Revision Under Section 263 Invalid Because AO’s Order Was Not Prejudicial to Revenue

Adani Green Technology Limited Vs PCIT (ITAT Ahmedabad)

The appeal was filed by the assessee against the order of the Principal Commissioner of Income Tax (PCIT), Ahmedabad-1, passed under section 263 of the Income-tax Act, 1961 for Assessment Year 2018–19. The dispute concerned the PCIT’s action in revising the assessment order passed by the Assessing Officer (AO) under section 143(3) read with sections 143(3A) and 143(3B) of the Act.

During review of the assessment records, the PCIT observed that the assessee had made substantial investments in shares and securities that could potentially generate exempt income under section 10(34) of the Act. The PCIT also noted that the assessee had claimed total expenses, including financial costs of ₹20,36,767, in its profit and loss account. However, the assessee had not made any disallowance under section 14A read with Rule 8D of the Income-tax Rules. According to the PCIT, CBDT Circular No. 05/2014 dated 11 February 2014 required disallowance under section 14A even in cases where no exempt income had been earned. On this basis, the PCIT concluded that the AO had passed the assessment order without conducting necessary verification or inquiries. Accordingly, the PCIT set aside the assessment order and directed the AO to conduct fresh assessment after proper inquiry.