No S.14A disallowance without exempt income earned; PCIT cannot revise AO's plausible view under S.263 via change of opinion.

आदेश/ORDER

PER. RAVISH SOOD, J.M:

The present appeal filed by the assessee company is directed against the order passed by the Principal Commissioner of Income Tax, Hyderabad-1, under Section 263 of the Income-tax Act, 1961 (for short, “Act”) dated 20/02/2025, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under section 143(3) r.w.s 144B of the Act dated 21/09/2022 of the for the Assessment Year (AY) 2020-21. The assessee company has assailed the impugned order of the CIT(A) on the following grounds of appeal:

1. “The order u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as 'Act') dated 20.02.2025 passed by the Ld. Pr. Commissioner of Income Tax, Hyderabad is erroneous both in law and on facts.

2. The Ld. Pr. CIT erred in invoking provisions u/s 263 of the Act and passing the order under section 263 of the Act, without considering the submissions made by the appellant during the course of proceedings u/s 263 of the Act.

3. The Ld. Pr. CIT has grossly erred in passing the revisionary order without satisfying the twin conditions that the order should be both erroneous and prejudicial to the interests of the revenue.

4. The Ld. Pr. CIT erred in passing the revisionary order by forming different opinion from that of the Assessing Officer taken during the course of assessment proceedings.

5. The Ld. Pr. CIT ought to have appreciated the fact that the return of income furnished by the appellant was taken up for complete scrutiny by the Assessing Officer, the appellant furnished every information in support of its return and the Assessing Officer passed order u/s 143(3) of the Act after examining the same.

6. The Ld. Pr. CIT ought to have appreciated the fact that the recourse to revision u/s 263 of the Act is not justified because the Assessing Officer has examined the issues extensively and has taken one of the courses permissible in law whereas the Pr. CIT revised the assessment on change of opinion.

7. The Ld. Pr. CIT ought to have appreciated the fact that the Assessing Officer had completed the assessment u/s. 143(3) of the Act, after duly examining the explanations and submissions on all the issues including the issue in question placed before him during the course of assessment proceedings.

8. Without prejudice to the other grounds, the Pr. CIT ought to have appreciated that the assessee has not earned any exempt income for the year under consideration and that the disallowance proposed u/s 14A read with rule 8D is invalid in law.

9. Without prejudice to other grounds, the PCIT ought to have appreciated that the amendment brought in section 14A by inserting Explanation vide Finance Act, 2022 is applicable prospectively from assessment year 2022-23 and not applicable for the year under consideration.

10. Without prejudice to the other grounds, the PCIT ought to have appreciated that for the year under consideration there are no investments made by the assessee in which case, the disallowance proposed by the Ld. PCIT is not correct.

11. Without prejudice to the other grounds, the PCIT ought to have appreciated that for the year under consideration, the appellant has not incurred any expenditure in relation to the investments made in the subsidiaries and that the disallowance proposed by the Ld. PCIT is not valid.

12. The assesseę may add, alter, or modify or substitute any other points to the grounds of appeal at any time before or at the time of hearing of the appeal.”

2. Succinctly stated, the assessee company had filed its return of income for the AY 2020-21, wherein, after setting off its brought forward business loss, the returned income