MADHYA GUJARAT VIJ COMPANY LTD.,VADODARA V. THE PR. CIT-1, VADODARA

ITA 191/AHD/2022

AI Insights

The case involves Madhya Gujarat Vij Company Ltd. appealing against the order of the Principal Commissioner of Income Tax-1, Vadodara, which exercised its revisionary jurisdiction under Section 263 of the Income Tax Act, 1961. The PCIT had found the assessment order for the year 2017-18 to be erroneous and prejudicial to the interest of the revenue on three counts: allowance of unpaid bonus, allowance of interest accrued but not due on PFC loans, and incorrect calculation of amounts written back from capital grants and subsidies. The Tribunal examined each issue, considering the arguments and evidence presented by both parties, and made determinations based on the legal provisions and facts of the case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29679 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRATHVI RAJ MEENA
• Assessee Lawyers: M. K. PATEL
• Keywords: Set aside; Capital asset; Opportunity of being heard; Depreciation; Assessment record; Revision of order
• Section: 143(3); 263; 13; 43B

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “डी“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ D ” BENCH, AHMEDABAD ] ] BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं /ITA No.191/Ahd/2022 िनधा \u000fरण वष\u000f /Assessment Year : 2017-18 Madhya Gujarat Vij Company Ltd. Sardar Patel Vidyut Bhavan Race Course Vadodaa – 390 007 बनाम/ v/s. Pr.Commissioner of Income Tax-1 Vadodara – 390 007 \u0013ायी लेखा सं./PAN: AADCM 7439 H (अपीलाथ\u0018/ Appellant) (\u0019\u001a यथ\u0018/ Respondent) Assessee by : Shri M.K. Patel, Advocate Revenue by : Shri Prathvi Raj Meena, CIT-DR सुनवाई की तारीख/Date of Hearing : 27/12/2024 घोषणा की तारीख /Date of Pronouncement: 10/01/2025 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: The above appeal has been filed by the assessee against the order dated 31/03/2022 passed by the Ld. Principal Commissioner of Income-Tax (hereinafter referred to as “ld.PCIT) in exercise of his revisionary jurisdiction under Section 263 of the Income-Tax Act, 1961 [hereinafter referred to as \"the Act\" for short] for Assessment Year (AY) 2017-18. 2. Grounds raised by the assessee are as under: 1.0 The learned Pr. Commissioner of Income Tax-1, Vadodara has erred in law and on facts in holding that the assessment order dated 29-12-2019 passed under section 143(3) of the Income Tax Act, 1961 is erroneous and prejudicial to the interest of revenue and thereby erred in invoking the provisions of section 263 of the IT Act ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 2 2.0 The learned Pr. Commissioner of Income Tax-1, Vadodara erred in law and on facts has held that the assessment order dated 29-12-2019 passed under section 143(3) of the Income Tax Act, 1961 is erroneous and prejudicial to the interest of revenue on the ground that the Assessing Officer failed to verify and examine the claim of (i) Bonus; (ii) interest accrued but not due on loans from PFC and (iii) Amount transferred to Profit & Loss Account in respect of Capital Grants & Subsidies and Consumer Contribution. The learned Pr. Commissioner of Income Tax-1, Vadodara failed to appreciate that the above claims were duly verified and examined by the Assessing Officer at the time of assessment proceedings. 3.0 The learned Pr. Commissioner of Income Tax-1, Vadodara erred in law and on facts has set aside the assessment order passed on 29-12-2019 under section 143(3) of the IT Act. 4.0 The above grounds of appeal are without prejudice to each other. 5.0 The appellant craves leave to add to, alter, delete or modify any of the grounds of appeal either before or at the time of hearing of this appeal. 3. As transpires from the order of the Ld.PCIT, the revisionary jurisdiction was exercised by him u/s.263 of the Act on the assessment order made in the case of the assessee in the impugned year u/s.143(3) of the Act finding the same to be erroneous causing prejudice to the Revenue on three counts: 1. For allowing claim of bonus which was unpaid, amounting to Rs.2,02,67,957/-, in violation of the provisions of section 43B of the Act. 2. For allowing claim of interest accrued but not due on PFC (RAPDRP) which was unpaid, amounting to Rs.17,91,17,390/-, in violation of the provisions of section 43B of the Act and 3. on account of the addition made by the AO to the income of the assessee of Capital Grants & Subsidies and Consumer Contribution written back during the year being short to the tune of Rs.52,47,39,161/-. ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 3 4. All these issues were confronted to the assessee during the revisionary proceedings, who submitted his explanation contending that there was no error on the impugned issues in the assessment order. The Ld.PCIT, however, held that in the reply furnished by the assessee, certain details in respect of the issues had been furnished in the proceedings before him u/s.263 of the Act, which details were not furnished during assessment proceedings before the AO, therefore, he found that the AO had not made necessary verifications/enquiries on the issue which should have been during assessment proceedings. Accordingly, invoking Explanation-2 to section 263 of the Act, as per which any order passed without making any enquiries or verification which should have been made is deemed to be erroneous causing prejudice to the Revenue, the Ld.PCIT held that the assessment order passed in the present case was erroneous causing prejudice to the Revenue and, accordingly, he set aside the assessment order passed by the AO directing him to pass fresh assessment order. 5. We have heard both the parties, gone through the order of the Ld.PCIT and perused the material available on record. The argument of the ld.counsel for the assessee viz-a-viz all the three issues noted by the Ld.PCIT to have not been properly examined by the AO was - (i) That, all the issues were examined/enquired into by the AO during the course of assessment proceedings, due reply filed by the assessee, after considering which the AO took legally correct view of no disallowance/addition to be made in the hands of the assessee. (ii) That, necessary explanation, in this regard, that there was no error in the order of the AO vis a vis the impugned issues, was also furnished to the Ld.PCIT, who disregarded the same and ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 4 went on to hold that the assessment order was erroneous causing prejudice to the Revenue. 6. We shall now be adjudicating the appeal dealing with each issue raised by the Ld.PCIT considering all the explanations and evidences referred to by the assessee as well as the contentions of the Ld.DR. 7. Taking up the first issue of allowance by the AO of bonus remaining unpaid amounting to Rs.2,02,67,957/- in violation of the provisions of section 43B, as per the Ld.PCIT, the assessment records revealed this amount of bonus as remaining unpaid during the year, and despite so the AO had not made any disallowance of the same u/s.43B of the Act, which mandates bonus to be allowed only on payment basis. 8. The assessee’s contention against this finding of the Ld.PCIT was that this issue had been inquired into during assessment proceedings by the AO and demonstrated to him that the said amount was not unpaid by the assessee but was paid before the due date of filing of the income-tax return. That, accordingly, the AO had rightly allowed the claim of this amount of bonus to the assessee in terms of the provisions of section 43B of the Act. That, this explanation was furnished to the Ld.PCIT also. It was contended that this fact of the bonus of Rs.2.02 crores being not unpaid but was paid by the due date of filing of the return of income was duly reflected, as such, in the Tax Audit Report furnished by the assessee. 9. In this regard, with respect to the enquiry conducted during the course of assessment proceedings, our attention was drawn to notices issued u/s.142(1) of the Act dated 28/08/2019, placed before us in the Paper Book (PB) at page No.123 and that issued on 12/11/2019, placed before us in the ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 5 PB at page Nos.25 to 32. From the same, it was pointed out that the assessee was asked to furnish its Tax Audit Report and was asked to furnish evidences with regard to claim of deduction on account of bonus. Thereafter, our attention was drawn to the reply dated 18/10/2019 furnished by the assessee in respect to both the notices which was placed before us in the PB at page No.24 and dated 26/11/2019 placed in the PB at page Nos.33 to 53 respectively. Referring to the same, it was pointed out that, in response, the assessee had filed copy of the Tax Audit Report, which duly reflected the amount of bonus of Rs.2.02 crores as having been paid before the due date of filing of the income-tax return. Copy of the Tax Audit Report reflecting the said fact was placed before us, wherein it was pointed out that the assessee at point No.26(i)(B)(a) had reflected bonus of Rs.2.02 crores as liability incurred during the impugned year paid on or before the due date of filing the return of income u/s.139(1) of the Act. 10. With regard to the submissions made before the Ld.PCIT on this issue, our attention was drawn to the assessee’s reply in response to the notice issued by the Ld.PCIT u/s.263 of the Act, which was placed before us at page Nos.62 to 74 of the Paper Book submitted by the assessee. More particularly, our attention was drawn to PB at page No.60, wherein the assessee had in very clear terms submitted to the Ld.PCIT that the amount of bonus of Rs.2.02 crores stood paid before the due date of furnishing of return of income u/s.139(1) of the Act , which fact it was stated was verifiable from the Tax Audit Report for the year, copy of which was also furnished to the Ld.PCIT along with reply. The assessee, had, therefore, stated that there was no need in adding back the said amount of bonus which already stood paid by the assessee. ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 6 11. Considering the above submissions of the Ld.Counsel for the assessee, it is evident that during the course of assessment proceedings itself the assessee had placed the copy of the Tax Audit Report to the AO, wherein the amount of bonus of Rs.2.02 crores was reflected as paid before the due date of filing of the return of income. The said fact was also communicated to the Ld.PCIT. Having noted the above facts, we now turn to the findings of the Ld.PCIT holding the assessment order to be erroneous on this count. 12. As noted in the earlier part of our order, the Ld.PCIT has generalized his findings with respect to the all three issues at paragraph No.7 of his order, as under: “7. I have carefully considered the facts of the case, assessment records and the written reply furnished by the assessee. The facts of the case have already been discussed herein above and the reasons/grounds on which the proceedings under Section 263 of the I.T. Act have been initiated have been discussed in the initial paragraphs of this order. On perusal of the reply furnished by the assessee, it is noticed that the assessee has furnished certain details in respect of the issues mentioned in the show cause notice issued during the course of the proceedings u/s 263 of the I.T. Act. However, on perusal of the case records, it is noticed that no such details/explanation in respect of the above issues are found to have been furnished by the assessee during the course of assessment proceedings. It is also found that the Assessing Officer has not made necessary verification or inquiries on the issues as mentioned above which should have been made during the course of assessment proceedings. On perusal of the case records, it is found that the Assessing Officer has finalised the assessment without making necessary verification or inquiry on the above issues during the course of assessment proceedings and accordingly the assessment order u/s 143(3) of the I.T. Act passed by the Assessing Officer for the A.Y. 2017-18 on 29/12/2019 is found to be erroneous in so far as it is prejudicial to the interest of revenue within the meaning of Section 263 of the I.T. Act. Here it is pertinent to refer to the relevant provisions of the Section 263(1) of the I.T. Act which reads as under: 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 7 enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 7.1. Explanation 2 to Section 263 of the I.T. Act has been inserted by the Finance Act, 2015 w.e.f. 01/06/2015. The relevant portion of the same is reproduced as under: Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 7.2. In view of the above explanation, if an order is passed without making verification or inquiry which should have been made during the course of assessment proceedings, then clause (a) of the Explanation 2 to Section 263(1) of the I.T. Act 1961 would be applicable. Here in the instant case, as stated in the foregoing paragraphs, it is found that the Assessing Officer has not made any verification or inquiry on the above issues which should have been made during the course of assessment proceedings. Accordingly, this case is covered by clause (a) of the Explanation 2 to Section 263(1) of the I.T. Act 1961. 7.3. From the above position of the law, it is amply clear that after insertion of Explanation 2 to Section 263 from 01/06/2015 onwards, it is sufficient that if the concerned Principal Commissioner of Income-tax satisfy himself that the order was passed without making inquiries or verification which should have been made and hence clause (a) of Explanation 2 to Section 263 of the I.T. Act was clearly applicable in the case of the assessee. In this case, on perusal of the assessment records, it is apparent that the issues as mentioned above have not been verified or inquired into by the Assessing Officer during the course of assessment proceedings and hence, the provisions of Section 263 of the I.T. Act are clearly attracted in this case. 13. As per the Ld.PCIT, the assessment order was held to be erroneous for the reason that the assessee has furnished certain details with respect to the issue of bonus before him which were not there before the AO and the AO , ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 8 therefore, had not made necessary enquiries or verification with respect to the same. 14. It is clearly evident from the facts noted by us regarding the enquiry conducted by the AO on the issue of bonus, that the finding of the Ld.PCIT that the assessee has now furnished certain fresh details which were not considered by the AO is blatantly incorrect and false. All explanations with evidences demonstrating the fact of bonus having been paid before due date of filing of return of income was furnished to the AO during assessment proceedings itself. Therefore, the finding of the Ld.PCIT that the assessee has now furnished fresh details which needed to be looked into by the AO and verified, is found to be incorrect by us. 15. Moreover, we agree with the Ld.Counsel for the assessee that even on merits, no disallowance of bonus amounting to Rs.2.02 crores was called for since the assessee had established both to the AO and the Ld.PCIT that the assessee had not claimed the said amount as an expense in violation of provisions of section 43B of the Act, having paid the same before the due date of filing the return of income, which fact was certified by the Tax Auditor in its Tax Audit Report. The bonus was clearly demonstrated to be not unpaid. 16. The Ld.DR was unable to controvert the factual contention of the Ld.Counsel for the assessee b, both with regard to the examination of the impugned issue by the AO and the fact of the assessee having demonstrated both to the AO and the Ld.PCIT of the bonus not remaining unpaid, but in fact paid before the due date of filing of return of income. The Ld.DR was unable to point any infirmity accordingly in the allowance of claim of Bonus of Rs. 2.02 Crs by the AO in terms of the provisions of section 43B of the Act. ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 9 Therefore, we hold that the AO had taken a legally correct view by not making any disallowance of bonus expenses. 17. The finding of error therefore on the issue of the assessment order being erroneous for having allowed the assessee’s claim to bonus of Rs.2.02 corres allegedly on violation of provisions of section 43B of the Act is accordingly set aside. 18. Taking up the next issue of allowance of interest expenses paid on PFC loan (RAPDRP) amounting to Rs.17,91,17,390/- against in alleged violation of provisions of section 43B of the Act on account of the same, having remained unpaid 19. The contention of the Ld.Counsel for the assessee of the same having been examined during the assessment proceedings was demonstrated by referring to the notice issued by the AO u/s.142(1) dated 12/11/2019, copy placed before us at page No.27 of the PB, from where it was pointed out that the AO had specifically asked the assessee at point No.8 of the notice to “furnish details of interest pertaining to the year under consideration in respect of loan taken from PFC & REC under different projects/scheme separately and whether the outstanding interest as on 31/03/2017 in respect of these loans had been paid by the due date of filing the return of income furnished date of payment)”. The assessee it was pointed out, furnished reply to the same vide his letter dated 26/12/2019, placed before use at page Nos.75 to 79 of the PB. Our attention was drawn to the reply furnished by the assessee to this specific query at page No.76, wherein the assessee furnished details of interest pertaining to interest from loan from REC and PFC along with its actual date of payment vide Annexure B. ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 10 20. Thereafter, with respect to the explanation and reply furnished during revisionary proceedings to the Ld.PCIT, our attention was drawn to Page No.62 of PB submitted by the assessee from where it was pointed out that the assessee had explained in detail to the Ld.PCIT that the provisions of section 43B of the Act were not attracted to interest amounting to Rs.17.91 crores which accrued on the loans from PFC for the reason that this had not become due for payment for the impugned year and the provisions of section 43B of the Act, therefore did not apply to such claims which had not become due for payment. It was pointed out that the assessee had explained to the Ld.PCIT that these loans were issued with the term and condition that they would be converted into capital grants on the fulfilment of certain stipulated condition and the fulfilment of the conditions was to be seen up to January-2017 after which if the conditions were found to be not furnished, the loans were to be repaid with interest in installments over a period of four years. It was also pointed out that the assessee had explained to the Ld.PCIT that this moratorium period upto January-2017 had been extended upto January-2022. Similar explanation had been furnished with respect to the APDRP scheme loan also. Our attention was drawn to the contents to the same, is as under: “2) Interest accrued but not due on loans from PFC It has been stated in the notice that there was interest amounting to Rs. 17,91,17,390/- accrued but not due on loans from PFC, which remained unpaid till the date of filing of the Return, has not been disallowed by the Assessing Officer under section 438 white completing assessment under section 143(3) of the IT Act. It is submitted that the facts of the case have not been considered in totality. This is because although the Loan was from PFC, being a Financial institution falling within the meaning of section 438 of the IT Act, the impugned interest amounting to Rs.17,91,17.390/- did not become due to be paid till the date of filing of the IT Return of the year under consideration. Hence the provisions of section 438 does not apply to same. The facts are clearly reflected in the Notes to the Audited Annual Accounts, ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 11 copy of the relevant extracts from the Notes to Accounts is enclosed herewith as Annexure B. As per terms of Part-A, the loan of Rs.5,554.55 lakhs may be converted into capital grant on fulfilment of stipulated conditions. If conditions are not fulfilled, the loan is repayable in remaining 29 monthly instalments over a period of 3 years at an average of Rs.191.54 lakhs each. As per terms of SCADA Part-A, for the loan of Rs.701.00 lakhs may be converted into capital grant on fulfilment of stipulated conditions. If conditions are not fulfilled, the loan is repayable in 40 monthly instalments over a period of 4 years at an average of Rs.17.52 lakhs each starting from January-2017. As a matter of facts, this period moratorium period was extended and R- APDRP Part A loan along with interest accrued thereon has been converted into loan in January 2022, Copy of intimation and confirmation letter of the same received from Power Finance Corporation Ltd. (PFC) is enclosed herewith as Annexure C. Further, as per terms of Part-B of R-APDRP Scheme, the loan of Rs.1,105.20 lakhs will be converted into Grant up to 50% on fulfilment of stipulated conditions. The loan will be paid in 140 monthly instalments over a period of 14 years at an average of Rs.7.62 lakhs. If conditions are not fulfilled, further Rs.1,525 lakhs are disbursed for Additional Anand & Dahod towns and SCADA under RAPDRP Part B, it will be converted into Grant up to 50% on fulfilment of stipulated conditions. The loan will be repaid in 150 monthly instalments over a period of 15 years at an average of ₹ 10.17 lakhs, starting from March-2021, if conditions are not fulfilled, starting from June-2021. Rate of Interest is 9% p.a.. In view of the facts, it is clear that as per the terms of sanction of Loan by PFC the Company was not liable to pay any instalment either of principle or interest at least till 31.03.2017. It was only because the Company is following the mercantile system of accounting and as per the Companies Act and various Accounting Standards, it has to mandatorily recognize and account the interest accrued on all the borrowings, the Company has accounted the said interest. However, the provisions of section 43B of the IT Act cannot be made applicable to the same. The law is well settled on the issue that the book entries are totally irrelevant for the purpose of making allowances and/or disallowances under any provision of the IT Act.” Under the circumstances, it is submitted that there is no infirmity in the claim of interest on PFC loan under 43B of the IT Act 1961 and the issue requires no revision. 21. The Ld. DR however relied on the order of the Ld.PCIT. ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 12 22. Having considered the contentions of both the parties, we do not find any infirmity in the finding of error by the Ld.PCIT on this issue of interest on PFC loans of Rs.17.91 Crs being allowed by the AO without proper inquiry. The fact that this interest remained unpaid during the year is not disputed by the assessee. The assessee admits to the same in its explanation furnished to the Ld.PCIT and also the AO. It is also not disputed that such interest is allowable only on payment basis as per section 43B of the Act. The only explanation given by the assessee vis a vis the unpaid interest expense not being disallowable u/s 43B of the Act is that it had not become due for payment and therefore could not be disallowed on account of remaining unpaid. We fail to understand how this explanation justifies the case of the assessee of the unpaid interest not being disallowable u/s 43B of the Act. There is no dispute with regard to the position of law u/s 43B of the Act allowing such interest payments only on payment basis . In the light of the clear position of law, we fail to understand how an unpaid interest, even if not accrued for payment, is allowable. No judicial decisions to support the contention of the assessee was filed at any stage, i.e the AO, the Ld.PCIT or even before us. Therefore it is evident that the AO had not examined the issue of allowability of unpaid interest in the light of the provision of law u/s 43B of the Act and neither has the assessee been able to demonstrate allowability of the same u/s 43B of the Act. 23. The findings of the Ld.PCIT therefore of the assessment order being erroneous so as to cause prejudice to the Revenue for allowing unpaid interest on PFC loans of Rs.17.91 Crs in violation of the provisions of section 43B of the Act, is therefore upheld . ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 13 24. With respect to the last issue of Capital Grants & Subsidies and Consumer Contribution written back by the assessee on account of which addition was made by the AO but was found to be short by the Ld.PCIT to the tune of Rs. 52,47,39,161/-, the case of the Ld.PCIT was that undoubtedly the AO had examined the issue during assessment proceedings and made addition, but while calculating the amount found by him to have been written back short by the assessee, he had made an error. 25. The Ld.PCIT notes that during assessment proceedings the assessee had explained to the AO that the Capital Grants & Subsidies and Consumer Contribution being utilized towards infrastructure development of the assessee, by way of setting up distribution network for the distribution of electricity which business the assessee was into, the assessee was writing back every year 5.28% of these grants and contribution. The assessee furnished a calculation of the same pointing out as to how it had written back amount of 9568.27 lakhs on this account by way of adding back 5.28% of the Government Grants and Consumer Contribution during the year and those pertaining to the preceding year. The AO, however, was not satisfied with the explanation of the assessee noting that the assessee had not furnished the year-wise bifurcation of the amount transferred to the P&L A/c. and, therefore, he went on to make his own calculation of the amount of such grants and contributions which needed to be transferred to the P&L a/c. during the year. As per the AO, the assessee ought to have written back @ 15% of the grants and consumer contribution, which according to him worked out to Rs.17,464.94 lakhs and noting that the assessee had transferred only an amount of Rs.9568.27 lakhs, the remaining amount as per the AO of Rs.11,317.93 lakhs was added back to the income of the assessee. The Ld.PCIT therefore noted that the AO had made addition of Rs.11,317.93 lakhs to the ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 14 income of the assessee on account of amounts to be written back to the P&L A/c. from Capital Grants & Subsidies and Consumer Contribution received by the assessee. 26. The Ld.PCIT noted a mistake in this calculation of Rs.11317.93 lakhs added back by the AO to the income of the assessee. He noted that while the assessee had transferred an amount was only Rs.9,00,61,839/-(900 lacs) in the P&L A/c. for the year under consideration on this aspect, the AO had allowed the assessee benefit of Rs.6148.01 lakhs while calculating the amount short transferred to the P&L A/c. According to the Ld.PCIT, therefore, the AO had allowed excess deduction / relief of Rs.52,47,39,161 [Rs.66148.01 lakhs (-) 900.61 lakhs ] (5247 lacs)without making verification or enquiry in respect of the above excess claim of deduction. These facts are noted at page 5 of the Ld.PCIT’s order are reproduced hereunder:- “The Assessing Officer concluded that claim of the assessee was not factually correct. It was evident from Schedule DPM of the ITR that the assessee has claimed depreciation @ 15% on the assets of Plant and Machinery. Though the assessee has recognized the grant and consumer contribution @ 5.28% for the year under consideration aggregating to Rs.9568.27 lacs and transferred the same to the Profit & Loss Account, it would be Rs.6148.01 lacs for the F.Y. 2016-17 i.e. for the year under consideration, as computed above. Accordingly, the remaining amount of Rs.3420.26 lacs (9568.27 lacs-6148.01 lacs) is found to be pertaining to the earlier years. Further, it was noticed that the Assessing Officer has computed the amount required to be transferred to Profit & Loss Account at Rs.17464.94 lacs being 15% of Rs.116439.60 lacs (i.e. total year-end balance of subsidies, grant & contributions towards capital assets of Rs.106871.33 lacs transferred to balance sheet + Rs.9568.27 lacs transferred to Profit & Loss Account) and remaining amount of Rs.11317.93lacs (17465.94 lacs6148.01 lacs) was added to its total income. However, on verification of the submission dated 04/12/2019 (Annexure-A) furnished by the assessee, it was noticed that the assessee has transferred an amount of Rs.9,00,61,839 only in the Profit & Loss Account for the year under consideration. Accordingly, the amount required to be transferred to Profit & Loss Account was Rs.9,00,61,839/- only as against Rs.6148.01 lakh allowed by the Assessing Officer. From the above facts, it was found that the Assessing Officer has allowed the excess deduction/ relief of Rs.52,47,39,161/- Rs.61,48,01,000 Rs.9,00,61,839) without making verification or ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 15 inquiry in respect of the above excess claim of deduction/ relief of Rs.52,47,39,161/-“. 27. The Ld.counsel for the assessee pointed out that in the revisionary proceedings, the assessee had clarified to the Ld.PCIT that his entire basis for holding that the addition made by the AO on this amount was erroneous was based on incorrect appreciation of facts. He pointed out that it had been clarified to the Ld.PCIT that the assessee has not transferred an amount of Rs.900.61 lakhs but, in fact, transferred an amount of Rs.9568.27 lakhs. That, accordingly, the AO had not allowed any excess deduction or relief as compared to the amount noted to be allowable by the AO of Rs.6148.01 lakhs. In fact, the assessee had added back a greater amount of Rs.9568.27 lakhs as compared to Rs.6148.01 lakhs found to be allowable by the AO. In this regard, he drew our attention towards the reply filed to the Ld.PCIT at page No.65 of the PB submitted by the assessee, is as under: “THUS, TOTAL AMOUNT OF ₹95,68,27,264.55/- HAS BEEN TRANSFRRED TO PEL ACCOUNT WHICH IS 5.28% (ON SLM BASIS) OF THE GRANTS RECEIVED STARTING FROM THE FINANCIAL YEAR 2005-06 TO FINANCIAL YEAR 2016-17. SO HOW IT CAN BE SAID THAT ONLY 29,00,61,893.19/- HAS BEEN TRANSFERRED TO THE PEL ACCOUNT THOUGH THE AMOUNT TRANSFERRED OF ₹95,68,27,264.55/- IS CLEARLY BEING SHOWN IN THE PROFIT AND LOSS ACCOUNT OF THE YEAR UNDER CONSIDERATION, THUS, THE SAID ISSUE DOES NOT REQUIRE ANY REVISION.” Considering the above facts and circumstances, it is submitted that there is no error in the assessment order passed under section 143(3) of the IT Act and the same is not prejudicial to the interest of revenue in any manner.” 28. Even during the course of hearing before us, the Ld.Counsel for the assessee pointed out that from the order of the Ld.PCIT that he had even noted the fact of the assessee having transferred Rs.9568.27 lakhs to the P&L A/c at page 5 of his order reproduced above by us, but while finding error in ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 16 the order of the AO, he had noted the assessee to have transferred only Rs.900.61 lakhs which was incorrect. 29. The Ld.DR before us, though was unable to controvert this factual contention of the assessee, however, he relied heavily relied on the order of the Ld.PCIT on this issue that the assessee had furnished before him explanation which were not furnished during the course of assessment proceedings and, therefore, was not examined by the AO. 30. Having heard both the parties, we do not find any merit in the finding of error by the Ld.PCIT on the issue of write back of capital grants and consumer contribution being short. The assessee, we have noted, has not furnished any fresh detail to the Ld.PCIT but, in fact, he has pointed out to him the incorrect facts noted by him while arriving at this finding of the error on this issue. He had categorically pointed out from the facts on record the incorrect fact noted by him of the amount written back by the assessee in its Profit and loss account and had demonstrated the correct figures from the records itself . The assessee had also demonstrated that factually there was no shortfall in the amount of grants and contribution written back. The Ld.DR was also unable to controvert the factual contention of the Ld.Counsel for the assessee. 31. The Ld.PCIT has recorded his finding of error completely ignoring the factual averments of the assessee before him demonstrating otherwise. In view of the same, we do not find any merit in the finding of error by the Ld.PCIT on the issue of the amount of subsidy and grants written back being short. ITA No.191/Ahd/2022 Madhya Gujarat Vij Company Ltd. vs. Pr.CIT Asst. Year : 2017-18 17 32. In effect, therefore, we uphold the order of the Ld.PCIT finding error in the order of the AO causing prejudice to the Revenue only on the issue of unpaid interest on PFC amounting to Rs.17.91 Crs being allowed without not being examined by the AO in the light of the provisions of section 43B of the Act. On the remaining issues of allegedly unpaid bonus of Rs.2.02 Crs being allowed to the assessee in contravention of section 43B of the Act and write back of grants and contribution being short by Rs.52.47 Crs, we do not find any merit in the findings of error by the Ld.PCIT. 33. The order of the Ld.PCIT accordingly is partly confirmed and so also the appeal of the assessee is partly allowed. 34. In the result, the appeal of the assessee is partly allowed. Order pronounced in the Open Court on 10th January, 2025 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 10/01/2025 "