2024 (2) TMI 224 - AT - Income Tax

Revision u/s 263 - Incorrect allowance of additional depreciation and Wrong claim of Bad Debts - HELD THAT - With respect to the issue of allowance of additional depreciation, assessee has fairly conceded that he has no case since an identical issue of incorrect allowance on additional depreciation in identical set of facts, and on which revisionary jurisdiction was exercised u/s 263 of the Act, was upheld by the ITAT in the case of Dakshin Gujarat Vij Co. Ltd 2022 (4) TMI 98 - ITAT AHMEDABAD Therefore, we have no hesitation in holding that with respect to the finding of error by the Ld. PCIT in the assessment order on account of incorrect allowance of claim of additional depreciation, the same is confirmed. Claim of bad debts allegedly wrongly allowed by the AO - PCIT reveals that the assessee submitted explanation to him during revisionary proceedings , and noted the claim of the assessee to be in order, but still went on to hold the assessment order erroneous since the AO had not examined the case. PCIT goes on to hold the assessment order erroneous merely for the reason that these explanations and documents were not filed to the Assessing Officer during assessment proceedings and therefore, the Assessing Officer did not make proper inquiries on this issue. It is clearly evident from the findings of the Ld. PCIT, as noted above by us, that in very clear terms he stated to be satisfied with the explanation of the assessee regarding the irregularities noted by him in the assessment order and for which purpose he assumed jurisdiction u/s 263 of the Act for revision of the assessment order. It is but obvious that as per ld. PCIT himself there was no error in the assessment order in allowing the above claims to the assessee. PCIT was satisfied that these claims had been rightly allowed to the assessee on the basis of the assessee s explanation and the documents filed before him. When the ld. PCIT himself was satisfied that there was no error in the order of the Assessing Officer vis- -vis irregularities noted by him initially, there can be no case for exercising any revisionary power u/s 263 of the Act. The provisions of the section are very clear. The concerned authorities can exercise revisionary powers only on fulfillment of the essential conditions of finding error in the order sought to be revised and the error being such as causing prejudice to the Revenue. Merely because the AO had not examined these issues during assessment proceedings does not make the assessment order erroneous particularly when the ld. PCIT finds, on the basis of explanation and documents furnished to him, that the assessee s claim was eligible as per law . We have no hesitation in holding that the order passed by the ld. PCIT u/s 263 of the Act is not sustainable in law in the absence of any error noted by him in the assessment order passed the issue of allowance of claim of bad debts. Decided partly in favour of assessee.

Summary

Issues involved:
The judgment involves issues related to the exercise of revisionary powers under Section 263 of the Income-tax Act, 1961 for the Assessment Year 2014-15, specifically focusing on the incorrect allowance of additional depreciation and the wrong claim of Bad Debts.

Issue 1: Incorrect allowance of additional depreciation:
The ld. PCIT noted that the assessee claimed additional depreciation of Rs. 190,48,38,998/-, which was allowed during the assessment proceedings. The ld. Counsel for the assessee conceded that this issue was covered against the assessee by a decision of the ITAT Ahmedabad Benches in a previous case. The Tribunal confirmed the error in the assessment order regarding the incorrect allowance of additional depreciation based on the previous decision.

Issue 2: Wrong claim of Bad Debts:
The ld. PCIT observed that the assessee claimed Bad & Doubtful Debts written off/provided for, amounting to Rs. 2244.07 lakh, but only added back Rs. 19,15,78,384/- in the computation of income. The ld. Counsel for the assessee argued that there was no finding of error by the ld. PCIT regarding this issue. The assessee provided detailed explanations and documents to justify the claim of bad debts. The ld. PCIT acknowledged the explanation provided by the assessee but held the assessment order erroneous because the Assessing Officer did not examine the case thoroughly.

The ld. PCIT found that the explanations and documents were not submitted to the Assessing Officer during the assessment proceedings, leading to inadequate inquiries on the issue. However, the ld. PCIT himself was satisfied with the explanation provided by the assessee and found no error in allowing the claims. The Tribunal concluded that the ld. PCIT's order was not sustainable in law as there was no error noted in the assessment order regarding the allowance of bad debts. Therefore, the order was set aside on this issue.

In conclusion, the appeal of the assessee was partly allowed, confirming the incorrect claim of additional depreciation but setting aside the finding on the erroneous allowance of bad debts.