IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER &

SMT RENU JAUHRI, ACCOUNTANT MEMBER (Assessment Year :2016-17 ITO Ward-2(1) Vs. Chalk Farm Ventures Thane Private Limited Indralok, Near RBK Global School Bhayander East-401105 Thane PAN/GIR No.AAGCC0332A (Appellant) .. (Respondent Assessee by None Revenue by Shri Virabhadra S Mahajan, Sr. DR Date of Hearing 14/07/2025 Date of Pronouncement 22/07/2025 / O R D E R आदेश PER AMIT SHUKLA (J.M):

The aforesaid appeal has been filed by the Revenue against order dated 12/03/2025 passed by NFAC, Delhi for the quantum of assessment passed u/s.143(3) r.w.s. 263 for the A.Y.2016-17.

2. In the grounds of appeal the Revenue has raised following grounds:-

“1. On the facts and in circumstances of the case and in law, the Ld. CIT(A) ought to have kept the decision in abeyance, since the Revenue has not accepted the ITATs decision and is in appeal before the Hon'ble High Court.

2. On the facts and in circumstances of the case, since the Revenue is in appeal before the Hon'ble High Court on the ITAT's decision, which is pending as on date, this appeal is being filed to keep the issue alive.

3. The appellant craves leave to add, amend or alter any ground/grounds, which may be necessary.”

3. This appeal is arising out of directions given by the ld. PCIT u/s.263 vide order dated 26/03/2021 whereas, the order passed by the ld. PCIT itself has been quashed by the Tribunal in ITA No.906/Mum/2021 dated 26/04/2022. This has been stated in the order of CIT(A) in the following manner:-

2. The brief facts of the case are that this case was selected for scrutiny through CASS and assessment was completed u/s 143(3) of the Act vide order dated 30.10.2018 accepting the retuned income/loss.

The Pr. CIT, Thane-1 had an occasion to review the assessment order and found as under:

“02.It has been further observed from there cords that the assessee is a technology platform which facilitates EMI financing for online shoppers. It noticed from the record that during the course of assessment proceedings, the AO allowed the expenses incurred on software development charges which inter alia includes an amount of Rs. 1,88,50,794/- and Rs.11,94,528/- like platform subscription, server charges, technical fees professional and consultancy fee which are in nature of capital expenditure but claimed as revenue expenditure. Further, it is observed that the assessee has received capital through allotment of convertible preferential shares at a premium of Rs. 1,88,637/- per share. However, the AO allowed the claim of the assessee without proper verification of facts. Thus, the AO have not properly verified the above facts while passing the order u/s 143(3) of the Act, which caused this order prejudicial to the interest of the revenue.”

Thereafter, the Pr. CIT, Thane-1 passed order u/s 263 dated 26.03.2021 setting aside assessment order dated 30.10.2018 to the file of the AO with a direction to examine the issues discussed and redo the assessment after affording opportunity to the assessee. The relevant part of review order u/s 263 dated 26.03.2021 is asunder:

“04. The above explanation of the assessee has been perused, however, the assessee’s contention is not acceptable. The core issue of contention in this case is software development/software purchase expenses. As it is a well settled fact that Software is a capital asset and is an intangible asset. Therefore, any expenditure in acquisition of software/development of software is a capital expenditure thereby not eligible for deduction u/s 37(1) of the IT Act. However, depreciation is allowable as per IT Rules. The assessee failed to submit as to how software purchased/developed by the assessee in its first year of business has no enduring effect. As the assessee providing a software platform which is not a routine application software even it is of an enduring nature which do not get obsolete/redundant in a short span of time (especially durin