2026 (2) TMI 1356

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....ional jurisdiction u/s 263 of the Income Tax Act. 2. The brief facts of the case are that the assessee had filed its return of income for A.Y.2020-21 on 28.02.2021 declaring Nil income. The case of the assessee was selected for complete scrutiny under CASS. In the course of assessment, addition of Rs. 6,32,03,957/- was made on account of disallowance of interest u/s 36(1)(III) and disallowance of carbon credit. After allowing set off of current income loss, the assessment was completed u/s 143(3) on 13.09.2022 at Nil income. Subsequently, the case record was called for and examined by the Ld. PCIT. He found that the assessee had claimed deduction from "Exceptional Item" of Rs. 57,02,31,000/- during the year, the allowability of which was....

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.... during the course of hearing of the appeal." 4. Shri S. N. Soparkar, Ld. Sr. Advocate, appearing for the assessee explained that the assessee had claimed deduction of Rs. 57.02 crore in the Profit and Loss account in respect of "Exceptional Item" which was duly explained in note no.46 of the audited account. He explained that this claim was on account of swap gain/loss, bank charge syndicate fee and break cost which was duly explained in the reply filed before the Ld. PCIT in response to the notice u/s 263 of the Act. According to Ld. Sr. Counsel, the expenses claimed by the assessee were all allowable and, therefore, the order of the AO was not prejudicial to the interest of revenue. Ld. Sr. Counsel fairly conceded that the claim of "E....

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....f other borrowing cost related to earlier borrowings and cost of premature termination of derivative contracts. The same are treated as exceptional items in the financial statements." 7. It is thus found that the claim for deduction of "Exceptional Items" was in respect of onetime expense on account of refinance of its earlier borrowings and included prepayment charges, unamortized portion of other borrowing cost, premature termination of derivative contracts, etc. Considering the exceptional nature of the claim and the onetime expenditure, the AO should have examined the claim of the assessee by making appropriate queries in this regard. Since this aspect was not examined by the AO in the course of assessment, the Ld. PCIT had rightly h....