, 1961. The PCIT invoked Section 263, arguing that the assessment order was erroneous and prejudicial to the interest of Revenue due to lack of inquiry and verification by the Assessing Officer (AO).

2. Non-verification of depreciation on new assets:
The PCIT observed that the AO did not inquire or verify the depreciation claimed on new assets amounting to Rs. 3,11,73,124/-. The assessee contended that the AO had knowledge of the depreciation claim based on available information and had asked for explanations regarding the profit on the sale of depreciable assets. The Tribunal noted that the AO had indeed made inquiries and that the depreciation claim was in accordance with the law.

3. Non-verification of GST input credit lapse:
The PCIT noted that the AO failed to verify the GST input credit lapse of Rs. 64,68,703/- claimed as an expense. The assessee argued that the GST credit lapse was related to expenses incurred during the year and was allowable under Section 17(4) of the CGST Act, 2017. The Tribunal found that the AO had considered the GST credit lapse as an eligible expense and allowed it, deeming further inquiry unnecessary.

4. Discrepancy in disallowance under Section 43B:
The PCIT highlighted a discrepancy in the amount disallowed under Section 43B, where the auditor reported Rs. 2,35,31,575/- as not paid, but only Rs. 1,19,25,500/- was disallowed. The assessee clarified that the entire amount was disallowed in the return of income. The Tribunal found that the AO had already disallowed the amount as required under Section 43B.

Conclusion:
The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal quashed the PCIT's order under Section 263, stating that the jurisdictional conditions for invoking Section 263 were not met. The appeal of the assessee was allowed.