Bajaj Finance Limited Vs PCIT 3 (ITAT Pune)
Section 263 Cannot Be Invoked Where AO’s View Is Plausible: ITAT Pune Quashes PCIT Revision in Bajaj Finance Case
The Pune Bench of the ITAT quashed the revisionary order passed u/s 263 against Bajaj Finance Ltd. for AY 2019-20, holding that the assessment order was neither erroneous nor prejudicial to the interests of the Revenue.
The PCIT had invoked section 263 on two grounds:
(i) alleged excess allowance of deduction u/s 36(1)(viia) in respect of provision for bad and doubtful debts (including standard assets), and
(ii) alleged lack of verification of related-party payments u/s 40A(2)(b).
The Tribunal noted that, although the AO had not raised a specific query on the allowability of provision for standard assets in the impugned year, the issue was squarely covered in favour of the assessee by multiple judicial precedents, including decisions holding that provision for standard assets—made in accordance with RBI directions—forms part of “bad and doubtful debts” eligible for deduction u/s 36(1)(viia). Importantly, the Tribunal also relied on its own decision in the assessee’s case for AY 2018-19, where identical revision proceedings had been quashed.
Applying the settled principle that where two views are possible and the AO adopts one permissible view, section 263 cannot be invoked, the Tribunal held that absence of a specific query does not ipso facto render the assessment order erroneous, particularly when the legal position is settled in favour of the assessee.
As regards the issue of related-party payments u/s 40A(2)(b), the Tribunal noted that in the consequential assessment order passed pursuant to section 263, no addition was ultimately made, thereby nullifying the PCIT’s assumption of prejudice on that count as well.
Accordingly, the ITAT set aside the order passed u/s 263 and allowed the assessee’s appeal in full.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 30.01.2024 passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Ld. PCIT, Pune-3 relating to assessment year 2019-20.
