ITAT Quashes PCIT’s Revision Order, Ruling Second Opinion Not Allowed Under Section 263

The appeal was filed by a company, Makson Pharmaceuticals (India) Private Limited, before the Income Tax Appellate Tribunal (ITAT), Ahmedabad, challenging an order passed by the Principal Commissioner of Income Tax (PCIT), Ahmedabad-3, on March 31, 2025. The case is related to the assessment year 2020-21 and was decided on December 12, 2025.

The company filed its income tax return (ITR) for the aforesaid assessment year, declaring the total income of Rs. 17,32,75,190. During the scrutiny assessment, the Assessing Officer (AO) declared the total income of the company at Rs. 176,163,250 and made a disallowance of Rs. 2,888,059 under section 37(1) of the Act. Later, PCIT noticed that the assessee company had invested in a partnership firm amounting to Rs. 5.95 crore as of March 31, 2019, and Rs. 1.7 crore as of March 31, 2020. In due course, profits and losses lead to debits of various expenses.

As per the PCIT, the assessing officer did not properly examine issues like extra depreciation claimed on residential buildings, excess depreciation on plant and machinery, no disallowance under Section 14A for exempt income, and deduction under Section 80G claimed on CSR-related donations. In conclusion, the PCIT set aside the original assessment order dated September 20, 2022 (passed under Section 143(3) read with 144B) vide order dated March 31, 2025, passed under Section 263, calling it erroneous and harmful to revenue interests. Directed the AO to pass a fresh assessment order.

The assessee company thereafter filed an appeal before the tribunal, where it argued that all these issues were already examined by the AO during assessment, and detailed replies were submitted by them in response to the notices issued. Additionally, the same issues had arisen in earlier years, too, and there the tribunal also decided in the company’s favour. The assessee claimed that the PCIT is only giving a second opinion, which is not permitted under Section 263.

The tribunal heard the arguments of both sides and endorsed the arguments served by the assessee company. The assessing officer had already deeply examined and verified all the issues. supported the assessee’s argument that Section 263 cannot be used just because PCIT disagrees with the AO. In the final result, the tribunal set aside the PCIT’s order dated March 31, 2025, and restored the initial assessment. Appeal allowed in favour of the assessee.