Wardha Solar (Maharashtra) Private Limited Vs PCIT (ITAT Ahmedabad)
Section 263 Upheld for Lack of Enquiry on Exceptional Items; PCIT’s Scope Restricted: ITAT Ahmedabad
The Ahmedabad Bench of the ITAT partly upheld the revisionary order under section 263 passed by the PCIT for AY 2020-21, holding that the assessment order was erroneous and prejudicial to the interests of revenue due to complete lack of enquiry by the Assessing Officer into a substantial claim of ₹57.02 crore booked as “Exceptional Items.”
The Tribunal noted that the assessee had, for the first time, claimed deduction of a large one-time expenditure arising from refinancing of borrowings (prepayment charges, unamortised borrowing costs, termination of derivative contracts), clearly disclosed in Note 46 of the audited accounts. Since the AO had not examined or verified this claim during scrutiny, the PCIT was justified in invoking Explanation 2 to section 263, which deems an order erroneous where required enquiries are not made.
However, the ITAT found merit in the assessee’s grievance that the PCIT had travelled beyond the show-cause notice by directing the AO to also examine the allowability of losses, an issue not covered in the section 263 notice. Such expansion of scope was held to be unsustainable in law.
Accordingly, the Tribunal modified the PCIT’s directions, restricting the fresh assessment only to verification of (i) the ₹57.02 crore exceptional items and (ii) the minor discrepancy in sundry balances written off, and barred any roving enquiry on unrelated losses. The appeal was dismissed with modifications, granting partial relief to the assessee.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
