TaxTMI 
TaxTMI 
2023 (10) TMI 34
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.... dated 26 February 2021 passed by the learned Assessing officer ('the AO') under section 143(3) of the Act (the "Assessment Order"), on the alleged ground that the same is erroneous and prejudicial to the interest of the revenue. Accordingly, the Appellant prays that the order passed by the learned PCIT under section 263 of the Act is bad in law and ought to be quashed. 2. On the facts and in the circumstances of the case, revision proceedings under section 263 of the Act tantamounts to change of opinion as while passing the assessment order under section 143(3) of the Act, the learned AO had duly applied its mind and has adopted one of the possible views allowed under the law. Accordingly, the Appellant prays that the order passed by the learned PCIT under section 263 of the Act is bad in law and ought to be quashed. 3. On the facts and in the circumstances of the case, the Learned PCIT has erred in law by holding that the AO has failed to carry out adequate enquiries / verification while passing the assessment order without appreciating the fact that the case of the Appellant has been selected under Computer Aided Scrutiny Selection (CA....
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...., have heard both the parties, and have also gone through all the documents referred to before us by both the parties; more particularly, the documents which are placed before us by the ld.counsel in Paper Book comprising of 135 pages. 5. On careful consideration of all the above we hold that there was no error in the order of the AO allowing the assessee's claim of ESOP expenses; that the entire issue had been duly inquired into during the assessment proceedings; reply of the assessee duly considered by the AO and the AO had taken a plausible view on the issue based on the existing proposition of law with regard to the claim of ESOP expenses. Our reasoning follows. We find from the documents placed before us in PB that during the assessment proceedings the assessee was asked by the AO to justify its claim of ESOP expenses to the tune of Rs. 2,52,14,540/- vide notice issued under section 142(1) of the Act dated 19.2.2021. Copy of the same was placed before us at PB Page No.55 to 56. The assessee was specifically asked to file copy of the ESOP proposal made by it to M/s.Edelweiss Financial Services Ltd., who had framed ESOP scheme for the benefit of employees of the group comp....
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....im of ESOP expenses on the same principle, as referred to in the decision of Special Bench of the ITAT, were also cited before the AO. * The assessee had placed a detailed working of the expenditure on account of ESOP claimed during the year, pointing out that it was worked out on the basis of option which were exercised by the employees during the impugned year. * Copies of the form no.16 of the employees were also filed showing TDS on the perquisite of ESOP given to them, as also, copy of Edelweiss Employees Stock incentives offer, by virtue of which the ESOP given to the employees of the assessee. 7. Evidently, the assessee had explained in detail to the AO what ESOP scheme was, and how it was an expenditure for the assessee, and also basis for calculating the ESOP expenditure, pertaining to the year. Its claim was duly supported with the decision of the Special Bench of the ITAT, which was confirmed by the Karnataka High Court also. Based on these submissions of the assessee, the AO allowed the claim of the assessee. 8. The ld.Pr.CIT's order, however, reveals that he has taken a totally contrary view on the issue, that these ESOP expenses are capital in ....
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....above facts, has directed verification of the said claim of the assessee. It is settled law that the power under section 263 of the Act cannot be exercised for verification of the issue. There has to be a finding of error causing prejudice to the Revenue, by the ld.Pr.CIT, for valid exercise of revisionary power under section 263 of the Act. Verification precedes finding of the error. Therefore, any direction for verification of the claim u/s. 263 of the Act is not in consonance with the requirement of law. Accordingly, the ld.Pr.CIT's order, directing verification of claim of carry forward of current year's business loss is also set aside. 12. In sum and substance, therefore, the order of the ld.Pr.CIT passed under section 263 of the Act, in entirety, is set aside. 13. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 27th September, 2023 at Ahmedabad. ============= Document 1 5. The contentions of the assessee have been thoroughly considered and the same is not found to be acceptable. First of all it is necessary to understand the ESOP. A scheme of Employee Stock Option (ESOP) is one such process where employer reward....