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TMI Blog2024 (2) TMI 1427X X X X Extracts X X X X X X X X Extracts X X X X ..... ion charges and further adding to total income and reducing from the total income is in accordance with law. Therefore, PCIT is completely erred in observing that lease equalization charges created is a notional income/expenditure and crediting to P L A/c should not have been reduced from the total income, because debit to P L A/c has not been added to statement of total income is incorrect and devoid of merits. AO has verified the issue of lease equalization charges and its treatment in the books of accounts and computation of income during the course of assessment proceedings, which is clearly evident from notices u/s. 142(1) dated 09.12.2020 20.02.2012 issued by the AO, where specific question was asked in respect of accounting treatment of lease equalization charges and subsequent treatment in computing the total income as per the provisions of the Income Tax Act, 1961 The assessee vide submission explained the method of accounting of lease equalization charges in the books of accounts and subsequent treatment while computing income from business and profession. AO after considering relevant submissions has accepted the claim of the assessee. From the above, it is undoubtedly c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case and in law, the Ld. PCIT has erred in invoking the provisions of section 263 of the Act with a preconceived notion that the Ld. AO had not verified the transaction, without looking into all the records of the assessment proceedings wherein the Appellant has duly furnished the relevant documents/explanation with regard to the same issue when sought for by the Ld.AO. 2.5. On the facts and in the circumstances of the case and in law, the Ld. PCIT erred in not appreciating that merely because an issue was not elaborated in the assessment order, the same would not lead to a conclusion that the Ld. AO had not verified the same. Without prejudice to the above grounds that the proceedings under section 263 of the Act cannot be invoked for the impugned AY, the Assessee wishes to submit the following grounds on merits of the case: 3. Eligibility for deduction of reversal of lease equalization charges 3.1 On the facts and circumstances of the case and in law, the Ld. PCIT failed to appreciate that the lease equalization reserve debited / credited in the books of accounts is in accordance with the accounting standards laid down by the Institute of Chartered Accountants of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iples provided in Accounting Standard-19 - accounting for lease. The same is not a real income/expenditure, but it is a notional charge accounting in the books. However, the assessee has not added back lease equalization charges although, in earlier assessment years, the same was debited to P L A/c as is evident from the statement of computation of income. The AO has not examined the issue which rendered the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. Therefore, called upon the assessee to explain as to why the assessment order passed by the AO shall not be revised u/s. 263 of the Act. In response to show cause notice, the assessee vide letter dated 16.03.2023 submitted that the assessee has created lease equalization charges as per Accounting Standard-19 accounting for lease, issued by the Institute of Chartered Accountants of India in the books of accounts by considering rent and lease charges. But, lease equalization charges debited into P L A/c has been added back in the statement of total income for the respective assessment years while computing income from business. Similarly, when the lease equalization charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of total income. The Ld.Counsel for the assessee further submitted that the assessee has created lease equalization charges in terms of Accounting Standard-19 accounting for lease and debited to P L A/c as and when the reserve is created. The amount debited to P L A/c has been added to total income in the statement of total income. Similarly, the reversal of lease equalization charges has been credited to P L A/c, however, the same has been reduced from the total income, because, the debit has been already added back to total income. The AO after considering relevant facts has rightly accepted the claim of the assessee and thus, assessment order passed by the AO cannot be considered as erroneous in so far as it is prejudicial to the interest of the Revenue. 7. The Ld.CIT-DR, Shri Nilay Baran Som, supporting the order of the PCIT, submitted that the AO has not carried out required enquiries he ought to have been carried out in light of relevant provisions of the Act, which rendered the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. Therefore, the PCIT has rightly set aside the assessment order u/s. 263 of the Act, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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