Madurai Power –Corporation Pvt. Ltd. Vs PCIT (ITAT Chennai)
Conclusion: AO while passing the re-assessment order u/s.147 did apply his mind to the issue and had accepted the claim of the assessee being satisfied with the explanation given by it during re-assessment proceedings. In such a scenario, the action of the AO couldn’t be held to be a view taken without enquiry or without application of mind. PCIT couldn’t substitute his views with that of the AO, if the AO’s view on the issue was a plausible view.
Held: AO had raised queries on two issues i.e. (i) assessee claimed only 15% depreciation on the Higher Efficiency Boilers (being energy saving device), when it was eligible for depreciation allowance of 80% on the Written Down Value (WDV). AO alleged that assessee was claiming less depreciation on the Higher Efficiency Boilers in order to claim higher/excess deduction u/s.80IA and asked assessee as to why the excess deduction claimed be disallowed. Pursuant to which, assessee replied wherein assessee brought to the notice of AO that Boilers in question were generating electricity and couldn’t be termed as Energy Saving Devises which were specifically prescribed under clause (ix) of item (8) of Schedule-III and that energy saving devices lowered consumption of energy and saving of energy couldn’t be equal to generation of electricity. And AO accepted the contention of assessee and dropped this issue. And on the second issue which was raised in the reasons recorded for reopening, AO had drawn adverse inference against the assessee in respect of the depreciation claimed @5% on building as against eligible depreciation at 10% for the building acquired from Standard Chartered Bank on 17.04.2013 at Rs.11,88,67,800/-; and thus, the AO made an addition of Rs.59,43,390/- (short claim of depreciation) which resulted in excess claim of deduction u/s.80IA by order dated 29.03.2022 u/s.147 r.w.s.144B. PCIT interfered with the action of AO under section 263 and issued notice to assessee raising the same issue of depreciation on High-efficiency Boilers. Despite assessee’s reply, PCIT held that the order of AO was erroneous and prejudicial to the interest of the revenue. PCIT also directed AO to pass a fresh order. Aggrieved by the order, assessee filed an appeal before ITAT. It was held that AO while passing the re-assessment order u/s.147 did apply his mind to the issue and had accepted the claim of the assessee being satisfied with the explanation given by it during re-assessment proceedings. In such a scenario, the action of the AO couldn’t be held to be a view taken without enquiry or without application of mind. PCIT couldn’t have interfered with the action of the AO without giving a finding that the view of the AO on the issue [accepting the claim made by assessee on less depreciation on boilers] as unsustainable in law. It was a well settled position of law, PCIT couldn’t substitute his views with that of the AO, if the AO’s view on the issue was a plausible view. Since there was no finding of PCIT that the action of the AO accepting the claim made by assessee on the fault found by PCIT, were unsustainable in law, PCIT erred in exercising his jurisdiction u/s.263 without fulfilling the conditions precedent for doing so. Therefore, the impugned action of u/s.263 was quashed.
