TaxTMI 
TaxTMI 
2025 (5) TMI 1789
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....lected for scrutiny. The assessment was completed under section 143(3) vide order dated 30.04.2021 by the ITO, Ward 3(1)(1), Ahmedabad. During the course of assessment, the Assessing Officer examined the financials and submissions furnished by the assessee and accepted the returned income after making inquiries on certain issues. 3. Subsequently, the PCIT exercised jurisdiction under section 263 of the Act on the basis that the assessment order passed by the AO was erroneous in so far as it is prejudicial to the interest of Revenue on multiple grounds. Show cause notice under section 263 was issued, pointing out various issues, including: i. Allowance of depreciation on goodwill allegedly created upon amalgamation of a subsidiary, ii. Allowance of deduction under section 80IA, iii. Non-taxation of alleged unexplained credit of Rs. 10.80 crore under section 68 r.w.s. 115BBE in respect of loan from Crown Laminates Pvt. Ltd., iv. Carry forward and set-off of unabsorbed depreciation on such goodwill and Acceptance of set-off of losses of Rs. 11,18,52,160/- without proper verification, 4. After going through the detailed reply of the assessee, in the detailed revisionary order....
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....nce of any finding of Ld. PCIT how the alleged error of AO has resulted in loss of revenue particularly when depreciation on goodwill on amalgamation has been rightly claimed under the provisions of the Act. 4. The subject order u/s. 263 passed by the Ld. PCIT is illegal and bad in law in absence of any finding of Ld. PCIT how the alleged error of AO has resulted in loss of revenue particularly when unabsorbed depreciation on goodwill on amalgamation has rightly been carried forward and set off in accordance with the provisions of Section 32(2) of the Act. 5. The subject order u/s. 263 passed by the Ld. PCIT is based on the wrong assumption that the case of the appellant for AY 2016-17 with respect to depreciation on goodwill on amalgamation is sub-judice. The Hon'ble ITAT has pronounced its judgement for AY 2016- 17 in favour of the appellant before passing of the subject order u/s. 263. The Hon'ble ITAT has allowed the depreciation on goodwill on amalgamation for AY 2016-17 rendering the revisionary proceedings bad in law. 6. The subject order u/s. 263 passed by the Ld. PCIT is illegal and bad in law in absence of any finding of Ld. PCIT how the alleged error of AO ....
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....judicated by the Coordinate Bench in the assessee's own case for A.Y. 2016-17 (in the case of Sara Suppliers Pvt. Ltd., ITA No. 432/Ahd/2022, order dated 21.02.2024), wherein the claim of depreciation on goodwill was upheld after thorough analysis of the amalgamation scheme, valuation report, and relevant provisions of section 32(1)(ii). It was therefore submitted that once the depreciation on goodwill was allowed in earlier years and has attained finality by way of a binding decision of the Co-ordinate Bench, the opening WDV in the subsequent year has to be accepted, and depreciation thereon has to be mandatorily allowed as per settled law. Consequently, the order of the AO allowing such depreciation cannot be regarded as erroneous. 9. In respect of Ground No. 6, pertaining to the deduction under section 80IA, the learned AR submitted that the AO had duly examined the claim during the assessment proceedings. The assessee had filed Form 10CCB, profit and loss account of the eligible unit, and reconciliation of depreciation under the Companies Act and the Income Tax Act. The difference between book depreciation and tax depreciation had been explained and matched, and the AO was sat....
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....and explained by the assessee, the same cannot be treated as unexplained credit under section 68. The AR argued that in the present case, the assessee had submitted confirmations, bank statements, and details of past transactions to substantiate that the repayment was out of earlier recorded advances, and the AO had accepted the same after inquiry. Thus, there was no error in the assessment. 12. The AR further submitted that the revisionary order does not contain any independent inquiry or conclusive finding by the Ld. PCIT as to how the assessment order is both erroneous and prejudicial. The PCIT merely reproduced certain figures and directed the AO to conduct de novo assessment without any finding on incorrect allowance or loss of revenue. The revisionary jurisdiction under section 263, it was submitted, cannot be invoked merely for directing roving inquiries or for improvement of reasoning. It was stressed that where the AO has taken a plausible view after inquiry, the jurisdiction under section 263 is barred. 13. On the other hand, the learned Departmental Representative (DR) placed strong reliance on the impugned order passed by the Ld. PCIT. It was submitted that the Assess....
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....as claimed in A.Y. 2018-19 had no actual cost in the hands of the amalgamating company and hence was not eligible for depreciation under section 32(1)(ii) read with Explanation 7 to section 43(1). It was also mentioned that the matter for A.Y. 2016-17 was pending in appeal, and therefore, the claim made by the assessee in A.Y. 2018- 19 was incorrect, and the AO erred in allowing such depreciation without inquiry. Furthermore, the PCIT linked this background to subsequent claims made by the LLP for set-off of brought forward depreciation and observed that if the base depreciation itself was inadmissible in earlier years, the consequential set-off in A.Y. 2018- 19 also stood vitiated. Accordingly, the Ld. PCIT treated the entire chain of events-recognition of goodwill, claim of depreciation, and set-off-as forming an "erroneous and prejudicial" part of the assessment requiring revision under section 263. 16. We have carefully considered this background framing by the Ld. PCIT. However, for reasons discussed hereinafter in the issue-wise adjudication, we are of the view that the foundational presumption in the PCIT's order that the depreciation on goodwill stood disallowed and that t....
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....ad been reversed. It is also well established that where depreciation has been allowed in an earlier year and no material change in facts or law occurs, the Revenue is bound to maintain consistency which means that once a view is taken and accepted in an earlier year, it cannot be arbitrarily re-examined in subsequent years. The PCIT's contention that the goodwill was self-generated or lacked real consideration was already examined and rejected by the Tribunal in A.Y. 2016-17. The Co-ordinate Bench accepted that the goodwill arose from the excess of consideration over the net value of tangible assets transferred in amalgamation and was therefore a valid intangible asset eligible for depreciation under section 32(1)(ii). The Ld. PCIT could not have reopened the settled position through revision without first disturbing the allowance in the earlier year. In our opinion goodwill arising on amalgamation qualifies as an intangible asset eligible for depreciation. The finding of Co-ordinate Bench in A.Y. 2016-17 clearly brings the assessee's goodwill within the scope of this principle. 19. In light of the foregoing, we are of the opinion that the PCIT's invocation of section 263 on this....
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....r more detailed inquiry should have been made. In absence of any clear finding of incorrect allowance or revenue loss, the assessment cannot be considered erroneous. The AO's view is plausible and duly supported by documents. 23. The next ground for revision is that the AO made addition of Rs. 10.80 crore under section 28 whereas, according to PCIT, it ought to have been added under section 68. The AO, after calling for details and issuing notices under section 133(6), concluded that the repayment of loan by Crown Laminates was not properly explained, and made addition under section 28 treating it as business receipt. The PCIT has not established how such addition under section 28 was erroneous, or how invoking section 68 would have resulted in a higher tax liability. 24. In case of JMC Projects (India) Ltd. v. PCIT [67 taxmann.com 258 (Guj.)], the Hon'ble Gujarat High Court held that when an addition has already been made under one provision, the PCIT / Commissioner cannot revise the order merely because, in his view, a different provision ought to have been invoked. This is a classic case of improvement of reasoning, which is outside the scope of section 263. Further, the ITAT ....