Viacom 18 Media Pvt. Ltd Vs PCIT (ITAT Mumbai)
The appeal before the Mumbai Bench of the Income Tax Appellate Tribunal arose from a revisionary order passed under section 263 of the Income Tax Act, 1961. The Principal Commissioner of Income Tax invoked revisionary jurisdiction on the ground that the assessment order was erroneous and prejudicial to the interests of the Revenue. The assessment year involved was 2019–20.
The assessee had filed its return of income declaring a loss. The return was selected for scrutiny, and statutory notices were issued. During assessment proceedings, the Assessing Officer examined various issues, including depreciation claimed on goodwill and intangible assets and the determination of carry-forward of business losses. A transfer pricing reference was also made. The faceless assessment unit ultimately passed an order under section 143(3) read with section 144B, determining total loss and allowing depreciation on goodwill as well as computing the losses eligible for carry forward.
Subsequently, the Principal Commissioner called for assessment records and formed a view that the assessment order was erroneous and prejudicial to the interests of the Revenue on two grounds. First, depreciation on goodwill arising from amalgamation was allegedly wrongly allowed, despite similar claims having been disallowed in earlier years. Second, the carry-forward of business losses was stated to be incorrectly determined. A show-cause notice under section 263 was issued, calling upon the assessee to explain why the assessment order should not be revised.
In response, the assessee submitted that the assessment order was passed after detailed enquiries, verification of documentary evidence, and due application of mind. It was contended that both issues—depreciation on goodwill and computation of carry-forward losses—were specifically examined during assessment proceedings. The assessee further argued that depreciation on goodwill was allowable under the law applicable for the relevant assessment year and was supported by judicial precedents. It was also contended that the amendment disallowing depreciation on goodwill was prospective and not applicable to the year under consideration.
The Principal Commissioner, however, was not satisfied with the explanation and passed a revisionary order setting aside the assessment with directions to the Assessing Officer to pass a fresh order after conducting further enquiries.
Before the Tribunal, the assessee challenged the assumption of jurisdiction under section 263 as well as the merits of the revision. The Tribunal first examined whether the twin conditions for invoking section 263—namely, that the order is erroneous and prejudicial to the interests of the Revenue—were satisfied. The Tribunal also examined the applicability of Explanation 2 to section 263, which deems an order erroneous if it is passed without making enquiries or verification which should have been made.
On the issue of depreciation on goodwill, the Tribunal noted that the Assessing Officer had issued multiple notices under sections 143(2) and 142(1), raising detailed queries on depreciation. The assessee had furnished comprehensive replies, including break-up of depreciation, explanations regarding goodwill arising from acquisition and amalgamation, copies of High Court orders approving amalgamation, valuation reports, and judicial precedents supporting allowability of depreciation. The Tribunal observed that the Assessing Officer had also issued a specific show-cause notice asking for justification of depreciation on goodwill and had accepted the claim after examining the replies and materials on record. The assessment order contained express findings on the issue.
Regarding carry-forward of losses, the Tribunal noted that the Assessing Officer had examined schedules of losses, verified adjustments made in earlier years, and computed the losses eligible for carry forward after verification. The Tribunal found that the computation was made after due scrutiny of records and explanations furnished by the assessee.
The Tribunal held that this was not a case of lack of enquiry or absence of verification. It emphasized that where the Assessing Officer has conducted enquiries, examined evidence, and taken a plausible view, the order cannot be revised merely because the Principal Commissioner holds a different opinion. The Tribunal observed that section 263 does not permit substitution of the Commissioner’s judgment for that of the Assessing Officer when the latter has taken a legally sustainable view after due enquiry.
The Tribunal further noted that the Principal Commissioner had not demonstrated how the assessment order was erroneous in law or fact, nor how it caused prejudice to the Revenue beyond a mere disagreement with the conclusions reached by the Assessing Officer.
Accordingly, the Tribunal held that the invocation of section 263 was not justified. The revisionary order was set aside, and the original assessment order was restored. The appeal of the assessee was allowed.
