Rochem Separation Systems India Private Limited Vs PCIT (ITAT Mumbai)
ITAT Mumbai held that exercising revisionary jurisdiction under section 263 of the Income Tax Act by PCIT on the basis of factual misconception is liable to be quashed. Accordingly, appeal allowed and order u/s. 263 quashed.
Facts- The assessee, a resident corporate entity, is stated to be engaged in the business of manufacturing and trading of Water treatment systems, Water pollution control equipment and Bio filters and resource recovery systems. A.O. completed the assessment u/s. 143(3) of the Act vide order dated 15.04.2021, determining the total income at Rs.3,07,74,710/-, after making couple of statutory disallowances u/s. 43B and 36(1)(va) of the Act.
After completion of assessment as aforesaid, PCIT, in exercise of powers u/s. 263 of the Act, called for and examined the assessment records of the assessee. While doing so, he was of the view that the assessment order is erroneous and prejudicial to the interest of the Revenue due to the following reasons. PCIT observed that as per records, the assessee had issued shares to CBTPL and net liabilities over assets were considered as ‘Goodwill’, which amounted to Rs.15,48,23,374/-. The goodwill so generated was capitalized and depreciation @ 25% amounting to Rs.3,87,05,844/- was claimed by the assessee. However, ld. PCIT observed, as per record of CBTPL, trade payable of Rs.80,31,286/- and trade receivable of Rs.9,46,42,705 (net trade receivable being Rs.8,66,11,419/-), also pertains to the undertaking taken over by the assessee. He was of the view, non-consideration of trade receivable has resulted in excess claim of ‘Goodwill’ to that extent resulting in excess allowance of depreciation to the tune of Rs.2,16,52,855/-. Thus, PCIT passed the impugned order, setting aside the assessment order, with a direction to make a thorough enquiry on the issue of claim of deprecation on Goodwill and reassess the income.
