TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 330
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..... 'PCIT') has initiated the proceedings under section 263 of the Act in gross violation of the provisions of the Act and that the order ought to be struck out in limine and consequent additions made thereunder, ought to be deleted. 2. The order passed by the Ld. PCIT is bad-in-law in so far as the Ld. PCIT has acted beyond jurisdiction by initiating proceedings under section 263 of the Act without appreciating the fact that the twin conditions of order being erroneous and prejudicial to the interests of the Revenue prescribed under the provisions of section 263 of the Act were not satisfied. 3. The Ld. PCIT erred in invoking the provisions of section 263 by treating the assessment order under section 143(3) by the Assessment Unit, National Faceless Assessment Center ('the AO') as erroneous and prejudicial to the interests of the Revenue, without appreciating that the AO had duly enquired into the issues, conducted proper verification, and passed the order after due application of mind. 4. The Ld. PCIT erred in initiating the proceedings under section 263 without appreciating the fact that there was no lack of inquiry or error of fact or of....
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....eation of a tangible or intangible asset for the Appellant, were not fulfilled. Disallowance of Retainership Fees and Recruitment Charges: Without prejudice to the issue of validity of proceedings and order passed under section 263 of the Act, the Ld. PCIT erred in law and on facts: 10. In erroneously in disallowing the claim of deduction of recruitment charges of INR 87,58,529/- and retainership fees of INR 52,84,362/- under section 37(1) of the Act, by treating the expenditure as preliminary expenses under section 35D of the Act and amortising the claim of deduction over a period of 5 years. 11. In failing to appreciate that section 35D applies only to specific nature of expenses incurred before commencement of activities or after commencement of activities but in connection with extension of undertaking or setting up of a new unit, as expressly enumerated therein and that the recruitment charges and retainership fees incurred by the Appellant do not fall within the ambit of section 350 of the Act and are allowable as revenue expenditure under section 37(1), having been incurred wholly and exclusively for the business of the Appellant. ....
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....f the ld. PCIT. It is submitted as per the provisions of section 263 of the Act, the pre-requisite condition for initiating revisionary proceedings is that the order of the AO should be erroneous and prejudicial to the interest of the revenue and the twin conditions enshrined under the said section are composite and non-segregable. From the perspective of section 263 of the Act, an assessment order cannot be termed as erroneous unless it is not in accordance with law. Further, it is a trite in law that unless there is lack of inquiry on the part of the AO while assessing the income, a mere change in opinion by the ld. PCIT does not permit initiation of proceedings under section 263 of the Act. It is further submitted that large number of judicial precedents have held that if the AO acting in accordance with law makes a certain assessment and passes an assessment order, the same cannot be termed as erroneous by the ld. PCIT simply because he has a different view than the one taken by the assessing authority. The second necessary element for invocation of jurisdiction under section 263 relates to the order being prejudicial to the interest of the revenue. If one of the above two cond....
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....nsultants for which the fees were paid. However, since the plans with respect to the joint venture proposal or the oncology treatment and tests did not materialize further, the proposals were discarded by the Company and accordingly, the costs incurred for these exercises were sunk costs. The Company continued to focus on its core strength, i.e. molecular diagnostics and developed the said business. 6.1 As regards, the Recruitment charges the said expenses were incurred in relation to hiring of employees of the Company. Since the captioned year was the first year of material operations for the Appellant it was difficult for the assessee to source the right talent and as a result, it had to appoint specialized agencies for sourcing the right talent for the its business. As per the terms of agreement with the parties, the it was required to pay a certain percentage of the amount of the annual salary of the employee hired by the Appellant as their commission / fees for providing services. The assessee had submitted party wise details of expenses incurred and payment made along with copies of invoices of the service providers during the course of the assessment proceedings and the r....
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....uch expenses. 6.4. The assessee also invited attention of the ld. PCIT to the fact that provisions of section 35D of the Act covers within its ambit only a specific nature of expenses incurred for certain specific purposes and that the expenses incurred by it did not satisfy any of those conditions. The assessee in its submissions before the ld. PCIT highlighted the fact that both section 35D and section 37(1) of the Act are enabling provisions and not mutually exclusive and that the deduction of expenses which are otherwise allowable under the provisions of section 37(1) of the Act, cannot be denied pursuant to section 35D of the Act. Additionally, the assessee also relied on the CBDT Circular No. 56 dated 19.03.1971, which clarifies that section 35D does not override or supersede any other provisions of the Act, or restrict deductions allowable under other provisions, including section 37(1) and on the contrary, the provisions of section 37D provides relief for expenses which are otherwise not deductible under section 37(1) of the Act. Further, the assessee in its response to the show cause notice issued by the ld. PCIT placed reliance on various judicial precedents wherein....
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.... basis of a presumption that the expenditure provided long-term benefits to the taxpayer. In view of the above facts and submissions, it is respectfully submitted that all relevant details and supporting documents were duly furnished during the course of assessment proceedings as well as the revisionary proceedings. The expenditure incurred was wholly and exclusively for the purpose of business and is therefore allowable under the provisions of section 37(1) of the Act. The disallowance made by the ld. PCIT is unwarranted and not supported by the applicable law. 7. The ld. DR has DR argued that the AO did not raise any specific querry examining the issue in the light of the provisions of section 35D of the Act. The company was incorporated on 18.10.2009 and the instant year is the second year of operation. 8. We have carefully considered all the relevant facts of the case, perused the records and have also gone through the relevant provisions of the Act. The sole question arises for determination in this case is whether impugned expenses incurred by the assessee are revenue expenses or could be amortized u/s 35D of the Act and whether provisions of section 263 of the Act coul....
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.... incurred before commencement of the business or after commencement of the business but where there is an extension of undertaking or setting up of a new unit. Both these conditions are not fulfilled here. So, we are of the considered view that the expenses cannot be amortized by invoking the provisions contained u/s 35D of the Act. The AO has taken a reasonable view by allowing the deduction claimed u/s 37(1) of the Act to which the ld. PCIT does not concur with as he holds a different view of the impugned issues. In this connection, reference is made to the decision of Hon'ble Bombay High Court in the case of CIT vs. Gabrial India Ltd (1993) 203 ITR 108 (Bom) where the hon'ble Bombay High Court held as under :- "An order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because according to him the order should have been written more elaborately. This section does not visualise a case of substitution of judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erro....
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.... Officer is erroneous and prejudicial to the revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no occasion to exercise powers of revision can arise. Nor can revisional power be exercised for directing a fuller inquiry to find out if the view taken is erroneous, when a view has already been taken after inquiry. This power of revision can be exercised only where no inquiry as required under the law is done. It is not open to enquire in cases of inadequate inquiry. [Para 6] In this case, during the assessment proceedings, the Assessing Officer issued a query memos to the assessee, calling upon him to justify the genuineness of the gifts. The assessee responded to the same by giving evidence of the communications received from his father and his sister i.e. the donors of the gifts along with the statement of their bank accounts. On perusal, the Assessing Officer was satisfied about the identities of the donors, the source from where these funds have come-and also the creditworthiness/ capacity of the donor. Once the Assessing Officer was satisfied with regard to the same, there was no further requirement on the part of the ....