PCIT's order under Section 263 quashed; Tribunal rules assessment order was neither erroneous nor prejudicial. Cooperative Bank appeal allowed.

The Tribunal quashed the PCIT's order under Section 263, concluding that the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal found that the AO had conducted adequate inquiries regarding depreciation on new assets, GST input credit lapse, and disallowance under Section 43B. Consequently, the jurisdictional conditions for invoking Section 263 were not satisfied. The appeal by the assessee, a Cooperative Bank, was allowed, thereby invalidating the PCIT's directive for reassessment.

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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.

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