TaxTMI 
TaxTMI 
2025 (7) TMI 444
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....s of real estate and property development. For the Assessment Year 2020-21, the assessee filed its return of income on 06.01.2021. Later the said return was revised on 30.03.2021 declaring a total income of 'NIL' after setting off unabsorbed depreciation loss under normal provisions against gross total income. The case was selected for scrutiny and assessment proceedings were conducted under section 143(3) r.w.s. 144B of the Act. During the course of assessment, the Assessing Officer issued multiple notices under section 142(1) seeking detailed explanations and documentary evidence regarding the computation of income, treatment of brought forward losses, claim of depreciation, and other aspects. In compliance, the assessee filed detailed written submissions including the one dated 14.09.2022 explaining the claim of unabsorbed depreciation pertaining to earlier years including A.Y. 2018-19 and 2019-20. The assessment was finally framed determining the gross total income under normal provisions at Rs. 62,91,18,337 and net total income (after Chapter VI-A deductions under section 80IBA of Rs. 35,98,30,738/-) at Rs. 10,54,37,004. The major disallowance made by the AO in the assessment ....
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.... said issue. 4. In response to the show cause notice, the assessee filed a detailed reply dated 19.03.2025 explaining that the depreciation on goodwill amounting to Rs. 14,87,59,399 had already been disallowed by the AO in the assessment order and that the remaining unabsorbed depreciation of Rs. 16,38,50,595 relating to A.Y. 2018-19 had been correctly set off against the income computed under the normal provisions. It was pointed out that the amount claimed as set off in the computation was not Rs. 48.03 crore as alleged, but only Rs. 16.38 crore as was actually allowed by the AO. The assessee further submitted that there was no carry forward of depreciation losses from A.Ys. 2016-17 and 2017-18, and therefore, the PCIT's premise was factually incorrect. 5. Despite this explanation, the Ld. PCIT proceeded to pass the impugned order dated 26.03.2025 under section 263 of the Act. In the said order, the Ld. PCIT observed that the AO had failed to verify the quantum of unabsorbed depreciation available for set off and had mechanically allowed the claim of Rs. 48,03,58,938/- resulting in an erroneous order causing prejudice to the interest of the Revenue. 6. Aggrieved by t....
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....e Ld. AR submitted that the assessment proceedings were initiated by issuance of notice under section 143(2) dated 29.06.2021, followed by several notices under section 142(1), pursuant to which the assessee submitted detailed replies on 28.07.2021, 17.01.2022, 07.03.2022, 26.08.2022, and 18.09.2022, respectively. All such replies were duly acknowledged and considered by the AO, and copies of the same were placed in the Paper Book before us. The AR took us through each of these replies during the course of hearing and submitted that the AO had thoroughly examined all claims including the deduction under section 80IBA and set-off of brought forward unabsorbed depreciation. It was contended that the AO, after due examination, disallowed the depreciation of Rs. 14,87,59,399/- claimed on goodwill, clearly referencing the same to past assessments in A.Y. 2016-17, and further clarified that such depreciation was not allowable even in future years. Simultaneously, while computing total income under normal provisions, the AO allowed set-off of Rs. 16,38,50,595/- towards brought forward unabsorbed depreciation from A.Y. 2018-19 alone. The gross total income was determined at Rs. 62,91,18,33....
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.... reflects non-application of mind. Mere clerical reflection of incorrect carry-forward in ITR does not lead to an automatic presumption of allowance, particularly when the AO has consciously acted upon verified figures. In conclusion, the Ld. AR submitted that the revisionary order deserves to be quashed in entirety since (i) the issue was already the subject matter of rectification notice, (ii) there was due inquiry and verification by the AO, and (iii) the matter involves debatable interpretation of depreciation law and carry forward rules. Hence, there was no error, much less a prejudicial error, in the order of the AO warranting action under section 263. 11. The Ld. Departmental Representative (DR), on the other hand, supported the order of the PCIT. However, when queried, the Ld. DR fairly conceded that no final rectification order under section 154 has been passed by the AO as of the date of hearing. 12. We have carefully considered the rival contentions, perused the assessment order dated 27.09.2022, the impugned revision order passed under section 263 by the Ld. PCIT dated 26.03.2025, the assessee's written submissions including the reply dated 19.03.2025, and the mat....
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....either renders the assumption of jurisdiction invalid. In the present case, the record clearly evidences that the AO had conducted detailed inquiries. Notices under section 143(2) and 142(1) were issued on multiple occasions, and the assessee's replies dated 28.07.2021, 17.01.2022, 07.03.2022, 26.08.2022 and 18.09.2022, inter alia, explained the workings of unabsorbed depreciation and details of claim under section 80IBA. The AO not only disallowed depreciation on goodwill but also correctly allowed set-off of Rs. 16.38 crore which was eligible under law. Thus, the assessment order is a result of conscious examination and application of mind. The finding of the PCIT that the AO failed to verify the availability of brought forward depreciation losses and also failed to verify the details of deduction u/s 80IBA, is factually unsustainable and legally untenable. 15. Further, the record reveals that prior to the issuance of the 263-notice dated 07.03.2025, the AO had already issued a notice under section 154 dated 27.11.2024 proposing to rectify the very same issue i.e., the alleged excess set-off of depreciation loss. In the said notice, the AO computed the excess allowance at Rs. ....