ITAT Quashes Revisionary Order u/s 263 Against Sabarmati Gas as PCIT Exceeded Scope of Show Cause Notice [Read Order]

The Income Tax Appellate Tribunal (ITAT) atAhmedabad, has set aside a revisionary order passed under Section 263 of theIncome Tax Act, 1961 after holding that the Principal Commissioner of Income Tax (PCIT) exceeded the scope of the show cause notice by attempting to reopen matters that had already been examined.

The assessee, Sabarmati Gas Ltd., had filed its return of income for assessment year 2020-21 and declared income exceeding ₹113 crore. During its scrutiny, multiple statutory notices were issued and detailed replies were presented before the Assessing Officer. After examination of the records, the Assessing Officer made certain additions and disallowances, including partial disallowance of depreciation and other expenses.

Subsequently, the PCIT issued a show cause notice under Section 263 proposing revision on the ground that additional depreciation claimed under Section 32(1)(iia) and deduction claimed under Section 80G in respect of CSR expenditure had not been properly examined. It was observed that compression of natural gas could not be treated as a manufacturing activity. And CSR expenditure was not allowed as a deduction under Section 80G. On this basis, the assessment order was set aside with a direction to pass a fresh assessment order, along with instructions to verify rental expenses and related TDS compliance.

Aggrieved by the revisionary order, the assessee approached the Tribunal contending that the directions relating to rental expenses were wholly beyond the scope of the show cause notice issued under Section 263. It was further argued that the claims related to additional depreciation and CSR expenditure had already been examined by the Assessing Officer during the original assessment proceedings, and the revision amounted to only a mere change of opinion.

The Tribunal, comprising Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member), examined the records and noted that the show cause notice mentioned only the issues of additional depreciation and deduction under Section 80G. There was no reference to rental expenses in the notice. The Bench observed that directing verification of an issue not mentioned in the show cause notice amounted to travelling beyond the jurisdiction conferred under Section 263 of the Act.

The Tribunal further observed that the Assessing Officer had already disallowed a portion of the depreciation in the original assessment itself. Similarly, the issue relating to CSR expenditure and deduction under Section 80G had also been scrutinised. In this light, the Tribunal held that the Principal Commissioner cannot invoke revisionary powers merely because a different view was possible on the same set of facts.

Holding that the mandatory conditions for invoking Section 263 were not satisfied, the Tribunal concluded that the revisionary order was unsustainable in law. Accordingly, the order passed by the Principal Commissioner was quashed and the appeal filed by the assessee was allowed.

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