VERSATILE CARD TECHNOLOGY PRIVATE LIMITED ,SIDCO,CHROMEPET,CHENNAI V. PRINCIPAL COMMISSIONER OF INCOME TAX, CHENNAI-3, INCOME TAX OFFICE, MAIN BUILDING - IV FLOOR, NUNGAMBAKKAM, CHENNAI

ITA 1392/CHNY/2024

AI Insights

The case involves Versatile Card Technology Private Limited, which appealed against the order of the Principal Commissioner of Income Tax (PCIT), Chennai-3, directing the addition of Rs.5,22,15,905 to the book profits under section 115JB of the Income Tax Act. The PCIT's order was based on the grounds that the assessee had improperly credited excess depreciation to the 'Reserves and Surplus' account instead of routing it through the profit and loss account. The Tribunal examined whether the PCIT's order was justified under section 263, which allows for revision of an assessment order if it is found to be erroneous and prejudicial to the interests of the revenue. The Tribunal concluded that the PCIT's order did not meet the criteria for revision under section 263, as the Assessing Officer had adequately addressed the issue during the reassessment.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 29967 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 09-05-2024
• Other Referred Cases: M/s.Rational Handloom Pvt. Ltd., ACIT vs. Srinivas Synthetics P Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILAY BARAN SOM
• Assessee Lawyers: GOPAL KRISHNA RAJU
• Keywords: Set aside; Reassessment proceedings; Depreciation; Additional depreciation; Tax effect; Principle of natural justice; Assessment record; Revision of order
• Section: 147; 148; 143(3); 263; 13; 115JB

Judgement Text

" आयकर अपीलीय अिधकरण,‘ए’ ᭠यायपीठ,चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ᮰ी एबी टी. वक᳹, ᭠याियक सद᭭य एवं ᮰ी एस. आर.रघुनाथा, लेखा सद᭭य के समᭃ BEFORE SHRI ABY T. VARKEY, HON’BLE JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./ITA No.: 1392/Chny/2024 िनधाᭅरणवषᭅ / Assessment Year: 2016-17 Versatile Card Technology Private Limited, AC-21, 4th Main Road, SIDCO Industrial Estate, Thirumudivakkam, Chrompet, Chennai – 600 044. [PAN:AABCV-0567-B] v. Principal Commissioner of Income Tax, Chennai -3, Income Tax Office, Main Building, IV Floor, Nungambakkam, Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮकᳱओरसे/Appellant by : Shri. Gopal Krishna Raju, CA ᮧ᭜यथᱮकᳱओरसे/Respondent by : Shri. Nilay Baran Som, CIT सुनवाई कᳱ तारीख/Date of Hearing : 06.08.2024 घोषणा कᳱ तारीख/Date of Pronouncement : 18.10.2024 आदेश /O R D E R PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the learned Principal Commissioner of Income Tax (Appeals), Chennai-3, dated 30.03.2024 and pertains to assessment year 2016-17. 2. The assessee has raised the following grounds of appeal: “1. The impugned order is illegal, opposed to the facts, contrary to law, without jurisdiction and against the principles of natural justice and therefore liable to be quashed. :-2-: ITA. No: 1392/Chny/2024 2. The learned PCIT erred in issuing notice under section 263 on 25.03.2024 requiring the assessee to file reply on or before 28.03.2024 without giving adequate time to respond in a proper manner. 3. The learned PCIT ought to have seen that allowing only 2 clear days was not sufficient and this inadequate time caused prejudice to the assessee in as much no time was available to consult the experts on the subject. 4. The learned PCIT erred in directing the assessing officer to add Rs.5,22,15,905/- to the book profits under section 115JB without noticing that the assessee paid tax under section 115JB only for AYs. 2005-06 and 2013-14. 5. The learned assessing officer ought to have seen that the assessee paid tax under the normal provisions of the Income- tax Act in respect of all the remaining AYs and therefore the reversal of excess depreciation relating to those AYs could not be added to the book profits under section 115JB. 6. The learned PCIT failed to distinguish the decision of Hon'ble Mumbai ITAT in the case of M/s.Rational Handloom Pvt. Ltd. and did not explain as to how this decision was not applicable to the facts of this case. 7. The appellant prays for leave to add, alter, amend or modify any or all the grounds at any time before or at the time of hearing.” 3. The brief facts of the case are that, the assessee is a private limited company and filed its return of income on 15.10.2016 claiming a loss of Rs.3,97,06,230/-. The assessment was completed under section 143(3) of the Act on 20.12.2018 determining the loss at Rs.3,93,26,918/-. The assessment was reopened under section 148 of the Act on 31.03.2021, to examine the issue of additional depreciation claimed by the assessee. The re-assessment was completed on :-3-: ITA. No: 1392/Chny/2024 15.03.2022 assessing the loss at Rs.3,93,26,918/- as in the original assessment order. 4. Subsequently, the PCIT noticed that the assessee credited an amount of Rs.5,22,15,905/- to the ‘Reserves and Surplus’ account in the balance sheet on the ground that it represented ‘excess depreciation’ provided in the earlier years but reversed during this year. The PCIT was of the opinion that while computing the book profits under section 115JB, the reversal of such excess depreciation provided in the earlier years should have been added and therefore issued show cause notice dated 25.03.2024 under section 263 requiring the assessee to file reply on or before 28.03.2024. The assessee submitted reply dated 28.03.2024 stating that this issue was examined by the Assessing Officer and the assessee had filed reply dated 21.02.2022, in which it was pointed out that from AY 2005-06 to 2015-16, the assessee was liable to pay tax under section 115JB only for AYs 2005-06 and 2013-14 and for the other AYs the tax was paid under the normal provisions of the Income- tax Act. The assessee filed chart from AY 2005-06 to :-4-: ITA. No: 1392/Chny/2024 2015-16 and pointed out that only Rs.2,24,868/- relating to AY 2005-06 and Rs.30,07,848/- relating to AY 2013-14 totalling to Rs.32,32,716/- was the excess depreciation provided, reversed in this year and the same could be added for determining the book profits under section 115JB as per the decision of the Honourable Mumbai ITAT in the case of M/s.Rational Handloom Pvt. Ltd. and submitted a copy of the decision. However, the PCIT passed an impugned order on 30.03.2024 directing the assessing officer to add Rs.5,22,15,905/- under section 115JB and enhance the assessment and the same is contested in this appeal. 5. The Ld.AR of the assessee stated that the amount of Rs.5,22,15,905/- is reversed during the year due to amendment in Companies Act 2013 w.e.f. relevant AY in respect of computation of depreciation and hence assessee had changed the method of depreciation from straight line model to Life of the asset model as provided in the Companies Act 2013. :-5-: ITA. No: 1392/Chny/2024 1. The reason for crediting Reserves & Surplus: a. It's not a transaction surplus and indeed it is profit and loss appropriation item only for the purpose of Companies Act. b. It is a book adjustment item to Fixed Assets / Property, Plant & Equipment as prescribed in companies Act 2013 as per section 123(1)(a) and section 123(2) read with schedule II. c. Explanation (iii) to Section 115JB(2C)- Transition amount does not include - adjustments relating to items of Property, Plant & Equipment recorded at Fair value d. In our instant case, the book values are aligned to market/fair value based on the revised useful life of the assets. 2. Shift from Rate-based requirements to Useful Life As per ICAI Guidance Note(GN) on Accounting for Depreciation in companies in the context of Schedule II of the Companies Act, 2013 - GN(A)35 (Page 26; Para 64); Any cumulative impact due to its :-6-: ITA. No: 1392/Chny/2024 applicability should be recognised in ‘revenue reserves’ and disclosed separately. 3. Provision vs. Reserve Adapted/ Reference: ACIT vs. Srinivas Synthetics P Ltd (ITAT Agra) ITA286 (2005) With reference to the return for each of the eleven preceding years (from AY 2005-06 to AY 2015-16), shown that the tax for those years stood computed under the regular provisions for nine out of eleven years, even as the MAT provision (Section 115JB) was applicable for the said nine out of eleven years, implying that there has been no claim of tax reduction qua the amount of book profit represented by the excess depreciation relating to those years, i.e., as now written back. The amount written back as excess depreciation provided in earlier years is from accumulated provision for depreciation. In this regard, we would firstly state that as distinct from a reserve, which represents only an appropriation of profits, so that it stands necessarily included in the :-7-: ITA. No: 1392/Chny/2024 book profit of the relevant year, i.e., in which it is created. A provision is, by definition, an amount set aside out of the profits/surplus to provide for any liability, the amount of which cannot be ascertained with accuracy, or toward depreciation in the value of the assets, i.e., in respect of diminution in the value of the assets on account of wear and tear, obsolescence, etc. A provision, thus, leads to a reduction in the profits for the relevant year. 4. Two out of 11 years under 115JB The only meaningful way to harmonize this apparent anomaly discussed above is to increase the book profit of the relevant year(s); the provision of s. 115JB being applicable, by the amount of write back. To the extent the same does not lead to invocation of section 115JB, the amount written back can be validly reduced from the current year's profit, the balance not, as it would, if added to the book profit for that year, result in book profit tax, which stands not paid. :-8-: ITA. No: 1392/Chny/2024 For this reason, the assessee vide letter dated 28/03/2024 had attached workings for past eleven years verifying the applicability of Section 115JB. The workings clearly represents that only two years (AY 2005-06 and AY 2013-14) book profit is greater than taxable income for which the assessee had already offered in the above said letter. 5. Tax Effect In Para 12 (Page 6 of 8) of the Order u/s.263 mentions about Announcements of Council of ICAI XXVIII. Tax effect of expenses/income adjusted directly against the reserves and/or securities premium account either pursuant to Court Order or Under transitional provisions prescribed in an Accounting Standard Any income credited directly to a reserve account, or a similar account should be net of tax effect. In our case, reversal of provision of depreciation is not an income. Nevertheless, the tax effect of the reversal of excess depreciation as per the above explained para shall be the following: :-9-: ITA. No: 1392/Chny/2024 Assessment year Written back Depreciation Tax Effect 2005-06 224,868 17,633 2013-14 3007,848 601,803 Total 619,436 The detailed workings are submitted to AO and further submitted to PCIT along with written submissions dated 28/03/2024. The assessee is recognising the above tax effect in the books of accounts during the year ended 31/03/2024. 6. The ld.AR argued that the specific issue of ‘excess depreciation of Rs.5,22,15,905/-‘ has been enquired (PB Page No.4 & 5) during the reassessment by issuing notice u/s.142(1) dated 15/11/2021 as detailed below : Annexure 1) ……. 2) Please furnish details of excess depreciation claimed and credited to the statement of profit and loss account amounting to Rs.5,22,15,905/- The same was explained by filing the detailed reply on 21/02/2022 (PB Page No.8 to 10) and provided the working of MAT in the table. The AO had considered :-10-: ITA. No: 1392/Chny/2024 the entire reply and passed the order u/s.147 r.w.s. 144B of the Act dated 15/03/2022 by accepting the assessed income as per the order U/s.143(3) dated 20/12/2018. The Ld.AR vehemently argued and submitted that the order of the Ld.PCIT u/s.263 need to be quashed based on the above submissions. 7. Per contra, the ld.DR stated that the assessee had credited the excess depreciation of the earlier years to the “reserves and surplus” in the balance sheet instead of routing through the P & L Account and hence the PCIT is rightly invoked the provisions of section 263 and prayed for dismissing the appeal of the assessee. 8. We have heard the rival contentions and perused the orders of the AO and that of the PCIT along with the various case laws referred by the ld.AR to claim that the order u/s.263 of the Ld.PCIT is against the law and facts. The jurisdiction u/s 263 can be exercised only when both the following conditions are satisfied: :-11-: ITA. No: 1392/Chny/2024 (i) the order of the Assessing Officer should be erroneous and (ii) it should be prejudicial to the interest of the revenue, These conditions are conjunctive. In the instant case, there was nothing erroneous and prejudicial. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible as held in the case of Malabar Industrial Company Ltd Vs.CIT (243 ITR 83) (SC) and CIT Vs. Green World Corporation (314 ITR 81)(SC). 9. The Principal CIT can invoke section 263 if on examination of records he forms an opinion that the order passed by the Assessing Authority is erroneous in so far as it is prejudicial to the interest of the revenue. The learned Principal CIT, failed to note that a revision order cannot be passed against an order of assessment merely on the basis that in his opinion, an alternate view is possible. The PCIT, cannot substitute his view in place of that of the Assessing officer merely because the Principal Commissioner of Income Tax thinks that the assessment should have been completed in another way. It has been held by the Bombay High Court in the :-12-: ITA. No: 1392/Chny/2024 case of Gabriel India Ltd. (203 ITR 108)(Bom) as to when an order can be termed as erroneous: \"From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of 'substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous……………… . There must be some prima facie decision is held to be erroneous material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statue on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed...” 10. We have gone through the PCIT’s order and noted that excess depreciation of Rs.5,22,15,905/- of earlier 11 Assessment years credited to the “Reserves & Surplus” account in the Balance sheet has been the subject matter for invoking the provisions of Section 263 by noting the facts and his observation as under:- “2. The records related to the assessment dated 15.03.2022 were perused. It is seen from the Schedule No.2, Schedules forming part of Balance sheet, under the Head Reserves and surplus, assessee had added Rs.5,22,15,905/- to the statement of P&L Account of Reserves and surplus, stating excess depreciation provided in earlier years now reversed. As depreciation claimed in the books is allowed as deduction while computing the book profits u/s 115JB, reversal of such provision already claimed and allowed by the assessee has to be offered to tax. As the assessee has been taxed u/s 115JB, the reversal of excess depreciation should have been Credited to P&L Account and brought to tax, :-13-: ITA. No: 1392/Chny/2024 One of the main purpose reopening is to address this issue of direct credit to the Reserves and Surplus and without routing through the profit and loss account. You have filed reply dateaz2.02.2022 in the re-assessment proceedings stating that prior to AY 2016-1 7 the assessee claimed depreciation under straight line method; however, as per the companies Act, 2013, it was changed to life of the asset model. Hence, as per AS6of ICAI, the deficiency or surplus arising from retrospective computation of depreciation as per SLM and useful life of the assets has been adjusted in the retained earnings of earlier years. 3. However, as per the Accounting standards issued by the Institute of Chartered Accountants of India and GN(A)35 - Guidance note on accounting for depreciation In companies in the context of Schedule II to the Companies Act, 2013, recognizing and presenting the tax effect of an income in a manner which is different from the manner in which income itself has been recognized and presented is contrary to the generally accepted accounting principles. 4. Therefore, the claim is contrary to Accounting Standard and the audit report has failed to follow the aforesaid guidelines of 1CAI. The Assessing Officer has simply accepted your statement has without making proper enquiries or verification which the assessment order, which is incorrect both should have been made, has passed the on facts and law. In view of the above, the order passed u/s. 147 read with section 144B of the I.T.Act on 15.03.2022 by the Faceless Assessing Officer is erroneous and prejudicial to the interest of revenue in terms of clause (a) and clause (b) of Explanation 2 under sub-section(1) of section 263 of the Income-tax Act, 1961.Hence, this is fit case for initiating proceedings u/s 263 of the Income-tax Act, 1961. 5. 6. 7. 8. 9. 10. 11. 12. 13. In the guidance note, it is clearly laid down that not recognising tax benefit is contrary to the generally accepted accounting principles. However, the assessee did not route it through P&L account and also not recognised tax benefits. Hence, the same is against the accounting principles laid down by the ICAI. :-14-: ITA. No: 1392/Chny/2024 14. The auditor ought to have added this amount in Form 29B while computing the book profit u/s 115JB of the Income-tax Act 1961 which he had failed to do and the Assessing Officer also failed to take this in to account. 15. It is seen after the show cause notice, the assessee has accepted the accounting position but stated that since only two years in which the assessee has paid taxes u/s 115JB of the Income-tax Act, 1961, the same may be disallowed. 16. This is not acceptable as the amount is directly taken to Reserves during this financial year relevant to assessment year 2016-17 and hence, as per clause (b) of Explanation 1 to Section 115JB of the Income-tax Act, 1961, the amounts carried to any reserves, by whichever name called (other a reserve specified u/s 33AC) shall be added to the book profit. Since, the whole amount was taken to reserves this year, Whole the profit u/s 115JB. In case, if the assessee pays same has to be added to book more tax u/s 115JB of the Income-tax Act, 1961 than tax payable under normal provisions, then it will get higher MAT credit for set off against the normal tax payable in the following years. 17. Therefore, the order of the Assessing Officer dated 15.03.2022 is party set aside and restored back to the file of the Assessing officer with the direction to add the amount of Rs.5,22,15,905/- in the computation of book profit u/s 115JB of the Income-tax Act, 1961 and accordingly, re-compute the tax payable by the assessee and communicate the same with the issue of demand notice as per law. The Assessing Officer is directed to give effect to this order accordingly.” 11. We noted that the PCIT has simpliciter carried out unnecessary exercise by obtaining the information from the AO’s order u/s.147 r.w.s.144B of Act dated 15/03/2022 in re- assessment records, which are entirely considered by the AO after receiving the details sought u/s.142(1) during the reassessment proceedings. Further, the PCIT without appreciating the fact that the assessee has credited the said excess depreciation of Rs.5,22,15,905/- of earlier 11 :-15-: ITA. No: 1392/Chny/2024 Assessment years to the “Reserves & Surplus” account in the Balance sheet as per the amended provisions of the Companies Act, 2013 and also following the Guidance Note issued by the ICAI in regard to reversal of depreciation based on the life of the asset irrespective of the method of depreciation followed. Further, the PCIT has observed that the assessee has not followed the guidance note issued by the ICAI in crediting the excess depreciation of Rs.5,22,15,905/- of earlier 11 Assessment years to the “Reserves & Surplus” account without recognising the tax benefit. 12. We note that tax effect of expenses/income adjusted directly against the reserves and/or securities premium account either pursuant to Court order or under transitional provisions prescribed in an Accounting Standard any income credited directly to a reserve account, or a similar account should be net of tax effect. However, in the present case, reversal of provision of depreciation is not an income. Therefore, the assessee’s action of crediting the reversal of excess depreciation to the Reserves and surplus as per the amended provisions of Companies Act, 2013 followed by the Guidance note issued by ICAI (PB Page No.36 to 39) is in accordance with law and hence :-16-: ITA. No: 1392/Chny/2024 the AO’s action of accepting the same cannot be disapproved under the garb of Section 263 of the Act. The assessee’s reliance on the decision of the tribunal in the case of M/s.Rational Handloom Pvt.Ltd. – ITA No.6481/Mum/2016 for the A Y 2011-12, wherein the identical fact has been dealt and confirmed the action of the assessee as to treatment of reversal of excess deprecation in the books and also for computation of MAT, holding as under: 3. Brief facts of the case are as under :- The Assessing Officer in this case made the impugned disallowance by observing as under :- \"The Assessing Officer has discussed the issue and observed as under: \"On going through the P&L A/c it has been observed that assessee has credited an amount of Rs.5,37,61,180/- under the head \"Earlier years adjustment- Difference in depreciation provision\". During the assessment proceedings assessee was asked to file the details in respect of the adjustment of difference in depreciation provision amounting to Rs.5,37,61,180/-. In response assessee filed a chart showing how the assessee has arrived at the figure of difference in value of depreciation. On perusal of the chart it has been observed that the figure of Rs.5,37,61,180 is the cumulative figure of difference of depreciation from the A.Y. 2001-02 to A.Y. 2010-11. In earlier years assessee has calculated the depreciation as per Income Tax Act only and claimed depreciation as per I.T. Act. Assessee has not computed the depreciation as per the Companies Act in books of Accounts. Therefore, for adjusting the difference of depreciation assessee calculated the same at Rs.5,37,61,180 and credited to the P&L A/c. Assessee has calculated the value of the assets as per Straight Line Method (SLM). In the P&L A/c, the profit before the tax has been shown at Rs.10,70,89,374/- which is inclusive of the amount of Rs.5,37,61,180 being earlier years' :-17-: ITA. No: 1392/Chny/2024 adjustment - different in depreciation provision. For computing the income under books profit u/s 115JB assessee has taken the profit before tax at Rs.5,33,28,194 (10,70,89,374-5,37,61,180). Assessee has reduced the amount of Rs.5,37,61,180/- while computing the book profit from the total profit of Rs.10,70,89,3747- and shown profit before tax at Rs.5,33,28,194/- only. In assessee's case total profit as per P&L A/c is Rs.10,70,89,374/- and not Rs.5,33,28,194/- as taken by the assessee in its computation. The assessee has rightly credited the amount of Rs.5,37,61,180/- in its P&L A/c treated the same as profit, however reduced the same while determining the Book Profit. As per provisions of section 115JB reduction of this extraordinary item is not covered in any of subsection or clause. Further it is worthy to mention here that adjustments to profit as per P&L A/c can be made only as per defined provisions of section 115JB and in this case deduction of RS.5,37,61,180/- as credited in P&L A/c on account of depreciation difference is nowhere admissible. Therefore, the treatment of the assessee is not acceptable as discussed above.\" 4. Upon assessee's appeal learned CIT(A) noted the assessee's submission as under :- 1. Even if the Appellant had charged depreciation on straight line method as provided in Companies Act, 1956 and as charged for the Asst Year 2011-12, The Appellant was not required to pay MAT under section 115 JB for any previous assessment years from 2001-02 to 2011-12. 2. This change in depreciation method was as per Accounting Standard - 6 (AS-6) issued by The Institute of Chartered Accountants of India. 3. The annual accounts were prepared as per accounting standards issued by the ICAI having statutory recognition under sec 211 of the of the Companies Act, 1956. 4. The learned assessing officer has not raised any doubts genuineness of change in method of charging depreciation from written down value under Income Tax Act to straight line method under Companies Act. 5. The change in accounting policies regarding depreciation was duly reported in Annual Accounts as per note no 2 of Schedule 13, forming part of the Balance Sheet and Profit & Loss Account. :-18-: ITA. No: 1392/Chny/2024 6. The Annual Accounts were duly approved by Board of Directors on 05/09/2011 and subsequently duly adopted by share holders in Annual General Meeting. 7. The said adopted Annual Accounts were duly filed with the Registrar of Companies under Companies Act, 1956. 8. The Appellant has written back the excess depreciation as per the provisions of The Companies Act, 1956 which is generally accepted practice of providing depreciation for Companies. 9. The Honourable IT AT Agra Bench in the matter of ACIT v/s Srinivas Synthetics Packers P Limited held that: 'Coming to the facts of the present case, the learned Authorised Representative has, with reference to the return for each of the four preceding years, shown that the tax for those years stood computed under the regular provisions, even as the MAT provision (s. 115JB) was applicable for the said years, implying that there has been no claim of tax reduction qua the amount of book profit represented by the excess depreciation relating to those years, i.e., as now written back. In this regard, we would firstly state that as distinct from a reserve, which represents only an appropriation of profits, so that it stands necessarily included in the book profit of the relevant year, i.e., in which it is created, a provision is, by definition, an amount set aside out of the profits/surplus to provide for any liability, the amount of which cannot be ascertained with accuracy, or toward depreciation in the value of the assets, i.e., in respect of diminution in the value of the assets on account of wear and tear, obsolescence, etc. A provision, thus, leads to a reduction in the profits for the relevant year. The basic condition of the statute, i.e., as cast per proviso to cl. (i) of Expln. 1, is not satisfied so as to entitle the assessee the benefit of reduction of the respective provision to the extent written back. Why, in that case, the entire amount provided for could be written back in a subsequent year, claiming it as a reduction, even as the profit for the earlier year stood also reduced by the amount of the provision. So, however, and which is important there is no such charge of the write back being a subterfuge or not representing the excess provision, having been, as stated, worked out with reference to changed method of accounting with respect to depreciation and, therefore, though non-suiting the assessee's claim, i.e., at the threshold, however, would not operate to circumvent the satisfaction of the basic qualifying condition for the application of the provision. We are, at the same time, also conscious of the fact that the legislature has :-19-: ITA. No: 1392/Chny/2024 specifically provided for the reduction of the amount of withdrawal made out of the provision(s) (which, as aforesaid, by definition, only go to reduce the profits for the relevant year), so that they cannot go to increase the same, as in the case of, or in contradistinction to, the reserves, i.e., treated the two at par. The only meaningful way to harmonize this apparent anomaly is to increase the book profit of the relevant year(s); the provision of s. 115JB (or even s. 115JA) being applicable, by the amount of write back. To the extent the same does not lead to invocation of s. 115JB (s. 115JA), the amount written back can be validly reduced from the current year's profit, the balance not, as it would, if added to the book profit for that year, result in book profit tax, which stands not paid. For example, Rs. 3,68,008 written back for asst. yr. 1997-98, on its add back, results in the book profit for that year to increase to Rs. 15.39 lacs, the tax (including surcharge @ 13 per cent) on which works to Rs. 1,30,449, as against the tax liability for the year, which stands assessed at Rs. 4,32,146 (paper book pp. 16-19), so that s. 115JB does not get invoked. As such, the entire amount written back in that year (Rs. 3.68 lacs) could rightly be claimed as a reduction under the proviso to cl. (i) of Expln. 1, and so forth for the other years.' It is respectfully submitted that the facts of this case are exactly similar to the Srinivas Synthetics Packers P Limited case and as such depreciation write back of Rs 53761180.00 be reduced from the book profit as provided in cl. (i) of Expln. 1 of the Income Tax Act.\" The learned CIT(A)'s concurred with the above submission. He concluded as under :- \"The appellant has contested the action of the Assessing Officer on the ground that the appellant has rightly taken the books profit at Rs. 5,33,28,194/- as per the Form No. 29B, u/s. 155JB of the I.T. Act, 1961. The figures of depreciation written back of the earliest years for the A.Y. 2001-02 to 2010-11 for Rs. 5,37,61,180/- are not liable to be considered for the purpose of book profit or deductible as per the clause (i) of the explanations to the provision of section 115JB. The appellant has written back the excess depreciation as per the provisions of The Companies Act, 1956 which is generally accepted practice of providing depreciation for Companies and when there was change in the depreciation method as per Accounting Standard-6 (AS-6) issued by the Institute of Chartered Accountants of India, the appellant as such reduced the provisions of depreciation of the earlier years and credited the same to the appropriation part of the profit and :-20-: ITA. No: 1392/Chny/2024 loss account i.e. credited to the profit and loss as appropriation account and the said treatment has been given as per the Guidance Note issued by the Institute of Chartered Accountants of India. The ld. AR has further submitted that the issue in the present case is fully covered by the decision in the case of the Hon'ble IT AT, Agra in the case of ACIT v/s Srinivas Synthetic Packers (P) Limited (supra) and accordingly the same is deductible from the book profit as per the clause (i) of the explanations to the provisions of the section 115JB. In this case, the Hon'ble Tribunal held as under: \"Held that Explanation 1 to section 115JB is very clear. Unless it is shown that the provision written back, reduction in respect of which, in the computation of book profit, is being sought under Explanation 1 to section 115JB, having been credited to the profit and loss account for the year, had, in fact, gone to increase the 'book profit' for the relevant year, the said reduction would not be allowed. The assessee had, with reference to the return for each of the four preceding years, shown that the tax for those years stood computed under the regular provisions, even as the MAT provision (section 115JB) was applicable for the said years, implying that there had been no claim of tax reduction qua the amount of book profit represented by the excess depreciation relating to those years, i.e., as now written back. To the extent the same does not lead to invocation of section 115JA the amount written back can be validly reduced from the current year's profit, the balance not, as it would, if added to the book profit for that year, result in book profit tax, which stands not paid. The write back of the provision in the instant case was genuine. In the present case, no reservation was expressed by the revenue in this regard, and the assessee had explained it as in pursuance to the change in the method of accounting for depreciation with effect from the current year, consequent to the corresponding Accounting Standard (AS-6) (revised), the Accounting Standards issued by the ICAI having statutory recognition (section 211 of the Companies Act, 1956). Accordingly, the Commissioner (Appeals) was justified in deleting the addition.\" After considering the facts of the case and the stand of the AO as well as submission of the Appellant and also considering the decision in the case of ACIT v/s Srinivas Synthetic Packers (P) Limited, (supra), it is found that even the depreciation as per the changed method i.e. Straight Line Method, as prescribed under the Companies Act, 1956, which could had been charged to all :-21-: ITA. No: 1392/Chny/2024 the respective earlier assessment years, the appellant would not have been liable or required to pay the Minimum Alternate Tax [MAT] as per the provisions of the section 115JB time to time, for any assessment years of 2001-02 to 2010-11. Accordingly in view of the decision of the above referred judgment of the Hon'ble Tribunal in the case Srinivas Synthetic Packers (P) Ltd. (supra), the sum of Rs.5,37,61,180/- added to the book profit for the purpose of determination of the book profit u/s 115JB, by the AO cannot be held to be justified and therefore, the same is directed to be deleted for the purpose of book profit. Accordingly, the A.O. is directed to verify from the record with regard to the revised computation of total income for the AYs. 2001-02 to 2010-11 with the revised figure of depreciation and modify the figures accordingly. With the above observations and directions, the grounds of appeal are to be treated as Allowed.\" 5. Against the above order, Revenue is in appeal before us. 6. We have heard both the counsel and perused the records. Learned Departmental Representative relied upon the order of the Assessing Officer. 7. Per contra, learned Counsel of the assessee reiterated the submissions made before learned CIT(A). He further relied upon the decision of Agra Bench of the ITAT in the case of ACIT Vs. Srinivas Synthetics Packers (P) Ltd. (122 TTJ 832). 8. Upon careful consideration, we find that identical issue has been considered by the Agra Bench of the ITAT as above. The ITAT after careful analyzing found that the entire amount written back can be claimed as a reduction under the proviso to clause (i) of Explanation (1). No contrary decision has been shown. Hence we affirm the order of learned CIT(A).” 13. Therefore, the view taken by the AO, after considering the entire details furnished by the assessee sought, obtained and duly considered during the reassessment proceedings, cannot be termed as erroneous to invoke the powers u/s.263 of the Act. :-22-: ITA. No: 1392/Chny/2024 14. We, after going through the provisions section 263 of the act and facts of present case, are of the view that the factual matrix stares in the face of the record in the light of the legal requirement of a satisfaction that for invoking the powers u/s.263 of the Act, necessarily presupposes the statutory satisfaction that although there is some error with regard to the completed assessment but the order passed by the officer has to be erroneous in so far as prejudicial to the interest of the Revenue. The plain language of the provision is more than abundantly clear that it is not every error or mistake that should induce the PCIT to resort to exercise the powers u/s.263 of the Act. Where the factual matrix shows that it is a marginal situation and when by a careful and cautious judgment the AO has considered the issue in hand, the exercise of the power u/s.263 of the Act by the PCIT is not proper. Though the provisions of section 263 of the Act vests power in PCIT in subjective terms, the PCIT has blindly considered the issue of purchases as a reason for invoking the powers of section 263, stating that the order passed by the AO was an estimated percentage of disallowance of expenditure. In view of this discussion and respectfully following the various judicial :-23-: ITA. No: 1392/Chny/2024 decisions of Hon’ble courts, we are of the view that the order passed by the AO is neither erroneous nor prejudicial to the interest of the revenue. Thus, we set aside the order of the PCIT. Hence, we quash the revision order passed by the PCIT and allow the appeal of assessee. 15. In the result the appeal of the assessee is allowed. Order pronounced in the court on 18th October, 2024 at Chennai. Sd/- (एबी टी. वकŎ ) (ABY T. VARKEY) Ɋाियकसद˟/Judicial Member Sd/- (एस. आर.रघुनाथा) (S. R. RAGHUNATHA) लेखासद˟/Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated, the 18th October, 2024 JPV आदेशकीŮितिलिपअŤेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3.आयकर आयुƅ/CIT - Chennai 4. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF "