M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED,TELANGANA V. PCIT 2, JAIPUR

ITA 248/JPR/2023

AI Insights

The case involves M/s GVK Jaipur Expressway Pvt. Ltd., which appealed against the order of the Principal Commissioner of Income Tax, Jaipur, under section 263 of the Income Tax Act, 1961. The PCIT had set aside the assessment order passed by the Assessing Officer, claiming it was erroneous and prejudicial to the interest of the revenue. The Tribunal examined various issues including the disallowance of interest, periodic overlay expenses, and managerial commission, and found that these issues had been consistently decided in favor of the assessee in previous years. The Tribunal noted that the Assessing Officer had conducted necessary inquiries and the assessment order was not prejudicial to the interest of the revenue, leading to the decision to allow the appeal and set aside the revision order under section 263.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717004 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Appeal Filed On: 21-04-2023
• Other Referred Cases: Malabar Industrial Co. Ltd. Vs. CIT, CIT v. Max India Ltd., CIT Vs. M/s Deepak Real Estate Developers P. Ltd., CIT Vs. Green World Corporation, M/s Hariom Stones Vs. PCIT, Shri Narayan Tatu Rane vs ITO, Commissioner of Income Tax vs Ganpat Ram Bishnoi, Jhunjhunu Kraya Vikraya Sahkari Samiti Ltd. vs PCIT, Torrent Pharmaceuticals Ltd. vs DCIT, Indus Best Hospitality & Realtors Pvt. Ltd vs. PCIT, Amira Pure Foods Pvt. Ltd vs. Pr CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMAR
• Assessee Lawyers: TARUN MITTAL
• Keywords: Set aside; Opportunity of being heard; Revenue expenditure; Reassessment proceedings; Question of law; Depreciation; Rule of consistency; Tax effect; TDS; Audit objection; Deemed to accrue or arise in india; Revision of order; Tangible material; Prejudicial to interest
• Section: 143(3); 263; 15; 14A; 115JB; 80G

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 248/JPR/2023 fu/kZkj.k o\"kZ@Assessment Years : 2018-19 M/s GVK Jaipur Expressway Pvt. Ltd. 156-159 Paigah House, Sardar Patel Road, Paradise, Secunderabad, Telangana. cuke Vs. The PCIT-2, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCG5541J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Tarun Mittal, C.A. jktLo dh vksj ls@ Revenue by : Shri Arvind Kumar, CIT-DR a lquokbZ dh rkjh[k@ Date of Hearing : 30/06/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 19/08/2025 vkns'k@ ORDER PER DR. S. SEETHALAKSHMI, J.M. By way of present appeal, the assessee challenges the finding recorded in the order of the ld. Principal Commissioner of Income Tax, Jaipur -2 [for short “ld. PCIT”] dated 30.03.2023 passed u/s 263 of I.T. Act, 1961 for A.Y. 2018-19. 2. The assessee challenges the order of ld. PCIT on the following grounds:- Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 2 “1.On the facts and in the circumstances of the case and in law, ld. PCIT has erred in passing order u/s 263 dated 30.03.2023, by holding that assessment order passed u/s 143(3) of the Income Tax Act, 1961 dated 26.03.2021 is erroneous in so far as it is prejudicial to the interest of revenue and thus setting aside the assessment order, arbitrarily. 1.1 That, ld. PCIT has further erred in holding that ld.AO has passed the order in routine and perfunctory manner and without examining the issues mentioned in Revision order whereas the proceedings are based on audit objections. Appellant prays that all the necessary records were duly examined by ld.AO and assessment order was passed after due application of mind, thus the action of ld. CIT (admin) in holding the order as erroneous and prejudicial to the interest of revenue deserves to be set-aside. 2 That, ld. PCIT has erred in holding the order passed by ld.AO as erroneous insofar as disallowance of interest of Rs.89,42,24,331/- was made u/s 36(1)(iii) instead of under section 14A of the Income Tax Act. Appellant prays that disallowance of interest was made by ld.AO, after considering all the facts as well as submission made by assessee and in light of decision of Hon’ble ITAT passed in the case of assessee itself, therefore assessment order so passed by ld.AO after due application of mind, deserves to be upheld without revision. In any case, the order of AO is not prejudicial to the interest of revenue on this issue as amount has already been disallowed. 2.1 That the ld. CIT (Admin) has further erred in ignoring the fact that ld. FAO, apart from making disallowance, has simultaneously made adjustment of the impugned amount in book profit computed u/s 115 JB. Thus the assessment order so passed by FAO is neither erroneous nor in any way prejudicial to the interest of revenue on this issue. 3. That. Ld. PCIT has erred in holding the order passed by ld.AO by observing that addition on account of periodic overlay expenses was made at Rs.30,35,81,900/- as against Rs.35,55,31,591/- and that no addition was made on this account u/s 115JB of the Income Tax Act. Appellant prays that periodic overlay expenses were ascertained liability as finally held by Hon’ble ITAT and therefore no disallowance was required to be made by ld. AO and further no adjustment was required to be made u/s 115JB, and order passed by ld.AO is neither erroneous nor prejudicial to the interest of the revenue and deserves to be upheld. 3.1 That, ld. PCIT has further erred in issuing directions for revision of assessment order with respect to allowability of periodic overlay expenses while computing income as per provisions of section 115JB (MAT), by holding the same as unascertained liability. Appellant prays that periodic overlay is mandatory as per maintenance agreement and no adjustment was made in book profit computed u/s 115JB by the department in all preceding assessment years, completed u/s 143(3) where such disallowance was made in assessment order, therefore directions for making adjustment in book profit u/s Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 3 115 JB are contrary to the principle of consistency and no adjustment is called for on this count. 3.2 That the ld PCIT (Admin) has further erred in proposing to increase the disallowance from 30.35 crores to 35.55 crores by ignoring the fact that such disallowance would be added to business profit which is eligible for deduction u/s 80 IA, thus there would be no increase in total income and no effect on the tax payable, therefore the assessment order is neither erroneous nor prejudicial to the interest of revenue. 4. On the facts and in the circumstances of the case ld.PCIT (Admin) has grossly erred is doubting the amount of amortization of expresses on construction of toll Road by ignoring the fact that the same were claimed and allowed in preceding assessment years under similar circumstance and no new event or fact has been brought are record. Thus the assessment order is neither erroneous are prejudicial to the interest of revenue on this account. 4.1 That the ld PCIT (Admin) has further erred in doubting about the amount of subsidy/grant received from NHAI which has already been examined and allowed by department in AY 2006-07 where for the first time, the issue of total cost and allowbility of depreciation was examined u/s 143(3), thus the action of ld PCIT (Admin) in raising doubts to the settled issue is an attempt to unsettle the past history and such direction deserves to be struck down. 5. On the facts and in the circumstances of the case ld. PCIT (Admin) has grossly erred in holding the assessment order as erroneous as well as prejudicial to the interest of revenue on the issue of deviation which was already added back to the total income in preceding year and was reverted in the books in the year under consideration and reduced from total income to avoid double taxation. Ld. PCIT (Admin) has failed to appreciate the same thus the direction of ld. PCIT for revision of order on this issue deserves to the quashed. 6. On the facts and in the circumstances of the case ld. PCIT (Admin) has grossly erred in holding the assessment order as erroneous and prejudicial to the interest revenue on the issue of TDS on managerial commission where TDS is payable at the time of payment and not at the time of making provision, therefore the order of PCIT (Admin) directing the AO in this regard deserves to be held bad in law and consequent proceeding u/s 263 be quashed on this issue. In any case, the present assessment order cannot be said to be prejudicial to the interest of revenue on this issue nor it is erroneous. 7. On the facts and in the circumstance of the case ld. PCIT (Admin) has grossly erred in holding the assessment order as erroneous and prejudicial to the interest of revenue by ignoring the fact that the issues raised are either already considered by ld. FAO or the issue raised would not have any tax implication due to allowbility of dedication u/s 80 IA, thus the assessment order is not prejudicial to the interest of revenue and therefore the revision order passed u/s 263 does not fulfill the twin conditions as enumerated in Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 4 section 263 and according the revision order so passed deserves to be set aside. 8. That the appellant requests to reserve its right to add, amend or alter any of the ground of appeal either before or at the time of actual hearing.” 3. Brief facts related to the case are that during the year under consideration return of income was e-filed by the assessee declaring total income at Rs. 14,16,57,000/- after claiming deduction u/s 80-IA at Rs. 124,64,75,516/-. Simultaneously assessee has shown book profit as per provision of section 115JB at Rs. 1,29,24,56,130/- and paid MAT on it. The case was selected for scrutiny and assessment was completed by FAO [NeAC] u/s 143(3) determining total income at Rs. 29,30,91,526/- after allowing enhanced deduction u/s 80IA amounting to Rs. 2,44,59,66,041/- on account of increased in the profit of eligible business due to additions / disallowance made by the FAO in the order, under normal provisions of the Act and book profit was determined at Rs. 218,95,11,959/- u/s 115JB of the I.T. Act, 1961 vide order dated 26.03.2021. Against such order appeal was e-filed by the assessee before NFAC on 22.04.2021, which is pending. As per the assessee detailed submissions have been filed by it and appeal order of ld. CIT(A) is awaited. Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 5 4. Meanwhile, after completion of assessment proceedings ld. PCIT, Jaipur-2 issued show cause notice on 15.02.2023 proposing to revise the assessment completed u/s 143(3). After going through the records, ld. CIT passed order u/s 263 dated 30.03.2023 whereby the order passed by ld. FAO u/s 143(3) was held to be erroneous on certain issues [as mentioned herein below] and has been set aside with the direction to revise the assessment order. 5. The facts related to the activities of the assessee are that the assessee is a private limited company engaged in the construction, operations and maintenance of highways in terms of Concession Agreement dated 08.05.2002 executed between National Highway Authority of India (for short “NHAI”) and the company, the assessee company was given the work of widening of two lane road to six lane road of 90.385 Km. stretch on NH-8 between Jaipur and Kishangarh on Build, Operate, Transfer (BOT) basis. As per this agreement, the company was to build and operate the highway and transfer the same after a period of 18 years in the same condition as on initial opening of highway. The work of widening of highway was completed by the company and road was opened for public on 09.04.2005. As mentioned above, on completion of concession period, the company is to deliver / handover the buildings, superstructures, rest rooms etc. along with road, Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 6 bridges, culverts, fencing, walls etc. as existed on the date of commencement of concession period in original condition to the NHAI. It is further agreed that no consideration would be receivable by the Company at the time of handing over of road to NHAI. Ownership over road and superstructures etc. built by the Company as owned and built by it, would remain in its exclusive possession for the contract period. During construction and operational period, continual spot inspections are being carried out by the independent consultants appointed by NHAI and according to their instructions, maintenance work was carried out. Since the date of construction till the handing over of toll road, the Company is maintaining the toll road on toll collection basis. 6. In grounds No. 1 & 1.1, the assessee has challenged the action of ld. PCIT in holding the order passed by AO as erroneous and also prejudicial to the interest of revenue and thereby setting aside the same. In grounds Nos. 2 to 6, the assessee has challenged the finding and direction of ld. PCIT on various issues mentioned therein. In ground No. 7, the assessee has submitted that ld. PCIT has erred in holding the assessment order as erroneous and prejudicial to the interest of revenue by ignoring the fact that issues raised are either already considered by FAO or the issue raised would not have any tax implication due to allowability of deduction u/s 80IA and thus assessment order is not Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 7 prejudicial to the interest of revenue and the order passed by FAO did not fulfill twin conditions prescribed u/s 263. 7. It is seen by us that ground No. 1 is broadly legal ground. The ground No. 7 will apply to broadly various specific issues and will be dealt with the specific issues for which the assessee has taken other grounds namely ground No. 2 to 6. As ground No. 2 to 6 are on specific issues, it will be appropriate to discuss and decide those issues specifically, coupled with the legal position related to action u/s 263. 8. The assessee has furnished following written submission in respect of common issues related to action u/s 263 in the initial part of its submission. Moreover the assessee has also furnished various case laws towards the end of its submission. These submissions being general in nature and effecting the various specific decisions, same are mentioned below:- “In this regard, at the outset it is submitted that assessment order in the case of assessee was passed after detailed examination and complete scrutiny of all the factual aspects on which directions have been issued by ld. PCIT. It appears that ld. PCIT issued show cause notice u/s 263 on the basis of certain audit objections. It is submitted that, assessee duly explained all the facts and submitted necessary documentary evidences on the issues raised in show cause notice, however ld. PCIT brushed them aside and proceeded to pass order with observations that “the order under Section 143 (3) of the IT Act dated 26.03.2021 for AY 2018-19 passed by the Assessing Officer is erroneous in so far as it prejudicial to the interest of revenue as the said order has been passed by the Assessing Officer in a routine and perfunctory manner without examining the issues Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 8 as discussed above. The order of the Assessing Officer is therefore liable to revision under the clause (a),(b) & (c) of Explanation (2) to section 263 of the Income Tax Act. Hence, the assessment order is set aside as discussed above and the AO is directed to examine the issues and pass suitable order after according opportunity of being heard to the assessee.” Basically, vide above order, ld. PCIT has issued directions for revision of assessment order on following issues: 1. Disallowance of interest of Rs.89,42,24,331/- u/s 36(1)(iii) instead of u/s 14A; 2. No addition on account of Finance charges of Rs.5,19,49,691/- by misunderstanding the same as part of periodic overlay expenses; and not making adjustment on account of addition made for Periodic Overlay expenses while computing book profit; 3. Amortisation of expenses on construction of toll road; 4. Donation already added back in earlier years and reverted in the books in the year under consideration; 5. TDS on managerial commission; In this regard, reliance is placed on: 243 ITR 83 (SC) Malabar Industrial Co. Ltd. Vs. CIT “A bare reading of section 263 of the Income Tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suomotu under it, is that the order of the Income Tax Officer is erroneous is so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent – if the order of the Income Tax Officer is erroneous but is not prejudicial to th Revenue or if it is not erroneous but is prejudicial to the Revenue – recourse cannot be had to section 263(1) of the Act.” 295 ITR 282 (SC) CIT v. Max India Ltd. The phrase “prejudicial to the interests of the Revenue” in section 263 of the Income-tax Act, 1961, has to be read in conjunction with the expression “erroneous” order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 9 the Revenue, unless the view taken by the Assessing Officer is unsustainable in law. Hon’ble Jurisdictional High Court (2014) 51 TW (IV) 186 (Raj HC) CIT Vs. M/s Deepak Real Estate Developers P. Ltd. It is no longer res-integra that the revisional jurisdiction available to a Commissioner u/s 263 of the Act, is essentially circumscribed by the determinant that the order of the Assessing Officer is erroneous so much so that it is prejudicial to the interest of the revenue. This statutory enjoinment carves out an extremely constricted ambit of such discretionary jurisdiction. The word ‘considers’ applied in the statutory provision involved, signifies a genuine satisfaction of that authority that the order of the Assessing Officer is erroneous and that the interest of revenue is prejudicing thereby. Any exercise of the revisional jurisdiction, bereft of such satisfaction and / or finding that the order of the Assessing Officer is erroneous and that it is prejudicial to the interest of the revenue and that too, based on tangible materials on record, is impermissible rendering the resultant order void. 314 ITR 81 (SC) CIT Vs. Green World Corporation The Income-tax Officer, while passing an order of assessment performs a judicial function. A revision application lies before the Commissioner. It is trite that the jurisdiction exercised by the revisional authority pertains to his appellate jurisdiction. The jurisdiction under section 263 can be exercised only when both the following conditions are satisfied (i) the order of the Assessing Officer should be erroneous, and (ii) it should be prejudicial to the interests of the Revenue. These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible. M/s Hariom Stones Vs. PCIT in ITA No. 534/Jp/2016, wherein the hon’ble bench of Jaipur ITAT has held as under : “7. …Thus, these facts suggest that the Assessing Officer has taken into consideration the material before him and after due application of law and of facts and then reached at the conclusion to conclude the assessment U/s 143(3) of the Act. It was not a case where Assessing Officer completed the assessment without conducting necessary and proper enquiries. The issue raised by the ld. Pr.CIT has been considered by the Assessing Officer at the time of assessment and the assessee has submitted evidences and details in support of its claim made in P&L account. Therefore, in our considered view, the order passed by the Assessing Officer U/s 143(3) of the Act on 24/3/2014 was not an erroneous order, which could be said to be prejudicial to the interest of Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 10 the revenue. Considering the ratio laid down in various case laws relied upon, we set aside the order passed by the ld. Pr.CIT. Shri Narayan Tatu Rane vs ITO ITA No.2690 & 2691/Mum/16 dated 06.05.2016 wherein hon’ble Mumbai bench of ITAT has held as under : “20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying out enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant.” Commissioner of Income Tax vs Ganpat Ram Bishnoi [2006] 152 Taxman 242 (Raj.) Para 11 of the decision is reproduced as under 11. Undoubtedly, the jurisdiction under section 263 is wide and is meant to ensure that due revenue ought to reach the public treasury and if it does not reach on account of some mistake of law or fat committed by the Assessing officer, the CIT can cancel that order and require the concerned Assessing Officer to pass a fresh order in accordance with law after holding a detailed enquiry. But when enquiry in fact has been conducted and the Assessing Officer has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, but the same is apparent from the record of the proceedings, in the present case, without anything to say how and why the enquiry conducted by the Assessing officer was not in accordance with law, the invocation of jurisdiction by the CIT was unsustainable. As the exercise of jurisdiction by the CIT is founded on no material, it was liable to be set aside. Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 11 on the basis that more enquiry ought to have been conducted to find something. Jhunjhunu Kraya Vikraya Sahkari Samiti Ltd. vs PCIT ITA No. 150/JP/2022 (Jaipur ITAT) (Relevant extracts reproduced): 11. Clearly, therefore, as long as the action of the Assessing Officer cannot be said to be lacking bonafides, his action in accepting an explanation of the assessee cannot be faulted merely because it could have been lawful to make mere detailed inquiries or because he did not write specific reasons of accepting the explanation. As for learned PCIT's observations regarding accepting the explanation \"in a routine and perfunctory manner\", there is nothing to question the bonfides of the Assessing Officer or to elaborate as to what should have been 'appropriate' evidence. The fact remains that the specific issue mentioned and has been examined and the contention of the assessee accepted by the Assessing officer. Merely because the Assessing Officer did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263, and non-mentioning of these reasons do not render the assessment order \"erroneous and prejudicial to the interest of the revenue\". 12. In view of the above discussions, as also bearing in mind entirety of the case we vacate the impugned revision order. The assessee gets the relief accordingly. It is further submitted that, the Hon’ble Bombay High Court in the case of CIT Vs. Gabrial India Ltd., reported in 203 ITR 108, has held that, “CIT cannot revise order merely because he disagrees with the conclusion arrived at by the ITO”. Further, in the case of CIT Vs. Sunbeam Auto Ltd., reported in 227 CTR 133, the Hon’ble Delhi High Court drew a distinction between “Lack of inquiry” and “inadequate enquiry” and held that, ‘in the case of inadequate enquiry, provisions under section 263 cannot be invoked.’ Hon’ble Bombay High Court in Moil Ltd. Vs. CIT [81 Taxmann.com 420] observed that if a query is raised during the assessment proceedings which was responded to by the assessee, the mere fact that the query was not dealt with in the assessment order then it would not lead to a conclusion that no mind has been applied to it and the Assessing Officer is not expected to raise more queries, if he was satisfied about the admissibility of claim on the basis of the material and the details supplied. Reliance Industries Ltd. vs PCIT ITA No.578/Mum/2021 decision dated 01.09.2021 (Mumbai ITAT)(Relevant extracts) Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 12 5. In the present case, we find that the issue was duly considered by Ld. AO after considering assessee’s detailed submissions. The view could not be said to be unsustainable view and it was one of the possible view. Therefore, on the given facts and circumstances, we find that the subject matter of proposed revision was already deliberated upon by Ld. AO and a possible was taken in the matter. That view could not be said to be contrary to law, perverse or unsustainable in law, in any manner and the same would be a possible view keeping in mind the assessee’s submissions during reassessment proceedings. This being the case, the assessment order could not be subjected to revision u/s 263 and the action of Ld. Pr.CIT in invoking jurisdiction u/s 263 could not be sustained in the eyes of law. Similar is the view of the Tribunal in assessee’s group concern i.e. M/s Reliance Corporate IT Park Ltd. V/s Pr. CIT (ITA No.2748/Mum/2015 dated 08/03/2017) wherein it has been observed by the coordinate bench that when Ld. AO had applied his mind on the given facts and material on record and took a possible view then such an assessment order could not be cancelled u/s 263 unless it was shown that the view was not tenable either in law or on facts. 6. The Ld. CIT-DR has relied upon the decision of Hon’ble Allahabad High Court in the case of CIT V/s Bhagwan Dass (272 ITR 367) which is a case wherein it was held that the order was passed without application of mind by Ld. AO. The same is not the case here. The case law of Chennai Tribunal in Bharat Overseas Bank V/s CIT (152 TTJ 546) was a similar case wherein no inquiry was made by Ld.AO during the course of assessment proceedings. Therefore, these case laws are distinguishable on facts and not applicable to the facts of the present case. 7. Finally, on the facts and circumstances of the case, we quash the order passed by Ld. Pr. CIT in terms of settled legal position as enumerated by us in opening paragraphs. Ground nos. 1 to 3 stands allowed which render adjudication of ground no.4 merely academic in nature. 8. The appeal stands allowed in terms of our above order.” Torrent Pharmaceuticals Ltd. vs DCIT: Ahmedabad ITAT I.T.A. No. 164/Ahd/2018 9.5 We thus find merit in the plea of the assessee that the Revisional Commissioner is expected show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action as interpreted by the Revisional Commissioner in the light of the Explanation Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 13 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to Section 263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. The AO in the present case has not accepted the submissions of the assessee on various issues summarily but has shown appetite for inquiry and verifications. The AO has passed the order in great detail after making several allowances and disallowances on the issues involved impliedly after due application of mind. Therefore, the Explanation 2 to Section 263 of the Act do not, in our view, thwart the assessment process in the facts and the context of the case. Consequently, we find that the foundation for exercise of revisional jurisdiction is surely missing in the present case. Resultantly, the order of the Pr.CIT passed under s.263 of the Act is set aside and cancelled and the order of the AO under s.143(3) is restored.” Indus Best Hospitality & Realtors Pvt. Ltd vs. PCIT (ITAT Mumbai) ITA No. 3125/JP/2017 S. 263 Revision: Explanation 2 to s. 263 inserted by the FA 2015 (which confers power upon the CIT to revise assessments where inadequate inquiries have been conducted by the AO) is prospective in nature and does not apply even to a case where the CIT passed the order after Explanation 2 came on the statute. The CIT should show that the view taken by the AO is unsustainable in law. The action of the CIT in directing the AO to conduct enquiry in a particular manner is contrary to the law interpreted by the Delhi High Court in CIT v. Goetze (India) Ltd 361 ITR 505. If such course of action is permitted, the CIT can find fault with each and every assessment order without making any enquiry or verification in order to establish that the assessment order is not sustainable in law. Amira Pure Foods Pvt. Ltd vs. Pr CIT (ITAT Delhi) ITA No. 3205/Del/2017 S. 263 Revision: Explanation 2 to s. 263 inserted w.e.f. 01.06.2015 does not override the law as interpreted by the various High Courts whereby it is held that the CIT cannot treat the AO's order as being erroneous Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 14 and prejudicial to the interest of revenue without conducting an enquiry and recording a finding. If the Explanation is interpreted otherwise, the CIT will be empowered to find fault with each and every assessment order and also to force the AO to conduct enquiries in the manner preferred by the CIT, thus prejudicing the mind of the AO, This will lead to unending litigation and no finality in the legal proceedings which cannot be the intention of the legislature in inserting the Explanation. In view of above, it is submitted that since all the issues sought to be revised vide order u/s 263 are such, in respect of which, either ld. FAO has already conducted detailed enquiries or the same are eligible for deduction u/s 80IA and thus no prejudice is caused to the interest of Revenue. Also, the only issue related to addition of Provision for periodic overlay expenses, which has been directed to be made in book profits, it is submitted that the issue has already attained finality by the order passed by Hon’ble ITAT as stated in above paras. Thus, the order passed by ld.AO is neither erroneous nor prejudicial to the interest of the revenue and Revision order passed by ld. PCIT deserves to be set aside. 9. In support of the written submission, the ld. AR has furnished various documents as follows: S. No. PARTICULARS PAGE NOS. 1. Copy of Show cause notice dated 15.2.2023 issued during 263 proceedings 1-4 2. Copy of Reply dated 28.2.2023 filed in response to show cause notice dated 15.2.2023 5-18 (i) Copy of Acknowledgement of return and computation of Total Income 19-26 (iii) Copy of Tax Audit Report and audited Balance Sheet set for the year ending 31.03.2018 27-81 (iv) Copy of reply filed before ld.AO dated 18.2.2021 82-87 (v) Copy of show cause notice dated 15.3.2021 having DIN ITBA/AST/F/143(3)(SCN)2020-21/1031491543(1) 88-94 (vi) Copy of Reply dated 18.3.2021 filed in response to show cause notice dated 15.3.2021 95-111 (vii) Copy of Reconciliation Statement of transactions related to Legal and Professional charges 112 (viii) Copy of Reconciliation Statement showing Sale of Scarp and TCS 113 Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 15 S. No. PARTICULARS PAGE NOS. transactions (ix) Copy of ledger of TDS on rent showing transactions covered u/s 194I of the Income Tax Act 114 (x) Copy of Order of Hon’ble ITAT , Jaipur bench for A.Y. 2010-11 bearing appeal no.761/JP/2014 and 14/JP/2015 115-131 (xi) Copy of order passed by Hon’ble Rajasthan High Court in assessee’s own case. 132-206 (xii) Copy of order of Hon’ble Supreme Court in SLP having Diary no.(S) 27373/2018 207 (xiii) Copy of Hon’ble ITAT order for A.Y. 2010-11 to A.Y. 2015-16 in assessee’s own case 208-303 (xiv) Copy of Schedule “L” of Concession agreement containing clause No. 4.5.1 related to Periodic Overlay (Pavement Riding Quality) of Toll Road 304-315 (xv) Copy of Form 35 filed before NFAC 316-319 (xvi) Copy of Reply filed before ld.CIT(A) NFAC 320-321 (xvii) Copy of Circular No. 37/2016 322-323 (xviii) Copy of Acknowledgement of Return of Income filed for .A.Y. 2017-18 324 (xix) Copy of Computation of Total Income for A.Y. 2017-18 325-327 3. Copy of Show cause notice dated 23.3.2023 issued during Revision Proceedings 328-329 4. Copy of Reply dated 25.3.2023 filed in response to notice dated 23.3.2023. 330-333 5. Copy of Draft Assessment Order dated 15.3.2021 334-341 10. It is seen by us that the ld. PCIT has issued direction for revision of assessment in respect of following, which has been agitated by assessee in the respective ground as mentioned herein below, apart from assessee taking two more grounds namely ground No. 1 & 7: 1. Disallowance of interest of Rs.89,42,24,331/- u/s 36(1)(iii) instead of u/s 14A - ground No. 2. Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 16 2. Non-disallowance of Finance charges of Rs.5,19,49,691/- and not making adjustment on account of addition made for Periodic Overlay expenses while computing book profit - ground No. 3. 3. Amortisation of expenses on construction of toll road - ground of appeal No. 4. 4. Donation already added back in earlier years and reverted in the books in the year under consideration - ground No. 5. 5. TDS on managerial commission - ground No. 6. 11. Submission made by the ld. AR on various issues which are being mentioned in the subsequent paragraphs alongwith respective grounds of appeal, are tabulated in short as below for the sake of convenience (taken from submission of ld.AR): Sl. No. Issue Remarks 1. Disallowance of interest of Rs.89,42,24,331/- u/s 36(1)(iii) instead of u/s 14A; Specific query and observations by ld.AO in assessment order and disallowance under normal provisions as well as under MAT made us 14A only and not u.s 36(1)(iii) 2. -No addition on account of Finance charges of Rs.5,19,49,691/- by misunderstanding the same as part of periodic overlay expenses; and -not making adjustment on account of addition made for Periodic Overlay expenses while computing book profit; -No additions on account of Finance charges in preceding years. Addition, if at all would be made under normal provisions of the Act, on which assessee is eligible to claim deduction u/s 80IA, thus tax neutral exercise in any case and order not prejudicial to the interest of revenue. - Periodic overlay is ascertained liability and not contingent and was treated as such in preceding years, thus as per principle of consistency, no disallowance made by ld.FAO as the facts being identical. Moreover, Hon’ble High Court has not admitted any Substantial Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 17 question of law on this issue in its order dated 31.5.2023, thus order passed by Hon’ble ITAT has attained finality. 3. Amortisation of expenses on construction of toll road and deduction on account of Provision of Donation returned back. Both the issues were examined by raising specific queries, vide show cause notice and after examining the same in depth, submission made by assessee as accepted. 4. TDS on managerial remuneration TDS provisions not applicable as assessee only made provisions and actual expenses not incurred. Moreover, as the assessee is paying taxes under MAT, thus no tax effect and order not prejudicial to the interest of the revenue. In view of above, it is submitted that ld.AO has made all the necessary enquiries before completion of assessment on above issues and moreover as the assessee is paying taxes under MAT, Order passed by ld. FAO cannot be held as erroneous nor prejudicial to the interest of the revenue.” 12. In ground No. 2, the ld. AR has agitated the direction of PCIT for considering the disallowance of interest of Rs. 89,42,24,331/- u/s 14A instead of disallowance made by AO purportedly u/s 36(1)(iii) [Issue No. 1]. 13. The ld. AR has made following submission in relation to this ground and issue:- “1. Disallowance of Interest of Rs.89,42,24,331/- u/s 36(1)(iii) instead of u/s 14A: In this regard, it is submitted that ld. PCIT observed that FAO has made the disallowance of Rs. 89.42 crores u/s 36(1)(iii) however, the same is incorrectly narrated as addition u/s 14A and also added to the book profit. In this regard, it is submitted that during the course of assessment proceedings, the ld. FAO vide draft assessment order dated 15.03.2021, which was issued alongwith the show cause letter of even date (APB 88-94), proposed to make disallowance u/s 14A at Rs. 92,98,58,499/- in terms of para 3 at page 2 to 3 of the draft assessment order. In reply to the same, assessee filed a detailed submission on 18.03.2021 (APB 95-111), and after considering the same, final assessment order was passed by making disallowance u/s 14A of Rs. 89,42,24,331/- and the said amount was also included in the book profit in terms of explanation 1(f) of Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 18 section 115JB(2) of the Act. Against the said addition, assessee filed the appeal before the CIT(A), NFAC where the detailed submissions have been filed and order is awaited. The observations made by the ld. FAO in para 3.4 of the assessment order passed u/s 143(3) are reproduced herein below for ready reference. 3.4 In view of the above and considering the judgment of the Hon’ble ITAT in assessee’s own case for A.Y. 2012-13 to 2015-16 and assessee’s reply of show cause letter, it is proved that assessee has diverted its interest bearing fund to interest free advances to its associate concerns. Accordingly, as accepted by the assesseee, Rs.89,42,24,331/- is disallowed out of interest expenses claimed and added back to the total income of the assessee. It is also considered for the purpose of adjustments in the amount of book profit for the purpose of Section 115JB as the provision of explanation 1(f) to section 115JB(2) of the Income Tax Act, 1961. Accordingly, Book Profit is to be increased with this amount, in the computation. Penalty proceedings u/s 270A of the IT Act, 1961 for under reporting of income are being initiated separately. From the perusal of the above, it is evident that the ld. AO though considered the past history of the assessee and the orders of hon’ble ITAT for previous years on this issue but even after that, he has invoked the provision of section 14A as is clear from FAO’s subsequent findings adding the same to the book profit of assessee company as per Explanation 1(f) of section 115JB(2) and compute the additional MAT liability accordingly. Though the title of Para 3 of the assessment order apparently depicts that ld. FAO has proceeded to make the disallowance u/s 36(1)(iii) but from the final conclusion drawn in para 3.4 of the order, as reproduced above, finally he made the addition u/s 14A as is clear from the application of Explanation 1(f) of section115JB(2) of the Act thus the error in title cannot make the assessment order erroneous and prejudicial to the interest of revenue. The total income as computed by ld.AO in para 7 of the assessment order and computation of deemed income for the purpose of MAT u/s 115JB in para 8 of the assessment order are reproduced as under: 7. Subject to the above remarks, total income is computed as under:- Income from business as per computation of Income Rs. 138,22,87,167 Sr No Head Addition made (Rs.) 1. Disallowance u/s 14A – Interest free advance to subsidiary company 89,42,24,331 2. Disallowance u/s 14A – on account of investment made 28,31,500 3. Disallowance of periodic overlay Expenses 30,35,81,900 120,06,37,731 4. Net income from business or profession Rs.258,29,24,898 Less: Income from Sale of scrap 11,47,206 Rs.11,47,206 5. Net income from business or Profession Rs.258,17,77,692 Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 19 6. Income from capital gain as declared in ROI Rs.58,45,354 7. Income from other sources Interest Income on FDR 3,36,13,023 Interest on IT Refund 10,21,98,628 Sale of Scrap 11,47,206 Income from sale of investment considered separately in computation 1,44,75,664 Rs.15,14,34,521 Gross Total Income Rs.273,90,57,567 8. Deduction u/s 80IA excluding Scrap sales) Rs.244,59,66,041 9. Assessed Total Income Rs.29,30,91,526 Rounded to Rs.29,30,91,526 8. Computation of deemed income for the purpose of MAT u/s. 115JB 1. Book Profit 129,24,56,128 2. Disallowance u/s 14A – Interest free advance to subsidiary company 89,42,24,331 3. Disallowance u/s 14A – on account of investment made 28,31,500 4. Net Book Profit Rs.218,95,11,959 From the perusal of the above computations, it is evident that while computing the total income and computation of MAT also, the ld. FAO has referred the disallowance u/s 14A and not u/s 36(1)(iii). Since the ld. FAO has already made the addition u/s 14A, therefore, there is no variance from the stand taken by the department on this issue. It is thus submitted that the assessment order is not erroneous. Further, with regards to the other limb of section 263 i.e. the order must be prejudicial to the interest of revenue, it is submitted that since the ld. FAO himself has already made the addition to the book profit and raised the additional MAT liability after including the disallowance u/s 14A to the book profit, there is no loss to the revenue hence, order passed by ld.AO cannot be treated as prejudicial to interest of revenue also.” 14. Ld. DR has placed reliance on the order of ld. PCIT. 15. We have considered the facts relevant to this issue and also perused the written submission and relevant record as well as heard both the parties. It is seen from the assessment order that FAO has made Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 20 disallowance of Rs. 89.42 crore in the body of assessment order and also finally in the computation of total income. It is further seen that the same amount of disallowance has also been considered by the AO while computing book profit u/s 115JB. The ld. PCIT is of the view that the AO has disallowed this amount u/s 36(1)(iii) whereas he should have disallowed this amount u/s 14A, as was being done in the past. On the other hand ld. AR has submitted that the AO vide draft assessment order dated 15.03.2021 has proposed to make disallowance u/s 14A at Rs. 92,98,58,499/-, as per para 3, page 2-3 of the draft assessment order. In the final assessment order, the AO has made disallowance of Rs. 89,42,24,331/- u/s 14A and said amount has also been included in the book profit in view of the explanation 1(f) of section 115JB(2) of the I.T. Act, 1961. These facts are clear on perusal of the computation of income at the end of the assessment order. The copy of the computation of income so given by the FAO in his assessment order has been reproduced in the written submission by way of table from where it is clear that AO has added the disallowance as ‘disallowance u/s 14A’. Similarly, while computing deemed income u/s 115JB, the FAO has added this amount with the narration ‘disallowance u/s 14A’. 16. It has also been submitted by ld. AR that in the earlier years matter has travelled to Hon’ble ITAT and Hon’ble ITAT has decided that Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 21 disallowance cannot be made u/s 14A and disallowance can be made u/s 36(1)(iii), in the common order dated 22.12.2020 passed for A.Y. 2012- 13 to 2015-16. Thus, the order so passed by AO in the year under appeal cannot be said to be erroneous. Moreover, the order is also not prejudicial to the interest of revenue on this issue, as the disallowance of interest has already been made by the AO while computing income under the normal provisions of the Income Tax Act and AO has further added the amount while computing income under the provisions of section 115JB. 17. It was further argued by ld. AR that without prejudice to the earlier arguments made, even for a moment it is presumed that AO has made disallowance u/s 36(1)(iii) in the assessment order (though not admitted), even then the action of AO is not erroneous. It is seen that in the year under consideration the impugned amount on which interest has been considered for disallowance has been shown as interest free advance to subsidiary company M/s Sutara Road & Infra Ltd. and clearly such amount is not by way of investment in the equity share or preference share of subsidiary company which could have possibly earned the exempted dividend income. Accordingly in any case even considering the view of ld. PCIT of AO making disallowance u/s 36(1)(iii), there is no error in the order of FAO, as in such situation, if at all, any disallowance Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 22 is to be made that can be made only u/s 36(1)(iii) and there is no question of any disallowance u/s 14A. 18. We have perused the findings and observations of the AO and ld. PCIT and also considered the submissions made from both sides and the relevant records. It is seen that though in the body of assessment order the AO has given the heading of ‘disallowance of interest u/s 36(1)(iii)’ but in the draft assessment order as well as subsequently in the body of assessment order he has himself mentioned in the same para 3.4 that this disallowance is also to be considered for the purpose of calculation of book profit u/s 115JB and book profit is to be increased by the aforesaid amount. Moreover, almost at the end of the assessment order while computing the total income at para 7 of the assessment order by incorporating disallowance / additions, the AO has mentioned the heading of the aforesaid disallowance as under: “Disallowance u/s 14A – interest free advance to the subsidiary company” – Rs. 89,42,24,331/- In the computation of deemed income u/s 115JB also, at para 8 of the assessment order, this amount of disallowance has again been considered as being made u/s 14A, which is clear from the heading mentioned therein also. Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 23 “Disallowance u/s 14A – interest free advance to the subsidiary company” – Rs. 89,42,24,331/- 19. Without prejudice to above, it is seen that as the AO has made disallowance under the normal provisions of the Income Tax Act and also for the purpose of deemed income u/s 115JB, it cannot be said that order is prejudicial to the interest of revenue on this issue. Hon’ble Courts have held in number of cases that twin condition is to be satisfied for an order of AO to be hit by provisions of section 263. Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT reported in 243 ITR 83 (SC) has held that :- “A bare reading of section 263 of the Income Tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suomotu under it, is that the order of the Income Tax Officer is erroneous is so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent – if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue – recourse cannot be had to section 263(1) of the Act.” 20. Without prejudice to above, it is further seen by us that ITAT in its common order dated 22.12.2020 for A.Y. 2012-13 to 2015-16 has occasion to consider the issue of investment in subsidiary company by way of equity out of the loan taken from IDFC Consortium which was Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 24 utilized for making payment of share application money for shares of GVK Airport Developers Pvt. Ltd. After going through the facts in detail the ITAT held as follows:- “76 The assessee has not disputed the said findings of the ld CIT(A) and is not in appeal before us for A.Y 2012-13 and A.Y 2013-14. In its appeal for A.Y 2014-15 and A.Y 2015-16, the assessee has rather pleaded to follow the decision of ld CIT(A) for A.Y 2012-13 and A.Y 2013-14 as can seen from its ground of appeal where it contends that the ld. CIT(A) has erred in not following the principle of consistency as in the immediate two preceding assessment years, wherein his predecessor CIT(A) had invoked the provisions of sec 36(1)(iii) for making disallowance of interest on the amount employed in making share application money out of the funds so borrowed and hence the facts are same as in the preceding years. 77. For A.Y 2014-15 and A.Y 2015-16, the ld CIT(A) has again recorded a similar finding that the assessee had raised an amount of Rs. 950 crores as loan and the entire loan amount was invested in the group concern of the assessee and therefore, there is no doubt that the loan was raised with the sole intention of investing in the group company which has a business object different to that of the assessee company and on such borrowings, the assessee has incurred interest expenditure of Rs 1,15,92,95,718/- for A.Y 2014-15 and Rs 1,11,92,41,369/- for A.Y 2015-16. Having recorded such findings, we find that the ld CIT(A) was not correct in not following the earlier orders so passed by his ld. predecessor for A.Y 2012-13 and A.Y 2013-14 in terms of invocation of provisions of section 36(1)(iii) of the Act instead of section 14A of the Act. Given that there are no changes in the facts and circumstances of the case, following the principle of consistency which applies equally to the assessee and the Revenue as laid down by the Hon’ble Supreme Court in case of Godrej & Boyce Manufacturing Company Ltd (Supra), we reverse the said findings of the ld CIT(A) and uphold the applicability of provisions of section 36(1)(iii) of the Act for the purposes of making the disallowance of interest expenses debited in the profit/loss account for these two assessment years, i.e, A.Y 2014-15 and A.Y 2015-16. 78. In light of aforesaid discussions and in the entirety of facts and circumstances of the case and following the decisions referred supra, in the instant case, we set-aside the invocation of provisions of section 14A and uphold the invocation of provisions of section 36(1)(iii) for the purposes of making the disallowance of interest expenses debited in the profit/loss account for each of the respective assessment years i.e, A.Y 2012-13 to A.Y 2015-16 under appeal before us.” Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 25 21. Thus, in the preceding years when the assessee company had made investment in share application money / shares of subsidiary company, the ITAT has set aside the invocation of provision of section 14A so made by AO for making disallowance out of interest expenses and instead of above, it has upheld the invocation of provision of 36(1)(iii) for making disallowance out of interest expenses. 22. Considering these facts it will not be appropriate and justified to disturb the action of AO where he has already made disallowance on this issue. 23. Without further prejudice to above, the ld.AR has also brought to our notice the difference in the facts for the year under consideration, wherein it is noticed from the perusal of balance sheet (APB Page 27 to 81) and also from the perusal of reply to the draft order dated 18.03.2021 (APB Page 95 to 111) submitted before AO that from A.Y. 2016-17 onward the impugned amount on which disallowance of interest is worked out has been shown as interest free advance to the subsidiary company. In such a scenario when there is no investment made by the assessee company in the subsidiary company by way of shares / equity, there is no question of earning or even future earning of tax free dividend income and consequently there is no question of any disallowance u/s Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 26 14A. Accordingly appeal filed before Hon’ble High Court by the revenue in earlier years i.e. A.Y. 2012-13 to A.Y. 2015-16 on this issue as observed by ld. PCIT in support of her view, will not be of much help for the year under consideration as facts have changed from the A.Y. 2016- 17 onward in relation to this issue of disallowance of interest. Thus order of FAO on this issue cannot be said to be prejudicial to the interest of revenue. We agree with the aforesaid argument taken by ld. AR.We derive support from the Hon’ble Apex Court decision in the case of Malabar Industrial Co. Ltd. (supra) wherein Hon’ble Court has held that twin conditions should be satisfied before taking recourse to action u/s 263. Hon’ble Supreme Court in another case namely CIT Vs. Max India Ltd. reported in 295 ITR 282 has held that every loss of revenue as a consequence of an order cannot be treated as prejudicial to the interest of revenue. When the AO adopts one of the two courses permissible in law and it has resulted into loss of revenue or where two views are possible and AO has taken one view with which Commissioner does not agree, it cannot be treated as erroneous order prejudicial to the revenue, unless the view taken by AO is unsustainable in law. Therefore, we are of the considered view that this disallowance so made by FAO, even if considered either way, does not require any interference by way of order u/s 263 as twin conditions are not satisfied. Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 27 24. Ground No. 3 to 3.2 – In these grounds the ld AR has challenged the direction of ld. PCIT about disallowing the financial charges of Rs. 5,19,49,691/- relatable to periodic overlay expenses of Rs. 30,35,81,900/- and further direction that AO has erred in not considering the periodic overlay expenses and also the financial charges for the purpose of section 115JB. 25. The submission of ld. AR so furnished on the aforesaid issue is as below:- “2. No addition on account of Finance charges of Rs.5,19,49,691/- by misunderstanding the same as part of periodic overlay expenses; and not making adjustment on account of addition made for Periodic Overlay expenses while computing book profit: Brief facts pertaining to the grounds of appeal are that ld.PCIT in his order has observed that the FAO has made the disallowance of Rs.30,35,81,900/- on account of provision for periodic overlay expenses debited to profit and loss account under the head ‘operating expenses’ however, has not disallowed Rs. 5,19,49,691/- claimed under the head ‘financial charges’. It has been further observed by ld.PCIT that though the disallowance was made by rejecting the claim of the assessee that it was an ascertained liability and not a contingent liability but the FAO has not considered this provisions of over lay expenses in the computation of profit u/s 115JB of the Act. Since it was a clear provision of expenditure and no actual expenditure was made, it should have been added back to the book profit in view of provisions of explanation 1(c) of section 115JB(2) of the Act. In this regard, it is submitted that a sum of Rs. 30,35,81,900/- was provided out of the current year’s income in the books of account towards the 3rd Periodic overlay to be carried out after the completion of Five years period from the 3rd periodic overlay, which stood disallowed in terms of para 5 of the assessment order. Besides this, in terms of the ICDS compliance, the finance cost for such expenses is debited under the head “Finance Expenses” of Rs.5,19,49,691/- and Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 28 since the same is directly incurred by the assessee company and is not part of the provision made for periodic overlay, thus the same was rightly claimed as well as allowed as revenue expenditure being relatable as well as totally incidental to the income earned during the year by the FAO. Further as stated herein above, the assessee has paid MAT, since it is claiming deduction u/s 80IA on the Income computed under head “Income from Business or Profession” and the disallowance of Provision for 3rd Periodic overly is being made and added to the Profit of the business eligible for deduction u/s 80IA, thus it would have no impact on the calculation of MAT paid by the assessee. Similarly, if at all the amount of Rs. 5,19,49,691/- is disallowed the same would also be added to the profit of the business which is eligible for deduction u/s 80IA, and thus would not have any impact on the book profit. It is also a fact on record that amount of similar nature was claimed in the immediately preceding year where after considering the facts and submissions, no disallowance was made on this account thus following the principal of consistency also, directions issued for making disallowance on this count is not justified, more particularly when the facts and circumstances remain identical i.e. without in any manner having variation in the activity as well as the claim made in earlier year. Further, the twin conditions mandated by section 263 i.e. the order sought to be revised should be erroneous and also prejudicial to the interest of revenue are not satisfied on this issue also, as the assessment completed by FAO thus being not prejudicial to the interest of the revenue cannot be revised on this score. With regards to the inclusion of the disallowance of the provisions for 3rd periodic overlay in the book profit in terms of explanation 1(c) of section 115JB(2), it is submitted that the same is neither contingent nor uncertain. As per the “Concession Agreement” clause 4.5.1 (APB 304-315, relevant page 311) as reproduced below, assessee has to ensure the minimum roughness of the highway and after the period of every Five year, it has to compulsorily carry out overlay on the highway. It is further provided that in case the roughness exceeds the 3500 mm/Km, the overlay should be carried out irrespective of the fact whether the period of Five years is completed or not i.e. even before the period of five years have elapsed and since inception of the “Concession Agreement” this practice is followed to work out the annual commercial profits which fully answers to be revenue reorganization principles consistently followed by the company and the same finds part of notes on accounts of the company. “Concession Agreement” in this respect provides as under: (APB 311) 4.5.1 Pavement Riding Quality The riding quality of the pavement shall be ensured by satisfying the minimum requirements given herein under. Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 29 i) Surface roughness of the Project Highway on completion of construction shall be 2500 mm/km as measured by the 5th wheel Bump Integrator. ii) Surface roughness shall not exceed 3500 mm/km during the service life of pavement at any time. A renewal coat of 25 mm of bituminous concrete shall be laid every 5 years after initial construction or where the roughness value reaches 3500 mm/km whichever is earlier to bring it to initial value of 2500 mm/km.” It is submitted that the FAO has failed to appreciate this clause of the “Concession Agreement” which is binding on the assessee, according to which the periodic overlay is not uncertain but is ascertained liability which has to be carried out after every five years. Once it is an ascertained liability, the provision thereof cannot be disallowed and added back to the book profits of the assessee company. It is also a fact on record that the disallowance of similar nature was firstly made in AY 2014-15 and was never added back to the Book profit in any assessment completed u/s 143(3) for AY 2014-15 or any subsequent assessment year thus following the principle of consistency, the action of FAO in not adding back the disallowance to the book profit can neither be held as erroneous or prejudicial to the interest of the revenue. Further in all the preceding years where such provision was disallowed, the same stood allowed by the ld. CIT(A) and such deletion was further confirmed by hon’ble ITAT vide its common order for AY 2010-11 to 2015-16 dt. 22.12.20 (APB 208-303). It is noteworthy to mention here that in the appeals filed by department before Hon’ble High Court against the order passed by Hon’ble ITAT, the only question of law admitted is as under (copy of High court order enclosed): “(i) Whether in the facts and circumstances of the case, the ITAT was right in deleting the disallowance of the interest expenditure amounting to Rs.1,11,92,41,369/- relating to investments made in the shares of group companies made by the AO u/s 14A of the Act, while directing that the said disallowance be made u/s 36(1)(iii) of the Act and further holding that the said disallowance cannot be added back to the assessee’s income computed under the provisions of section 115JB of the Act.” Hon’ble High Court has further observed that the other two substantial questions of law, as they are framed, do not constitute any substantial question of law. It is thus submitted that the as of date decision of Hon’ble ITAT on the issue is final and is binding, therefore Revision proceedings initiated on the issue is beyond the jurisdiction of ld. PCIT. Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 30 It is thus submitted that the issue is squarely covered in favour of the assessee by the order of hon’ble ITAT in preceding assessment year (APB 208-303), thus the directions to add back the same to the book profit is not permissible by the decision of Hon’ble High Court.” 26. Ld. DR has placed reliance on the order of Ld. PCIT. 27. We have considered the facts relevant to this issue and also perused the material on record as well as heard the parties. Ld. PCIT has observed in the order u/s 263 that AO has made disallowance on account of provision for periodic overlay expenses debited under the head “Operating Expenses”, however AO has not disallowed Rs. 5,19,49,691/- claimed under the head “Financial Expenses”. Moreover, ld. PCIT has also observed that though disallowance of periodic overlay expenses has been made by the FAO considering it to be a contingent liability but the FAO has not considered this provision of overlay expenses for the purpose of determining deemed income u/s 115JB. The ld. AR of the assessee has argued that financial charges of Rs. 5,19,49,691/- was debited under the head “Financial Expenses” in terms of ICDS compliance and since same is directly incurred by the assessee company and is not part of the provision made for periodic overlay same was claimed as well as rightly allowed by the FAO as expenditure. Without prejudice to it, it was also submitted that in any case the assessee has claimed deduction u/s 80IA on income under the head “Income from Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 31 Business & Profession” and this disallowance if made will increase the profit of eligible business, which is eligible for deduction u/s 80IA. Thus it would not have any impact on the total taxable income of assessee company. 28. It was furthermore submitted that this issue of disallowance of periodic overlay expenses has been raised from A.Y. 2014-15 onward(though claimed from A.Y. 2011-12 onward) and matter has travelled upto ITAT. The Co-ordinate Bench of ITAT vide its common order dated 22.12.2020 for AY 2010-11 to 2015-16 (APB 208-303)has held the periodic overlay expenses to be ascertained liability and held it to be thus allowable expenditure. Relevant paras of the order of Co-ordinate Bench order are as under: “45. In light of above, there has to be compelling reasons for a departure from the past settled position wherein the assessee has been held eligible for such claim all these years and such reasons have to be spelt out clearly by the Assessing officer. It has been contended by the ld A/R that during the year under consideration, there is no change in the nature of provision so made by the assessee company which is flowing out of the requirements of the concessionaire agreement executed with NHAI and determined based on an independent consultant report who has been appointed in consultation with NHAI except for the fact that the quantum of provision was revised in the fifth year. Even on perusal of the assessment orders and the findings of the Assessing officer, we note that there is no finding recorded by the Assessing officer that the nature of provision so made by the assesse company is different from the past years or not flowing from the requirements of the concessionaire agreement executed with NHAI. Even the report of the independent Consultant was obtained in the first year where it had estimated the total cost of Rs 56.64 crores which has therefore formed the basis for spreading the total cost equally across five years. We therefore failed to understand that where the provision for periodic wearing course overlay has been accepted all these years as an ascertained liability, then on what basis, the Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 32 said provision is treated as a contingent liability for A.Y 2014-15 and A.Y 2015-16. Interestingly, even for these two assessment years, while the Assessing officer has treated the provision as a contingent liability whilecomputing income under the regular provisions however at the same time, has not made any adjustment to the book profits towards such provision as “the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities” which again bring out the dichotomy and inconsistency in the stand of the Assessing officer for the same assessment year. Therefore, on this ground as well, where there are no changes in the facts and circumstances of the case, following the rule of consistency as upheld by the Courts from time to time, we are of the considered view that there is no basis to interfere with the consistent position which has been accepted in the earlier years that is, to hold that the provision so made is towards an ascertained liability and which is allowable for tax purposes while computing the income under the normal provisions of the Act. 46. Now, coming to the merits of the case. In its profit/loss account, the assessee company has debited a sum of Rs 11,33,00,000/- towards provision for second periodic wearing course overlay of the BOT road. During the course of assessment proceedings, the assessee company has submitted that as per the Concessionaire Agreement executed with NHAI, to ensure smooth riding quality, certain maintenance standards are required to be maintained in terms of surface roughness and in this regard, a report from an independent consultant has been obtained which has estimated the total cost at Rs 56.64 crores and basis the same, 1/5 of the said amount i.e, Rs 11.33 crores was provided in the profit/loss account for the year under consideration. The Assessing officer, though taken note of the said report, however held that it is an estimation certificate issued by Consulting Engineers Group Ltd and there is no scientific basis of making this certificate as the DSIR like agencies follows. He therefore disallowed the same while determining the income under the regular provisions holding that the basis of estimation of such cost of overlay expenses is not done on a scientific basis and is thus in a nature of contingent liability. On appeal, the ld CIT(A) has returned a finding that expenditure related to keeping the roughness of the highway at 2500 mm/Km is a mandatory clause and the assessee company has to relay the surface every five years and it is therefore an ascertained liability and the estimation has been done basis an expert report and the relevant findings of the ld CIT(A) read as under: “11.4.2 After consideration of the concession agreement signed between the appellant company and the NHAI, it is my considered view that the expenditure related to keeping the roughness of the expressway at 2500mm/km is a mandatory clause and the appellant company has to relay the surface every 5 years which is an ascertained liability. The estimation of the liability was made by the expert committee at Rs. 56.64 crores and the provision has rightly been created at Rs. 11.33 crores per annum and has rightly been allowed till A.Y 2013-14. Accordingly, the appellant company is Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 33 liable to get the benefit of ascertained contingent liability at Rs. 11.33 crores as claimed. Accordingly the addition of Rs. 11.33 crore is deleted and the appellant’s ground of appeal on the issue is allowed.” 47. We also find that as per the concessionaire agreement executed with NHAI, the assessee company is required to maintain the highway in traffic worthy condition through regular maintenance and preventive maintenance of the highway and it has been provided that MOST Manual for maintenance of roads and IRC-SP-35-1990 guidelines for inspection and maintenance of bridges shall be followed by the assessee company. And as part of the maintenance requirements, periodic maintenance of pavement has been specifically provided and we deem it appropriate to refer to the relevant clauses in the concessionaire agreement which read as under: “4.5 Periodic Maintenance of Pavement The framework of activities relating to pavement maintenance and rehabilitation in respect of flexible and rigid pavement are given in the flow charts in Appendix 3.1 and Appendix 3.2 respectively. The Concessionaire shall set forth in the Operations and Maintenance Manual the detailed procedures to be followed under each of these activities, and also choose the operational and performance criteria from the IRC/MOST standards and specifications for each of the performance indicators covered under pavement condition survey, roughness and BBD deflections. Where such criteria is not specified in the standards, the Concessionaire, for the purpose of routine maintenance shall set forth such criteria so as to conform to international standards or sound pavement maintenance practices in consultation with the Independent Consultant for using them as criteria. 4.5.1 Pavement Riding Quality The riding quality of the pavement shall be ensured by satisfying the minimum requirements given herein under. i) Surface roughness of the Project Highway on completion of construction shall be 2500 mm/km as measured by the 5th wheel Bump Integrator. ii) Surface roughness shall not exceed 3500 mm/km during the service life of pavement at any time. A renewal coat of 25 mm of bituminous concrete shall be laid every 5 years after initial construction or where the roughness value reaches 3500 mm/km whichever is earlier to bring it to initial value of 2500 mm/km. 4.5.2 Structural Condition of the Pavement i) The structural condition of the flexible pavement of the Project Highway shall be assessed every year by taking Benkelman Beam Deflections Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 34 and working out characteristic deflections of homogeneous sections of the Project Highway as per IRC-81-1997. Wherever the characteristic deflection exceeds 0.8 mm a bituminous overlay shall be provided appropriately designed according to IRC-81-1997 or its latest versions or amendments to it. ii) In the case of cement concrete pavement, joints shall be thoroughly inspected every year and the loss of sealing compounds made good.” 48. On reading of the above clauses, we find that the assesse company is required to follow the operational and performance criteriafrom IRC/MOST standards and specification for each of the performance indicators covered under pavement condition survey, roughness and BBD reflections and where such criteria is not specified, the assesse company is required to adhere to international standards or sound pavement maintenance practices in consultation with Independent consultant. In respect of riding quality of pavement, it has been specifically provided that the assessee company is required to maintain Surface roughness which shall not exceed 3500 mm/km during the service life of pavement at any time and a renewal coat of 25 mm of bituminous concrete shall be laid every 5 years after initial construction or where the roughness value reaches 3500 mm/km whichever is earlier to bring it to initial value of 2500 mm/km. We therefore find that the assessee company has to maintain the pavement riding quality by way of roughness meeting the minimum standards throughout the service life of the pavement and the same is clearly emerging from the operation and maintenance requirements of the concessionaire agreement executed by the assessee company with NHAI and we don’t see any infirmity in the findings of the ld CIT(A) where he has returned a finding that it is mandatory clause/requirement of the concessionaire agreement and the assessee company has to relay the surface every five years and it is therefore an ascertained liability. Now, coming to the basis of estimation of such cost, the assessee company has obtained and relied upon a report of an independent consultant, Consulting Engineers Group Ltd who has taking into considerations the standards so set in the concessionaire agreement and length of the highway, has estimated the total cost and the contents of the said report dated 27.04.2011 read as under: “In terms of Clause 4.5.1 (ii) of Schedule-L of the Concession Agreement dated 8th May, 2002, under the head “Pavement Riding Quality”, the Concessionaire is required to lay a renewal coat of 25mm of bituminous concrete at the end of every 5 years after initial construction or when the roughness value reaches 3500mm/km whichever is earlier to bring it to the initial value of 2500mm/km. Concessionaire has carried out first renewal coat in 2009-10. Next Periodic renewal shall be due in 2015. It is estimated that the cost of laying 25mm Bituminous Concrete, as required under Clause 4.5.1 (ii) of Schedule-L of the Concession Agreement in 2015 works out to be Rs. 56.64 cr the broad break-up of which is annexed.” Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 35 Annexure: Area Calculation Sheet S.No. Description Chainage Length(K m) Area (sqm) From To 1. Length of Main Carriageway 273.500 363.885 90.385 Length of Toll Plaza (Jaipur) 286.662 287.115 0.453 Length of Toll Plaza (Kishangarh 360.640 361.060 0.420 Net Length 89.512 2,193,044.00 2. Length of Service Road (LHS) 15.144 106,008.00 3. Length of Service Road (RHS) 16.081 112,567.00 4. Area of Junctions 32,173.14 5. Area of Tapering at SR Start/End Location 2,450,817.29 Cost of 25mm Thick Bituminous Concrete at Current rates S.No. Description Unit Qty Rate Amount (Rs) 1. Bituminous Concrete Cum 61270.43 7003 429,076,837 2. Tack Coat Sqm 2450817.29 8.0 19,606,538 Total Rs. 448,683,375 Estimated Cost of 25mm Thick Bituminous Concrete in 2015 S.No. Description Unit Qty Rate Amount (Rs) 1. Bituminous Cum 61270.43 8841 541,691,891 Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 36 Concrete 2. Tack Coat Sqm 2450817.29 10.1 24,753,255 Total Rs. 566,445,146 49. We therefore find that the Independent consultant has taking into considerations the standards so set in the concessionaire agreement and the length of the highway has estimated the total cost. The Assessing officer has rejected the said estimation holding that the basis of estimation of such cost of overlay expenses is not done on a scientific basis. We find that once the consultant has taken into consideration the standards of roughness as so specified in the concessionaire agreement which is in turn are based on international and other benchmarks so specified for the pavement riding quality standards, the basis of estimation is clearly based on well laid down standards and the method of evolution of such standards over the period of time and as they stood today is clearly a long drawn process of reasoning and experimentation which is nothing but scientific in nature. Further, where the Assessing officer is not satisfied with such estimation, he is required to specify the reasons as to why he is not so satisfied and may have referred the matter to another expert for seeking his opinion. Merely stating that he is not satisfied with such report will not satisfy the requirements of law as once the assessee has made a claim supported by report of an Independent Consultant, the onus shifts on the Revenue to disprove the same which in the present case has not been satisfied by the Revenue. During the course of hearing, the ld CIT D/R has stated that the entire length of the highway has been considered for estimating the cost which is not correct interpretation of clause (ii) as some stretches may require renewal coat in the interim period and not towards the end of fifth year. We find that the estimation has been made on the basis that the whole length of the highway shall be required to be maintained with prescribed roughness standard and it is likely that such renewal cost will be done towards the end of year 2015 and accordingly, the estimate has been made and we don’t find any infirmity therein. In case of Rotork Controls India (P) Ltd vs CIT (Supra), the Hon’ble Supreme Court was pleased to held as under: “10. What is a provision? This is the question which needs to be answered. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized. 11. Liability is defined as a present obligation arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 37 12. A past event that leads to a present obligation is called as an obligating event. The obligating event is an event that creates an obligation which results in an outflow of resources. It is only those obligations arising from past events existing independently of the future conduct of the business of the enterprise that is recognized as provision. For a liability to qualify for recognition there must be not only present obligation but also the probability of an outflow of resources to settle that obligation.” 50. In the instant case, the assessee company has a present obligation arising out of the concessionaire agreement executed with NHAI to maintain the highway in traffic worthy condition through regular and preventive maintenance of the highway and which mandatorily requires it to maintain the pavement riding quality by way of roughness meeting the minimum standards throughout the service life of the pavement, the settlement of which is expected to result in an outflow of resources and in respect of which a reliable estimate has been made based on report of an independent consultant. Our view is further fortified by the decision of the Hon’ble Rajasthan High Court in case of Udaipur Mineral Development Syndicate (P.) Ltd. Vs Deputy Commissioner of Income-tax [2003] 129 Taxman 728 (Rajasthan) wherein the Hon’ble Rajasthan High Court was pleased to held as follows: “5. Heard learned counsel for the parties. The submissions made before the CIT(A) in writing reads as under :— \"It is submitted that the assessee-company is engaged in open cast mining of soapstone crude. The lease for the exploration of mines has been granted by the Govt. of Rajasthan. From the terms and conditions of the lease agreement, it is obligatory on the part of the assessee-company to restore the land as far as possible to its original shape. An extract from clause 2 of part-V of the lease agreement is reproduced as below: As far as possible the lessee shall restore the surface land so used to its original condition. During the year under consideration, the company had dug new pits in the mining lease area for the purpose of excavating soapstone crude out of which some of the pits dug had no economic value and the land damaged by digging the land was required to be restored. Dimensions of the pit dug which were uneconomic were to the extent of 7568 Cub. mtr. and the estimated cost of their re-filling comes to Rs. 1,51,360 and therefore, the liability in respect of the same had been provided for as per the clause 2 of part-V of lease agreement. Thus the cost of refilling of above ascertained liability and is eligible for deduction because the assessee-company observes mercantile system of accounting.\" Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 38 6. It has also been brought to our notice that even in the year 1993-94 though the actual expenditure has been made, but that has been denied on the ground that CIT(A) has allowed this expenditure in the year 1991-92. Thus in both the years, the claim of the assessee has been disallowed. 7. Considering the clause in the agreement i.e. as far as possible the lessee shall restore the surface land so used to its original condition, the moment assessee digs pits, he is bound under the agreement to fill those pits and liability does accrue on the date when the pits are digged. Therefore, in our view, the Tribunal has committed error in disallowing the claim of the assessee in the year in hand i.e. 1991-92. We agree with the view taken by CIT(A) that the moment assessee digs the pits, liability does arise and he is entitled for deduction of the expenses which he is supposed to incur for filling those pits, as assessee is following the Mercantile System of Accounting. It can claim the expenses incurred as soon as it digs the pits. 8. In the result, we restore the view taken by CIT(A). The appeal stands allowed.” 51. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, the matter is decided in favour of the assessee and against the Revenue. In the result, ground of Revenue’s appeal for A.Y 2013- 14 and A.Y 2014-15 are dismissed and ground of assessee’s appeal for A.Y 2015-16 is allowed.” 29. It has been further brought to our notice by the ld. AR that in the appeal filed by the revenue before the Hon’ble High Court against the order passed by the Co-ordinate Bench of ITAT, the only question of law admitted is as under:- “(i) Whether in the facts and circumstances of the case, the ITAT was right in deleting the disallowance of the interest expenditure amounting to Rs.1,11,92,41,369/- relating to investments made in the shares of group companies made by the AO u/s 14A of the Act, while directing that the said disallowance be made u/s 36(1)(iii) of the Act and further holding that the said disallowance cannot be added back to the assessee’s income computed under the provisions of section 115JB of the Act.” Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 39 30. Similar is the position in the Hon’ble High Court in relation to other assessment years wherein Co-ordinate Bench of ITAT has decided the aforesaid issue of overlay expenses in favour of the assessee. 31. Thus it was submitted that as of today the decision of Jaipur ITAT on this issue is final and is therefore binding. Hence the revision proceedings initiated on the issue financial charges relatable to provide overlay expenses on the ground that periodic overlay expenses and consequently the financial charges are also contingent liability is beyond the jurisdiction of ld. PCIT. It was further submitted that since the disallowance so made under periodic overlay expenses has been deleted by Jaipur ITAT and same has become final, the issue of adding back of the same to the book profit will not arise. 32. We have gone through the various facts and other aspects of the issue under consideration. It has been noticed by us that financial charges related to overlay expenses has been claimed by the assessee company from various preceding years and same has been allowed till the year under appeal. It has been first time raised in the proceeding u/s 263. Moreover, it is a fact that issue related to disallowance of overlay expenses has been continuously arising from A.Y. 2014-15 onward and ITAT Jaipur Bench in its common order dated 22.12.2020 for AY 2010- Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 40 11 to 2015-16 has discussed the issue elaborately and has finally held this expenditure to be ascertained liability and as allowable deduction. The revenue has preferred appeal against the order of ITAT on various issues decided in favour of assessee company but as pointed out by the ld. AR only question of law admitted by the Hon’ble High Court is on the other issue namely on the issue of ‘disallowance of interest expenses’. Thus as of date this issue decided by ITAT holding overlay expenses as ascertained liability and thus allowable expenditure, has become final. Accordingly view taken by the AO of allowing financial charges related to such overlay expenses cannot be said to be prejudicial to the interest of revenue. 33. Similarly as the issue related to overlay expenses has become final by way of allowable expenses being ascertained liability, then it will not be just and proper to concur with the direction of ld. PCIT of tinkering with the order of FAO by way of giving direction of adding back periodic overlay expenses for the purpose of determination of deemed income u/s 115JB, by considering it as contingent liability. We derive support from the Hon’ble Apex Court decision in the case of Malabar Industrial Co. Ltd. (supra) wherein Hon’ble Court has held that twin conditions should be satisfied before taking recourse to action u/s 263. Further Hon’ble Supreme Court in the case of CIT Vs. Green World Corporation reported Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 41 in 314 ITR 81 (SC) has held that “The Income-tax Officer, while passing an order of assessment performs a judicial function. A revision application lies before the Commissioner. It is trite that the jurisdiction exercised by the revisional authority pertains to his appellate jurisdiction. The jurisdiction under section 263 can be exercised only when both the following conditions are satisfied (i) the order of the Assessing Officer should be erroneous, and (ii) it should be prejudicial to the interests of the Revenue. These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible”. The order passed by FAO, thus cannot be considered as erroneous and prejudicial to the interest of revenue on these issues. 34. Thus these grounds of appeal of the assessee are allowed. 35. Ground No. 4 & 5 – In ground No. 4 & 4.1, the assessee has challenged the observation of ld. PCIT about no detailed enquiry being made in respect of amortization expenses on toll road. In ground No. 5, the assessee has challenged the direction of PCIT of adding back the donation amount of Rs. 1,68,64,596/-. 36. The submission of ld. AR in this regard are as follows: Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 42 “3 & 4. Amortisation of expenses on construction of toll road and deduction on account of Provision of Donation returned back In this regard, ld.PCIT has held the order of ld.AO as erroneous on the observation that the assessee has claimed amortization of the expenses on ‘Toll Road’ at Rs. 20,27,54,486/-, for which no enquiry was made nor any enquiry was made with regard to the total cost of the ‘Toll Road’ and how the grant received was accounted for. In this regard at the outset kind attention of your honours is invited to the show cause cum draft assessment order dt. 15.03.2021 wherein the expenses claimed at Rs. 22,88,57,512/- was specifically show caused as to why the same be not added to the income of the assessee (APB 334-341). This amount of Rs.22,88,57,512/- includes the amortization of expenses on ‘Toll Road’ Rs. 20,27,54,486/- and claim of deduction on account of provision of donation returned back at Rs. 1,68,64,596/-. The assessee vide its submission dt. 18.3.2021 (APB 95-111) made reply before ld.AO on both the issues contending therein the necessity of the treatment given to such claim which fully commensurate the business expediency as well as the method of revenue recognition regularly adopted by the company, which stood examined in past and after considering the same, the FAO has made no addition / disallowance on these issues. Observation of ld. PCIT that no verification of these expenses was made by FAO rather the nature of communication with the AO and his taking a decision on the issue postulates full application of mind, thus the revision under section 263 in such circumstances as order of ld.AO cannot be held as erroneous by any stretch of imagination as the most pertinent enquiries were made by ld.AO and thereafter assessment order was passed. With regards to the merits of the issue, it is submitted that so far as the allowability of the amortization of the expenses on ‘Toll Road’ is concerned, assessee completed the construction of ‘Toll Road’ in the financial year 2005-06 relevant to AY 2006-07 where the assessee claimed depreciation on the same. While completing the assessment for AY 2006-07 u/s 143(3), the than ld.AO examined the total cost incurred and treatment of government grant which stood reduced from the total cost incurred and thereafter made disallowance of part of the cost claimed in respect to the payments to Engineering and Procurement Contractors and further disallowed the depreciation claimed on the balance cost. This issue travelled upto the hon’ble Supreme Court and assessee succeeded in claim of depreciation on the reduced cost of construction of road as determined by the hon’ble ITAT (APB 207). Thereafter till AY 2013-14, assessee claimed depreciation on the Road on WDV basis and from AY 2014-15 and onwards, in view of the CBDT circular No. 9/2014 amortization of the remaining cost is claimed on year to year basis during remaining concession period. Since it is not the first year of claim of cost of construction of ‘Toll Road’ nor the first year where the assessee has claimed amortization, and the FAO has already made necessary enquires with regard to the allowability of the expenses claimed, it is therefore submitted that the Revision proceedings on this issue are also not in accordance with law. Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 43 With regard to the allowability of donation retuned back and reduced from the total income of the year under consideration, it was explained before the FAO during the course of assessment proceedings that during AY 2017-18 assessee has disallowed a sum of Rs. 1,68,64,596/- pertaining to donations in the computation of income and also no deduction u/s 80G was claimed on such donation. Since the same was not paid, it has been reversed back during F.Y. 2017-18 in the books of accounts. As the same was already disallowed and necessary income tax was paid in AY 2017-18, the same stood reduced from the taxable income computed for the year under consideration. Copy of computation of income and copy of acknowledgment of return of income for AY 2017-18 in support of the claim are enclosed at paper book pages 324-327. It is thus submitted that the assessment order is not erroneous on these issues. It is further submitted that the assessee has paid MAT since it is claiming deduction u/s 80IA on the Income computed under head “Income From Business or Profession” and amortization of expenses on ‘Toll Road’ and donation is claimed out of the business profits eligible for deduction u/s 80IA, thus if any adjustment is made in the claim of these expenses, the same would be eligible for deduction u/s 80IA, and thus would have no impact on the working of MAT having been paid thus it has caused no prejudice to the interest of revenue. It is therefore, submitted that the assessment passed by FAO is neither erroneous nor prejudicial to the interest of revenue on these two issues.” 37. We have considered the facts relevant to this issue and also perused the material on record as well as heard the parties. Ld. DR has placed reliance on the order of the PCIT wherein it has been observed that assessee has claimed an amount of Rs. 22,88,57,512/- as other deductions which inter-alia included amount of Rs. 20,27,54,486/- being amortization of expenses on toll road and Rs. 1,68,64,596/- being deduction claimed in respect of donation returned back. The ld. PCIT noted that as per CBDT circular No. 9/2014 amortization of remaining cost of toll road expenses as on 01.04.2014 was to be allowed in equal amount every year till the period of concession. Ld. PCIT has mentioned Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 44 about not tallying the amount shown in the balance sheet and also theAO not examining about the total cost of the road project and as to how the NHAI grant of Rs. 2110 crore has been adjusted against the total cost. In respect of donation, the PCIT observed that donation was correctly disallowed in earlier year and now in current year it ought not to have been allowed as deduction unless the amount is first credited to Profit & Loss Account. Therefore, the order passed by AO is prejudicial to the interest of revenue on this issue. 38. On the other hand, ld. AR has submitted in his written submission that the assessee completed the construction of toll road in F.Y. 2005-06 relevant to A.Y. 2006-07, where the assessee claimed depreciation. While completing the assessment for AY 2006-07 u/s 143(3), the then AO examined the total cost incurred on construction of toll road and made disallowance of part of the cost claimed in respect of payment to E & P Contractors and also further disallowed depreciation claimed on the balance cost. This issue travelled upto the Hon’ble Supreme Court (APB 207) and assessee succeeded in getting the claim of depreciation allowed on reduced cost of construction of road as determined by Hon’ble ITAT. Thereafter till A.Y. 2013-14 depreciation on the road was claimed on WDV basis and from AY 2014-15 onward amortization of remaining cost is claimed in view of circular No. 9/2014. Thus both the issues namely (i) Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 45 not examining the cost of toll road and (ii) how NHAI grant has been adjusted, now taken up by PCIT in the year under consideration are old issues wherein claim so made by the assessee in those years has been examined and allowed in those earlier years after necessary enquiries and rather part disallowance was made after proper enquiry and scrutiny. Therefore, it cannot be considered as a case of inadequate enquiry that too during the year under consideration. 39. We have given a thoughtful consideration on the aforesaid issue. It is seen that construction of toll road was completed in FY 2005-06 relevant to AY 2006-07 and case of AY 2006-07 was under scrutiny wherein after examining the total cost incurred on toll road and after considering the grant etc. received the AO had made disallowance of part of the cost including disallowance of depreciation also. Thus issue of total cost of construction of toll road and grant received by assessee, both items are related to FY 2005-06 relevant to AY 2006-07 and not related to year under consideration, and moreover as seen from the records, these issues has been examined in the relevant year. Similarly the amortization of expenses on toll road have been made effective from AY 2014-15 onward in view of CBDT circular No. 9/2014. The case of AY 2014-15 was also scrutinized and thereafter case of AY 2015-16, 2016-17 and 2017-18 have also been scrutinized. Accordingly we do not see any Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 46 reason of concurring with the direction of ld. PCIT given in the order u/s 263 of examining these issues related to preceding years, now during the year under consideration, which have already been examined in the past. 40. Now coming to the issue of allowability of donation, it is seen that in the preceding year i.e. AY 2017-18, the assessee has disallowed a sum of Rs. 1,68,64,596/- pertaining to donation in the computation of income and further no deduction u/s 80G was claimed. Since the same was not actually paid in FY 2016-17, it has been reversed back during FY 2017- 18 in the books of accounts. As the same was already disallowed and tax was paid in AY 2017-18 and amount being reversed back in the year under consideration, same has been reduced from the taxable income computed for the year under consideration. Considering these facts we see no reason to treat the order of FAO as erroneous and prejudicial to the interest of revenue on this issue. Therefore, ground No. 4 & 5 of the assessee are allowed. 41. In ground No. 6 the assessee has challenged the observation of ld. PCIT in treating the assessment order as erroneous and prejudicial to the interest of revenue on the issue of TDS on managerial commission. 42. The written submission so filed by ld. AR is reproduced below: “5. TDS on managerial commission; Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 47 In this regard, ld. PCIT in his order has observed that in clause 23 of form 3CD, the auditors have reported that an amount of Rs 1,20,32,634/- was paid to a specified person Shri Krishan Ram Bhupal as commission but in clause 34(a) of 3CD there is no payment u/s 194H on which TDS is made. It was thus concluded that, no TDS was made by the assessee on such commission payment of Rs 1.20 crores. Also, it was observed that commission was not claimed in profit and loss account of the ITR, which implied that the amount of Rs 1.20 crore reported as commission in clause 23 of 3 CD has been debited in profit and loss account in any other head of expenses instead of commission. It was thus inferred that FAO has not verified as to under which head it has been claimed/debited and whether TDS compliances were made or not. Accordingly ld. PCIT held the assessment order as erroneous on this issue. Detailed submission was made before ld. PCIT in this regard, however the same were brushed aside. In this regard it is submitted that while finalizing the accounts for the year ending FY 2017-18 relevant to AY 2018-19, managerial remuneration was computed by assessee @1% of net profit before taxes as per the provisions of The Companies Act, 2013. Since it was a provision made at the end of the year, TDS provisions were not applicable for the same. Also, commission remained unpaid and lying in the outstanding balance even till revision proceedings were going on. It is further submitted that Commission to M.D. was grouped under salaries in the Profit and Loss Account. It is further submitted that the assessee has paid MAT since it is claiming deduction u/s 80IA on the Income computed under head “Income From Business or Profession” and managerial remuneration is claimed under the head “Salary” out of the business profits eligible for deduction u/s 80IA, thus even if any adjustment is made in it, the same would be eligible for deduction u/s 80IA, and thus would make no impact on the book profit therefore, it is not prejudicial to the interest of revenue. Since the managerial remuneration has been claimed as provided under the Companies Act, it is not erroneous also. It is thus submitted that the assessment passed by FAO on this issue is neither erroneous nor prejudicial to the interest of revenue, therefore directions for revision of assessment on this issue is also unjustified.” 43. The Ld. DR has placed reliance on the order of the Ld. PCIT. 44. We have considered the facts relevant to this issue and also perused the material on record as well as heard the parties. The ld. PCIT noticed that as per clause 23 of form 3CD, auditor has reported that amount of Rs. Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 48 1,20,32,634/- was paid to a specified person namely Shri Krishan Ram Bhupal as commission but TDS has not been deducted. Moreover, this commission expense was not noticed in Profit & Loss Account which indicated that it has been debited under any other head of expenses. In response to show cause, the ld. AR submitted before the PCIT that the managerial commission was worked out @ 1% of net profit to be payable to MD but since it was a provision made at the end of year, the TDS was not applicable. After considering the reply, ld. PCIT held that the order of AO is erroneous though not prejudicial to the revenue, in as much as that AO should have informed the concerned TDS authorities. 45. The ld.AR has submitted before us that while finalizing the account managerial commission was computed @ 1% of net profit and since it was a provision made at the end of the year, TDS provisions were not applicable. Also the commission remained unpaid and lying as outstanding balance till the revision proceedings were going on. Moreover, commission to MD was grouped under salaries in the Profit & Loss Account. It was also submitted that without prejudice to above this expense being part of profit of eligible business, even if added, will be consequently effectively allowed by way of increased claim u/s 80IA. Hence on this issue also the order of AO cannot be said to be erroneous and prejudicial to the interest of revenue. Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 49 46. The ld. PCIT has herself held that order of ld. FAO is not prejudicial to the interest of revenue on this issue but is erroneous only. Other aspects of such expense not being seen under the head “commission” in the Profit & Loss Account has been answered by ld. AR that this being managerial commission, has been debited under the head “Salaries”. Hon’ble Courts have held in number of cases that twin condition is to be satisfied for an order of AO to be hit by provisions of section 263. Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT reported in 243 ITR 83 (SC) has held that :- “A bare reading of section 263 of the Income Tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suomotu under it, is that the order of the Income Tax Officer is erroneous is so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent – if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue – recourse cannot be had to section 263(1) of the Act.” Considering the aforesaid decision of Hon’ble Apex Court and other decisions so mentioned the order of AO cannot be considered to be hit by the provision of section 263 on this issue. Accordingly ground of appeal No. 6 of assessee is allowed. 47. Based on the discussion so recorded we are of the considered view that the proceedings initiated u/s 263 fails on the twin condition and there Printed from counselvise.com ITA No. 248/JPR/2023 M/s GVK Jaipur Expressway Pvt. Ltd. 50 is no independent view of the ld. PCIT even on merits of the issue and therefore the ground No. 1 to 7 raised by the assessee are allowed. 48. Ergo, we quash the order passed by the Ld. PCIT. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 19/08/2025. Sd/- Sd/- ¼ jkBkSM+ deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 19/08/2025 *Santosh vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- M/s GVK Jaipur Expressway Pvt. Ltd., Telangana. 2. izR;FkhZ@ The Respondent- PCIT-2, Jaipur. 2. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File { ITA No. 248/JPR/2023 } vkns'kkuqlkj@ By order lgk;d iathdkj@Asst. Registrar Printed from counselvise.com "