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TMI Blog2024 (2) TMI 1427X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;Ld. PCIT') erred in finalizing an order of revision under section 263 of the Income Tax Act 1961 ('the Act') which is in violation of principles of natural justice, the provisions of the Act, is devoid of merits, are contrary to facts on record and applicable law, has been completed without adequate inquiries and as such is liable to be quashed. a. Grounds on validity of the revisionary order passed under section 263 of the Act 2.1. On the facts and in the circumstances of the case, the order passed by the Ld. PCIT is bad in law and liable to be quashed. 2.2. On the facts and circumstances of the case and in law, the Ld. PCIT erred in invoking the provisions under section 263 of the Act without appreciating the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges 3.1 On the facts and circumstances of the case and in law, the Ld. PCIT failed to appreciate that the lease equalization reserve debited / credited in the books of accounts is in accordance with the accounting standards laid down by the Institute of Chartered Accountants of India ('ICAI'). 3.2 On the facts and circumstances of the case and in law, the Ld. PCIT failed to appreciate the concept of lease equalization reserve wherein the said reserve being a notional item, needs to be disallowed in the year of creation and consequently should be reduced from the profits in the year of reversal. 3.3 On the facts and circumstances of the case and in law, the Ld. PCIT erred by not appreciating the fact that the Appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accordingly, show cause notice u/s. 263 of the Act, dated 13.03.2023 was issued and served on the assessee. In the said show cause notice, the PCIT observed that on perusal of the assessment record, it is noticed that the reversal of 'lease equalization charges' of Rs. 45,81,966/- was claimed as deduction in the computation of income instead of crediting the reversal of provisions to P & L A/c. The 'lease equalization charges' created on account of principles provided in Accounting Standard-19 - accounting for lease. The same is not a real income/expenditure, but it is a notional charge accounting in the books. However, the assessee has not added back 'lease equalization charges' although, in earlier assessment years, the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO cannot be held as erroneous in so far as it is prejudicial to the interest of the Revenue. 5. The PCIT after considering relevant submissions of the assessee and also taken note of various facts opined that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue, because, the AO has not carried out required enquiries he ought to have been carried out in light of relevant provisions of the Act in respect of 'lease equalization charges' credited to P & L A/c and excluded from the statement of total income which rendered the assessment order passed by the AO to be erroneous in so far as it is prejudicial to the interest of the Revenue. Thus, rejected the arguments of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es' has been credited to P & L A/c, however, the same has been reduced from the total income, because, the debit has been already added back to total income. The AO after considering relevant facts has rightly accepted the claim of the assessee and thus, assessment order passed by the AO cannot be considered as erroneous in so far as it is prejudicial to the interest of the Revenue. 7. The Ld.CIT-DR, Shri Nilay Baran Som, supporting the order of the PCIT, submitted that the AO has not carried out required enquiries he ought to have been carried out in light of relevant provisions of the Act, which rendered the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. Therefore, the PCIT h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct and devoid of merits. 9. Further, the AO has verified the issue of 'lease equalization charges' and its treatment in the books of accounts and computation of income during the course of assessment proceedings, which is clearly evident from notices u/s. 142(1) dated 09.12.2020 & 20.02.2012 issued by the AO, where specific question was asked in respect of accounting treatment of 'lease equalization charges' and subsequent treatment in computing the total income as per the provisions of the Income Tax Act, 1961. The assessee vide submission dated 22.12.2020 & 25.02.2021 explained the method of accounting of 'lease equalization charges' in the books of accounts and subsequent treatment while computing income from business and professio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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