GMM Pfaudler Ltd. Vs. PCIT (ITAT Ahmedabad)
PCIT invoked section 263, holding that the assessment order passed u/s 143(3) r.w.s. 144B was erroneous & prejudicial to Revenue, since AO had not made proper enquiry on: (1) Depreciation on goodwill (₹1.48 crore) acquired on slump sale, (2) Provision for warranty (₹48.50 lakh), & (3) Deduction u/s 80G (₹62.17 lakh) on CSR donations.
PCIT held that goodwill was ineligible for depreciation after amendment to section 32, warranty provision was not tested per Rotork Controls (SC), & CSR donations could not qualify u/s 80G in view of Explanation 2 to section 37(1).
Before ITAT, Assessee demonstrated that AO had issued detailed notices u/s 142(1), raised specific queries on all three issues, obtained replies with supporting evidence, & accepted the claims after due verification. It relied on Smifs Securities Ltd. (SC), Aculife Healthcare (Guj HC), Rotork Controls (SC), and multiple ITAT rulings allowing CSR-linked 80G claims.
Tribunal held that once AO adopts a plausible view after enquiry, the order cannot be revised merely because Pr.CIT prefers another opinion. Both conditions under s.263—error & prejudice—were absent. Accordingly, the 263 order was quashed and assessment restored.
Held: Where AO conducts due enquiry & adopts one of possible legal views on goodwill depreciation, warranty provision, & CSR-linked 80G deduction, revision u/s 263 is invalid.
