Zensar Technologies Ltd. Vs PCIT (ITAT Mumbai)
Sec 263 Quashed – AO Made Detailed Enquiry on U/s 10AA & R&D Allocation -Revision Based on Audit Objection Held Invalid – ITAT Mumbai
The PCIT invoked revisionary powers u/s 263 alleging lack of enquiry by the AO regarding allocation of R&D expenses while allowing deduction u/s 10AA to SEZ units. ITAT noted that during original assessment, the AO issued multiple notices u/s 142(1) specifically examining R&D expenses and deduction claim, and the assessee furnished detailed replies with supporting evidence. Hence, allegation of “no enquiry” was factually incorrect.
ITAT held that merely because PCIT disagreed with AO’s view on allocation of R&D expenses cannot render the assessment order erroneous or prejudicial to revenue. Revision cannot be exercised to substitute the PCIT’s opinion when the AO has taken a plausible view after enquiry.
Further, Tribunal observed that initiation of revision was influenced by audit objection, indicating lack of independent application of mind by PCIT, which vitiated jurisdiction u/s 263. Accordingly, the 263 order was quashed and the original assessment restored. Appeal allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
In the present appeal, the assessee assails the validity of the order dated 24.03.2025 passed by learned Principal Commissioner of Income Tax (PCIT), Mumbai under section (u/s.) 263 of the Income Tax Act, 1961 (in short the ‘Act’) pertaining to Assessment Year (A.Y.) 2020-21.
