Opening WDV of a block of assets cannot be disturbed to deny

Opening WDV of a block of assets cannot be disturbed to deny depreciation based on a circular.

Issue

Whether the Principal Commissioner of Income Tax (PCIT) can invoke revisionary jurisdiction under Section 263 to deny depreciation on an intangible asset (NHAI concession rights) by applying CBDT Circular No. 9/2014, when the asset had already entered the “block of assets” and depreciation was allowed in preceding years.
Whether the right to construct, operate, maintain a highway, and collect toll fees under an NHAI concession agreement qualifies as an intangible asset (“licence” or “commercial right of similar nature”) eligible for depreciation under Section 32(1)(ii).
Whether an assessment order can be deemed erroneous and prejudicial to the interest of the Revenue under Section 263 when the Assessing Officer (AO) has already conducted an inquiry and taken a legally permissible, possible view.

Facts

Asset & Capitalization: The assessee entered into a concession agreement with the National Highways Authority of India (NHAI) to build, operate, and maintain a highway and collect toll fees. The expenditure was capitalized as an intangible asset, and depreciation was duly allowed in earlier assessment years.
Current Year Claim: For the assessment year 2022-23, the assessee claimed depreciation on the written down value (WDV) of the relevant block of assets.
Scrutiny Assessment: The case was selected for scrutiny specifically regarding the investment in intangible assets and depreciation. The AO examined the issue and accepted the returned income.
Revisionary Action: The PCIT invoked Section 263, arguing that the assessment order was erroneous and prejudicial to the Revenue. Relying on CBDT Circular No. 9/2014, the PCIT asserted that the expenditure should have been amortized over the concession period rather than depreciated, attempting to restrict the current year’s claim.

Decision

On Disturbing the Block of Assets: Decided in favor of the assessee. Once an asset is accepted into the “block of assets” and depreciation has been granted in past years, the opening WDV for the current year cannot be disturbed or altered by the tax authorities to deny consequential depreciation.
On Nature of Concession Rights: Decided in favor of the assessee. Rights acquired under an NHAI concession agreement constitute a “licence” or “other business or commercial right of similar nature” under Section 32(1)(ii), rendering them eligible for depreciation. Furthermore, CBDT Circular No. 9/2014 is beneficial in nature and cannot be forcefully thrust upon an assessee to deny a statutory benefit they are otherwise eligible for.
On Section 263 Jurisdiction: Decided in favor of the assessee. The AO conducted an explicit inquiry during scrutiny and adopted a plausible view. The PCIT cannot invoke revisionary powers merely because they prefer an alternative view. Additionally, choosing between depreciation and amortization is revenue-neutral over time, creating only a timing difference, which fails to satisfy the “prejudicial to the interests of the Revenue” criterion. The Section 263 order was set aside.

Key Takeaways

Sanctity of Opening WDV: The tax department cannot indirectly review or alter past assessment years’ concluded issues by adjusting or freezing the opening WDV of a current year’s block of assets.
Concession Rights as Intangibles: Commercial road/toll operations rights are legally recognized as depreciable intangible assets. Statutory allowances prescribed by the Income-tax Act override restrictive interpretations derived from administrative circulars.
Circulars are Shields, Not Swords: Beneficial circulars issued by the CBDT are designed to provide alternative relief to taxpayers; they cannot be weaponized by the Revenue to strip away a taxpayer’s legitimate statutory deductions.
Revenue Neutrality Checks Section 263: Where an accounting treatment (like depreciation vs. amortization) merely causes a timing difference with zero absolute tax loss over the asset lifecycle, the assessment order cannot be deemed “prejudicial to the revenue.”

IN THE ITAT MUMBAI BENCH ‘E’

Hampi Expressways (P.) Ltd.

Principal Commissioner of Income-tax

Amit Shukla, Judicial Member
and Girish Agrawal, Accountant Member

IT Appeal No.3538 (MUM) of 2025
[Assessment year 2022-23]

MAY 21, 2026

Nitesh Joshi, Adv. for the Appellant. Ritesh Misra, CIT DR for the Respondent.

ORDER

Girish Agrawal, Accountant Member.- This appeal filed by the assessee is against the order of Ld. Principal Commissioner of Income Tax, Mumbai -1 vide DIN: ITBA/REV/F/REV5/2025-26/1075545003(1) dated 08.04.2025 passed under section 263 of the Income-tax Act (hereinafter referred to as the “Act”) against the assessment order passed u/s 143(3) read with section 144B, dated 20.03.2024 for Assessment Year 2022-23.

2. Assessee has raised the following grounds of appeal:

The Appellant submits the order passed by the learned Commissioner of Income Tax is illegal and without jurisdiction as the prescribed jurisdictional conditions were not satisfied.

The learned Commissioner of Income Tax erred in initiating proceedings under section 263 on an issue where two views are possible.

The learned Commissioner of Income Tax failed to understand that in the facts of the present case the Assessing Officer had in assessment proceedings has taken a particular view and the Commissioner cannot initiate revision proceedings based on a second view.

The learned Commissioner of Income Tax has ignored the fact that the Assessing Officer had already made enquiry on the issue of depreciation on intangible asset being ‘right to collect toll”.

The learned Commissioner has erred in initiating revision proceedings merely based on an audit objection.

The learned Commissioner erred in passing order under section 263 without considering the legal and factual submissions made by the Appellant.

The learned Commissioner of Income Tax has failed to consider that Circular No 9 of 2014 issued by the CBDT is discretionary in nature and the Assessee can choose the manner in which it would amortize the cost of the project.

The learned Commissioner of Income Tax has failed to consider that circulars issued by CBDT are binding on the Income Tax Authorities but cannot be enforced adversely against the assessee.

The learned Commissioner of Income Tax erred in ignoring the fact that by choosing depreciation method of claiming expenditure instead of amortisation, it was in fact claiming lower depreciation over the period of the life of the asset.

3. Assessee has raised nine grounds of appeal out of which ground nos. 1 to 6 relates to assumption of jurisdiction by ld. PCIT for invoking revisionary proceedings under section 263 and passing the impugned revisionary order thereafter. Ground nos. 7, 8 and 9 are in respect of the issues which lead to the invocation of revisionary proceedings by the ld. PCIT.

4. Brief facts as culled out form the records are that assessee had filed its return of income on 21.10.2022, reporting total income as loss at Rs. 25,76,55,298/-. Case of the assessee was taken up for scrutiny under CASS under ‘complete criteria’ for the following three reasons:

(i)

Investment in intangible assets and claim of depreciation,

(ii)

High creditors liabilities and

(iii)

Income from toll plaza

4.1. In the course of assessment proceedings, statutory notices were issued against which assessee furnished replies/submissions with relevant supporting documentary evidences which the ld. AO has acknowledged in para 2 of the assessment order. He also notices in para 3.2 about the assessee furnishing its replies/submissions on three different dates along with relevant supporting documentary evidences in support of the claims made by it. He further records that reply/explanatory replies, submissions along with relevant supporting documentary evidences have been carefully considered and found to be acceptable. He further records that by placing reliance on the replies/submissions furnished, details relevant supporting documentary evidences, information and materials etc. available on record, no variation was proposed. Thus, the income reported by the assessee in its return was accepted as such and was assessed which is a loss in the present case.

5. Subsequently, ld. PCIT initiated the impugned revisionary proceedings after calling for the records and examination of the assessment which was initially raised by the audit objection. In this regard, in the opening para of the impugned order under section 263, he records, “a revision proceeding has been initiated after calling for the records and examination of the issue, initially raised by the audit objection”. Ld. PCIT observes that assessee had claimed excess depreciation of Service Concessions Agreement (SCA) which has been treated by the assessee as an intangible right having rate of depreciation at 25%. According to him, CBDT has issued a Circular No. 09/2014 dated 23.04.2014 which clarified that SCA costs were to be amortized over the period of concession agreement. Based on these observations, he noted that the depreciation allowable is only Rs. 54.10 crore as against claimed by the assessee at Rs. 270.53 crore, resulting in excess claim, leading to an underassessment to the tune of Rs. 216.42 crores. By recording these observations on the issue relating to claim of depreciation, show cause notice u/s 263, dated 28.02.2025 was issued invoking the impugned revisionary proceedings. Assessee replied to the said show cause notice explaining on each aspect of the issue raised, duly supported by corroborative documentary evidences vide its submission dated 05.03.2025.

5.1. After considering the submissions made by the assessee, ld. PCIT concluded that the Assessing Officer is duty bound to follow CBDT Circular. According to him, since the Assessing Officer has failed to properly follow the CBDT circular in respect of grant of depreciation, the assessment order so passed by the Faceless Assessing Officer (FAO) is erroneous and prejudicial to the interest of Revenue. He thus, set aside the assessment order for the limited issue of allowance of depreciation on SCA to be done afresh after independent appraisal of facts and latest case law and statutory position by giving due opportunity to the assessee.

6. We perused the impugned revisionary order passed by the ld. PCIT which contains in all four paragraphs and the order running into two pages including the cause title. It is noted that ld. PCIT has summarily passed the revisionary order with sole emphasis on failure on the part of Assessing Officer to follow CBDT Circular No. 09/2014 rendering the assessment order erroneous and prejudicial to the interest of Revenue.

6.1. The core issue arising in the present appeal for the purpose of invoking revisionary proceedings and passing the impugned revisionary order thereafter, relates to claim of depreciation by the assessee on the intangible asset acquired by it in respect of license granted by the National Highway Authority of India Ltd (NHAI) under concession agreement.

7. Before we delve on the issue, certain basic facts necessary and relevant to the issue are taken note of as under:

7.1. Assessee company was incorporated on 23.04.2015 and has entered into SCA dated 10.06.2015 for augmentation of the Hospet Chitra Durga section of National Highway no. 13 from 292 Km to 418.750 Km, being approximately the stretch of (120.18 Km) in the state of Karnataka, awarded on Designed, Build, Finance, Operate and Transfer basis (DBFOT). The SCA is for a period of 25 years from 18.02.2016, being the appointed date as per NHAI letter No. NHAI/Hos-Chitra/NHDP-IVB/2014/2/7821. Assessee company is a wholly owned subsidiary of TRIL Roads Pvt. Ltd. At the end of SCA period, the entire facility will be transferred to NHAI. The only business carried on by the assessee is execution of the said contract (SCA) which would not be possible in absence of the license/rights granted under the said concession agreement.

7.2. Assessee achieved commercial operation for the stretch of 108.446 km of the highway and commenced tolling operation on 21.02.2020. In the said year, it had capitalized expenditure incurred inter-alia for construction for actual cost in respect of the intangible rights acquired under the Concession Agreement. Consequent thereto, for the purposes of computing its business income under the Act, it claimed depreciation thereon, as an intangible asset from AY 2020-21. In the course of assessment proceedings for the said year, the said claim of depreciation was allowed after due enquiry and verification. Ld. PCIT passed a revisionary order, dated 31.03.2025 on the same lines as the present year, directing the ld. AO to deny its claim for depreciation and instead allow the expenditure by way of spreading it over the balance period of the Concession Agreement. Upon appeal by the assessee against the said revisionary order before the Tribunal, in Hampi Expressways Pvt. Ltd. v. Pr. CIT [IT Appeal no. 3537 (Mum.) of 2025, dated 25.09.2025], the Tribunal quashed the said order as the same had been passed without issuing a show-cause notice and without dealing on the merits of the case.

7.3. Assessee claimed depreciation on the said intangible asset for AY 2021-22 which also has been allowed in the absence of its return of income being selected for scrutiny. These facts assume relevance as, in respect of the stretch of 108.446 km, depreciation has been allowed from AY 2020-21 and the only issue arising for the year under consideration is grant of consequential depreciation on the written down value (WDV) at the beginning of the year.

7.4. During the year under consideration, assessee achieved commercial operation for further 11.224 km and commenced tolling operation in respect of the same from 09.05.2021.

7.5. In the audited financial statements, the said intangible right has been separately disclosed in the balance sheet. Further, in the books of account, the said expenditure has been amortized over the period of concession by taking proportion of actual traffic counts for the relevant period over the total projected traffic count from project as estimated by its management. The notes to the financial statement explain this accounting policy thereof. Lastly, general information in the notes to the financial statements also gives a brief description with respect to the aforesaid project.

7.6. In the Tax Audit report, it has been duly clarified that the opening WDV of the block of assets of intangible assets stood at Rs. 936,05,26,874/-, to which the additions during the year stood at Rs. 146,07,00,000/-. Depreciation of Rs. 270,53,06,719/- has been claimed in respect of the said block of assets, resulting into a closing WDV of Rs. 811,59,20,155/-. The depreciation as relatable to the opening WDV of the block of assets is Rs. 234,01,31,719/-. The WDV to the extent of Rs. 936,05,26,874/- represents opening WDV.

8. In the course of hearing before us, on specific queries, references were made by the ld. Counsel of the assessee, detailing the relevant clauses of the concession agreement so as to gain understating of the nature of rights acquired by the assessee. The relevant clauses so referred to and relevant to deal with the issue before us which led to the invocation of revisionary proceedings are taken note of as under:

A) Right in the nature of license:

Article 3 dealing with grant of concession provides exclusive right, license and authority to the assessee to construct, operate and maintain the project for a period of 25 years commencing from the appointed date. Therein, it also inter alia allowed right of way, access and license to the site and the further right to demand, collect and appropriate fee from vehicles and users liable for payment of such fee for using the project highway or any part thereof or refuse entry of any vehicle if the fee due is not paid.

ii.

Article 10 dealing with right of way elaborates on the right granted to the assessee as a licensee including access to the site for the purposes of the concession agreement. It also inter alia mandates that during the tenure of this agreement; the Authority shall keep the site free from encumbrances and encroachments.

iii.

Article 43 dealing with rights and title over the site reiterates the license rights of the assessee as a Concessionaire.

B) Right in the nature of business or commercial rights of a similar nature:

Article 17 dealing with operation and maintenance obligation of the Concessionaire, in sub-clause (b) of clause 17.1.1 obligates the assessee to collect and appropriate the fee. Further, clause 17.15 permits the assessee to place commercial advertising, display or hoarding at the toll plazas, rest areas, bus shelters and telephone booths.

ii.

Article 27 dealing with user fee grants the assessee the sole and exclusive right to demand, collect and appropriate fee from the users of the highway. The said right commences from the Commercial Operation Date (the COD) which, as per clause 15.1, will be achieved only when the completion or the provisional certificate is issued. The construction of the project highway has to be in accordance with Article 12 and it’s monitoring as per Article 13. Therefore, the cost of construction of the highway is the cost of the intangible asset being the right to maintain and operate the highway and collect user fee i.e. the tolling right which is its mainstream of income. This right is in the nature of tool of trade enabling smooth carrying on of its business. In the absence of such right, it would not be possible for the assessee to carry on its business.

C) Right in the nature of non-compete:

Article 6 dealing with obligations of the Authority inter alia requires them to support the assessee in various manner. It further places a restriction on the said Authority to the effect that before the tenth anniversary from the appointed date, it shall neither construct nor cause to be constructed any competing road. Provided that, this restriction would not apply if certain conditions specified therein are fulfilled (see clause 6.3). Further, clause 30.1.1 again places such restriction in Article 30 dealing with construction of additional tollway. Violation of such condition would make the Authority liable for payment of compensation to the assessee as per clause 35.4.

D) Clause regarding assignment of rights:

Article 40 deals with assignments and charges. It mandates that the Concessionaire shall not assign rights acquired under the concession agreement save and except with the prior consent in writing of the Authority. Therein, the rights of such transferee have also been enumerated.

9. Based on the narration in the above paragraphs in respect of issue raised by the ld. PCIT for the impugned revisionary proceedings and taking into account the relevant facts, the issue which arise for our consideration in the present appeal can be listed as under:

Whether the PCIT erred in assuming revisionary jurisdiction under section 263 of the Act –

based on audit objection

ii.

alleging failure on the part of the AO in not following CBDT Circular No. 09/2014 while passing the assessment order;

iii.

without appreciating that the present is a case where the ld. AO had taken one of the possible views while passing the assessment order.

On the merits of the case, whether the appellant is justified in claiming depreciation on the cost of the rights acquired under the Concession Agreement as:

the issue relating to whether the asset under consideration could be regarded as a depreciable asset cannot be raised in a later year where depreciation is only claimed based on the opening WDV of the block of assets;

ii.

the rights acquired by the assessee under the Concession Agreement constitutes a ‘license’ or ‘any other business or commercial right of similar nature’ for the purposes of section 32(1)(ii) of the Act.

10. We have heard both the parties at length and perused the material placed on record including paper book and various judicial precedents relied upon. We have also given our thoughtful consideration to observations and findings arrived at by the ld. PCIT on the issue while passing the impugned revisionary order as well as records of assessment made by the ld. AO u/s 143(3), copies of which are placed in the paper book.

11. In order to lay our hands on the issue before us, we delve on the provisions of section 263 of the Act. From the perusal of provisions of section 263, it is apparent that there are mainly four features / stages of the power for revision to be exercised u/s 263 of the Act by the ld. PCIT –

(i)

The PCIT may call for and examine the records of any proceedings under the Act and for this purpose he/she need not show any reason or record any reason to believe as it is required u/s 147 or 143(2) of the Act. It is a part of his/her administrative control to call for the records and examine them.

(ii)

The PCIT on an analysis of both, the records and the order passed by the Assessing Officer arrives at a consideration that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. This is exercised by calling for and examining the records relating to any proceeding under this Act available at the time of examination by the PCIT. Till this stage, assistance of the assessee is not required by the PCIT.

(iii)

If after calling for and examining the records and the assessment order, the PCIT considers that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue, he/she is bound to give an opportunity of being heard to the assessee by issuing a show cause notice pointing out the reasons for arriving at such a consideration that action u/s 263 is required on a particular issue. The PCIT has to conduct an inquiry as he may deem fit and after hearing the assessee, he/she will pass the order as deem fit.

(iv)

The PCIT can annul or enhance or modify the assessment as a result of inquiry conducted and hearing the assessee by directing the Assessing Officer for a fresh assessment or to make such enquiries as he/she deems necessary.

11.1 . At this stage, before considering the multi-fold contentions of the ld. Counsel for the assessee, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the ld. PCIT taken u/s 263 of the Act. The coordinate bench of ITAT Mumbai in the case of Mrs. Khatiza S. Oomerbhoy v. ITO [2006] 100 ITD 173 (Mumbai) analysed in detail, various authoritative pronouncements including the decision of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) and has propounded the following broad principles to judge the action of CIT taken under section 263 –

(i)

The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled.

(ii)

Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted.

(iii)

An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous.

(iv)

If the order is passed without application of mind, such order will fall under the category of erroneous order.

(v)

Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under the law.

(vi)

If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO.

(vii)

The AO exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion.

(viii)

The CIT, before exercising his jurisdiction under section 263 must have material on record to arrive at a satisfaction.

(ix)

If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order, he does not make an elaborate discussion in that regard.

11.2 . For this, let us also take the guidance of judicial precedence laid down by the Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. (supra) wherein their Lordships have held that twin conditions need to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and in so far as prejudicial to the interest of the Revenue.

11.3 . In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact, or (ii) incorrect application of law, or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; [because AO has to discharge dual role of an investigator as well as that of an adjudicator) then, in aforesaid any of the events, the order passed by the AO can be termed as erroneous order.

11.4 . Looking at the second limb as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue, one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) held that this phrase i.e. “prejudicial to the interest of the revenue” has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law.

12. In the light of the above exposition on law enunciated under section 263 and the relevant facts relating to the issue raised by the ld. PCIT, we examined the deliberation made by both, the ld. Counsel of the assessee and by the ld. CIT DR for the purpose of our adjudication. It is well settled law for invoking the provisions of section 263 that both the conditions of order being erroneous in so far as prejudicial to the interest of Revenue needs to be satisfied.

13. Since in the present case, the sole basis for the revisionary order passed by the ld. PCIT is CBDT Circular no. 9/2014, according to which assessee has claimed excess depreciation by treating the right acquired under the SCA as an intangible right, against amortization which ought to have been done over the tenure of concession agreement, we referred to the said SBDT Circular. From the perusal of the said Circular, we note that it refers to the issue relating to expenditure incurred on development and construction of infrastructural facilities like roads/highways on Build-Operate-Transfer (BOT) basis with right to collect toll whether entitled for depreciation under section 32(1)(ii) or the same can be amortized by treating it as an allowable expenditure. In para 2 of this Circular, CBDT observed that in terms of concessioner agreement, the developer is required to construct-develop-maintain the infrastructural facility at its own cost in lieu of which the developer incurs costs and acquires right to collect tolls from the user of such infrastructural facility. It is further noted in the same para that right to collect toll does not fall in any of categories ‘intangible assets’ satisfied under section 32(1)(ii). The basis adopted by the ld. CBDT as noted in para 3 for such an observation is that assessee does not hold any rights in the project except recovery of toll fee to repay the expenditure incurred and therefore, it cannot be treated as an owner of the property for the purpose of claim of depreciation under section 32(1)(ii). In para 4, it records that assessee is entitled to recover the cost incurred by it towards the development of such facility. The expenditure incurred by the assessee on such infrastructural projects brings enduring benefit to the assessee in the form of right to collect toll during the period of agreement. By drawing an analogy from the decision of Hon’ble Supreme Court in the case of Madras Industrial Investment Corpn. Ltd. v. CIT [1997] 225 ITR 802/91 (SC), it concluded that the expenditure incurred on infrastructural project may be allowed to be spread during the tenure of concessionaire agreement by treating the same as incurred for the purpose of business or profession of the assessee.

14. As already noted, edifice for the impugned revisionary order lies in the non-adherence of the CBDT Circular by the ld. AO while passing the assessment order. In this regard, it is also important to note about the binding nature of CBDT circular on the Income-tax authorities for which gainful guidance is taken from the decision of Hon’ble Supreme Court in the case of CIT v. Hero Cycles (P.) Ltd. [1997] 228 ITR 463 (SC) wherein it was held that circulars bind the ITO but will not bind the appellate authority or the Tribunal or the Court or even the assessee.

14.1. In the case of UCO Bank v. CIT 237 ITR 889 (SC), Hon’ble Supreme Court while dealing with the legal status of such circulars, observed as under:

“Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Income-tax Act, which are binding on the authorities in the administration of the Act. Under section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the authority which wields the power for its own advantage under the Act is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorized as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities.”

14.2. In the matter of CIT v. Smt. Nayana P. Dedhia [2004]270 ITR 572 (Andhra Pradesh), the Hon’ble High Court of Andhra Pradesh held that the guidelines issued by the Board in exercise of powers in terms of section 119 of the Act relaxing the rigours of law are binding on all the officers responsible for implementation of the Act and, therefore, bound to follow and observe any such orders, instructions and directions of the Board.

14.3. In the decision of Dy. CIT v. Sunita Finlease Ltd.330 ITR 491 (Chhattisgarh) it was held by the Hon’ble High Court of Chhattisgarh in para 16 that the administrative Instruction No. 9/2004 issued by the Central Board of Direct Taxes is binding on administrative officer in view of the statutory provision contained in section 143(2), which provides for limitation of 12 months for issuance of notice under section 143(2). While giving its finding, the Hon’ble High Court of Chhattisgarh placed reliance on the decisions in the case of UCO Bank (supra) and Smt. Nayana P. Dedhia (supra).

14.4. Further, Hon’ble High Court of Calcutta in the case of Amal Kumar Ghosh v. Asstt. CIT 361 ITR 458 (Calcutta) dealt with the issue relating to CBDT circular which according to the Department cannot defeat the provisions of law. While giving its observations and finding on the issue, the Hon’ble Court referred to the decision of Hon’ble Chhattisgarh High Court in the case of Sunita Finlease Ltd. (supra), which are as under:

7. We have considered the rival submissions advanced by the learned Advocates. Even assuming that the intention of CBDT was to restrict the time for selection of the cases for scrutiny within a period of three months, it cannot be said that the selection in this case was made within the aforesaid period. Admittedly, the return was filed on 29th October, 2004 and the case was selected for scrutiny on 6th July, 2005. It may be pointed out that Mrs. Gutgutia was, in fact, reiterating the views taken by the learned Tribunal which we also quoted above. By any process of reasoning, it was not open for the learned Tribunal to come to a finding that the department acted within the four corners of Circulars No. 9 and 10 issued by CBDT. The circulars were evidently violated. The circulars are binding upon the department under section 119 of the I.T. Act.

8. Mrs. Gutgutia, learned Advocate submitted that the circulars are not meant for the purpose of permitting the unscrupulous assessees from evading tax. Even assuming, that to be so, it cannot be said that the department, which is State, can be permitted to selectively apply the standards set by themselves for their own conduct. If this type of deviation is permitted, the consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a standard for itself, the department is bound by that standard and cannot act with discrimination. In case, it does that, the act of the department is bound to be struck down under Article 14 of the Constitution. In the facts of the case, it is not necessary for us to decide whether the intention of CBDT was to restrict the period of issuance of notice from the date of filing the return laid down under section 143(2) of the I.T. Act. [emphasis supplied by us by underline]

14.5. In the present case before us, in the CBDT Circular no. 09/2014 at para 4, ld. CBDT has drawn an analogy by referring to the decision of Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. (supra) to bring out a clarification by way of this stated Circular that the cost of construction on development of infrastructure facilities of roads/highways under BOT projects may be amortized and claimed as allowable business expenditure. In the judgment of Madras Industrial Investment Corporation Ltd. (supra), the question which was addressed as reframed by the Hon’ble Madras High Court was in respect of whether an expenditure incurred was revenue or otherwise which was dealt by the Hon’ble Supreme Court. Subsequent to this decision, Hon’ble Supreme Court dealt with the provisions of section 32(1)(ii) in the case of CIT v. Smifs Securities Ltd. [2012] /348 ITR 302 (SC) wherein it held that the phrase ‘or any other business or commercial rights of similar nature’ in section 32(1)(ii) includes goodwill and classifies as an intangible asset entitle the assessee to claim depreciation on the value of goodwill.

14.6. Contention of the assessee before us is that the right acquired by it under the concessionaire agreement is an intangible asset falling within the provisions of section 32(1)(ii), being a business or commercial right, eligible for depreciation. The nature of expenses whether capital or revenue is not the subject matter of dispute in the present revisionary order in appeal before us as the expenditure incurred by the assessee has already been considered as capital expenditure in the preceding assessment year and claim of depreciation has been allowed in A.Y. 2020-21 and 2021-22. In the year under consideration i.e. A.Y. 2022-23, the claim is limited to the depreciation on WDV of relevant block of assets. Assessee neither in the preceding assessment year nor in the year under consideration has claimed it as deferred revenue expenditure. It has capitalized the expenditure so incurred claimed and characterized it as an intangible asset within the meaning of section 32(1)(ii) and claimed depreciation at the applicable rate as provided under the schedule of rate of depreciation in respect of intangible assets i.e. at the rate of 25%. Thus, in the year under consideration, there is no scope to examine whether the expenditure could have been amortized over the concession period as enunciated in the CBDT circular. In this regard, it is worth taking note of the certain judicial precedents supporting the contention of the assessee that the issue in the year under consideration is limited to the depreciation on WDV of relevant block of assets:

In the case of DIT (International Taxation) v. HSBC Asset Management (I) (P.) Ltd. (Bombay), Hon’ble jurisdictional High Court of Bombay held in para 9 and 10 that once the asset has entered in ‘block of assets’ and thereafter, depreciation has been allowed and in the succeeding year, the WDV of such asset is to be accepted as sacrosanct and depreciation has to be allowed on the same.

ii.

The above judgement was followed by the coordinate bench of ITAT Pune in the case of ohnson Matthey Chemicals India (P.) Ltd. v. DCIT [IT Appeal No. 1507 (Pun) of 2012, dated 12.12.2017], holding on similar lines.

iii.

Coordinate bench of ITAT Mumbai in the case of ACIT v. Horizon Packs (P.) Ltd. [IT Appeal Nos. 5950 and 6096/Mum/2024, dated 06.10.2025] held similarly by relying on the decision of the Hon’ble jurisdictional High Court in the aforesaid judgment.

14.7. It is important to note that the said CBDT Circular is for the benefit of the assessee. It is available to the assessee provided a claim is made by the assessee in this respect. If no claim is made by the assessee in terms of the said CBDT Circular, the benefit cannot be thrashed upon it. Accordingly, the very basis of the impugned revisionary order passed by the ld. PCIT gets eroded. We make a useful reference to the legal maxim ‘sublato fundamento cadit opus’ meaning thereby ‘the foundation being removed, the superstructure falls’ thus, whereas the foundational action is held to be invalid or removed, the subsequent and consequential proceedings automatically collapse. Accordingly, in the conspectus of the above detailed deliberation, the impugned revisionary proceedings invoked by the ld. PCIT and subsequent impugned revisionary order passed are held to be bad in law.

15. It is important to note at this juncture that in the preceding two assessment year i.e. 2020-21 and 2021-22 the issue relating to the claim of depreciation was not or could not be examined by the department, though in one of the assessment years i.e. in A.Y. 202021 matter travel before the Tribunal, but the merits of the case were not dealt with. It did not attain finality on the merits. In this regard, we find it appropriate to discuss the merits of the claim of the assessee of depreciation under section 32(1)(ii) by capitalizing the expenditure as intangible asset for the rights acquired under the concession agreement in the form of license for the collecting of toll fees. For this we refer to the relevant provisions contained in section 32(1)(ii):

Depreciation.

32(1)(ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature67, being intangible assets acquired on or after the 1st day of April, 1998, owned 67, wholly or partly, by the assessee67 and used for the purposes of the business67 or profession, the following deductions shall be allowed-

12. Explanation 3 to section 32(1) defines intangible asset as under:-

Explanation 3. For the purposes of this sub-section, the expression “assets” shall mean-

(a)

tangible assets, being buildings, machinery, plant or furniture: (b) intangible assets, being know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature

15.1. A plain reading of the aforesaid provisions would indicate that certain kind of assets being knowhow, patents, copyrights, trademarks, license, franchise, or any other businesses or commercial rights of similar nature are to be treated as intangible asset and would be eligible for depreciation at the specified rate. It is the claim of the assessee that the right acquired under SCA to operate the project facility and collect toll charges is in the nature of license.

15.2. The term ‘license’ has not been defined under the Act. For this a useful reference is made to the K J Aiyer’s Judicial Dictionary, 15^th edition, 2011 Volume-II, according to which the term ‘license’ means and is synonymous with ‘permit’, ‘permission’ or ‘authority’. The word in its general and popular sense, means a right or permission granted in accordance with law by some competent authority to do some act, to do a certain thing, to engage in some transaction which but for such license would be unlawful. A document embodying such authority is often times called ‘license’.

15.3. Also, in the P. Ramanath Aiyar’s Advanced Law Lexicon 3^rd edition Volume-III, 2005, ‘license’ is defined in relation to section 52 of the Easement Act, 1882 as under:

“Where one person grants to another, or to a definite number of other persons a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license. “

15.4. This issue had come up before the Hon’ble Special Bench, ITAT, Hyderabad in the case of Asstt. CIT v. Progressive Constructions Ltd. 191 TTJ 549/63 ITR(T) 516 (Hyderabad – Trib.)/ITA no. 1845/HYD/2014 dated 14.02.2017, wherein it was held that right granted to the assessee under the concessionaire agreement to operate the project/project facilities and collect toll charges is a license or akin to license, hence the intangible asset eligible for depreciation under section 32(1)(ii). Relevant paragraphs in this respect are extracted below from the said judicial pronouncement for ready reference:

“13. A plain reading of the aforesaid provisions would indicate that certain kind of assets being knowhow, patents, copyrights, trademarks, license, franchise, or any other businesses or commercial rights of similar nature are to be treated as intangible asset and would be eligible for depreciation at the specified rate. te. It It is is the claim of the assessee that the right acquired under C.A. to operate the project facility and collect toll charges is in the nature of license. However, the learned Senior Standing Counsel has strongly countered the aforesaid claim of the assessee by referring to the definition of license as provided under the Indian Easements Act, 1882. For better appreciation, we intend to reproduce herein below the definition of “license” as provided under section 52 of the Indian Easements Act, 1882:-

“License” defined: Where on person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful and such right does not amount to an easement or an interest in the property, the right is called a license.

14. It has been the contention of the learned Senior Standing Counsel that as the term “license” has not been defined under the Income Tax Act, 1961, the definition of “license” under the Indian Easements Act, 1882, has to be looked into. Accepting the aforesaid contention of the learned Senior Standing Counsel, let us examine the definition of “license” extracted herein above. A plain reading of section 52 of the Act makes it clear, a right granted to a person to do or continue to do something in the immovable property of the grantor, which, in the absence of such right would be unlawful and such right does not amount to an easement or interest in the property, then such right is called a license. If we examine the facts of the present case, vis-a-vis, the definition of license under the Indian Easements Act, 1882, it would be clear that immovable property on which the project / project facility is executed/implemented is owned by the Government of India and it has full power to hold, dispose off and deal with the immovable property. By virtue of the C.A., assessee has only been granted a limited right to execute the project and operate the project facility during the concession period, on expiry of which the project / project facility will revert back to the Government of India. What the Government of India has granted to the assessee is the right to use the project site during the concession period and in the absence of such right, it would have been unlawful on the part of the concessionaire to do or continue to do anything on such property. However, the right granted to the concessionaire has not created any right, title or interest over the property. The right granted by the Government of India to the assessee under the C.A. has a license permitting the assessee to do certain acts and deeds which otherwise would have been unlawful or not possible to do in the absence of the C.A. Thus, in our view, the right granted to the assessee under the C.A. to operate the project / project facility and collect toll charges is a license or akin to license, hence, being an intangible asset is eligible for depreciation under section 32(1)(ii) of the Act.

15. Even assuming that the right granted under the C.A. is not a license or akin to license, it requires examination whether it can still be considered as an intangible asset as described under section 32(1)(ii) of the Act. In this context, it has been the contention of the learned Senior Standing Counsel that the intangible asset mentioned under section 32(1)(ii) of the Act are specifically identified assets, except, the assets termed as “any other business or commercial rights of similar nature”. He had submitted, applying the principle of ejusdem generis the rights referred to in the expression “any other business or commercial rights of similar nature”, should be similar to one or more of the specifically identified assets preceding such expression. The aforesaid contention of the learned Departmental Representative is unacceptable for the reasons enumerated hereinafter.”

15.5. In this regard, we also take note of the submissions made by the ld. CIT DR who placed reliance on the following judicial precedents:

(i)

North Karnataka Expressway Ltd. v. CIT -10 (Bombay)

(ii)

Moradabad Toll Road Co. Ltd. v. Asstt. CIT [2014/[2014] 369 ITR 403 (Delhi)

(iii)

Narmada Infrastructure Construction Enterprises Ltd. v.. ACIT [TCA No.868 to 870 of 2009, dated 29-12-2022] and others order dated 29.12.2022 by Hon’ble High Court of Madras.

(iv)

Hazaribagh Ranchi Expressway Ltd. v. ACIT [209 ITD 522 (Mumbai – Trib.)

15.6. We have given our thoughtful consideration to the submissions made by the ld. CIT DR by perusing the judicial pronouncements relied upon as listed above. In the judgments at serial no. 1, 2 and 4, the issue dealt is in respect of claim of depreciation on the ‘toll road’ identified as ‘tangible asset’, treating it plant and machinery or building where the bone of contention was its ownership with the assessee for the allowability of depreciation. Hence, are clearly distinguishable from the present set of facts and the issue under adjudication before us. In respect of judgment at serial no. 3 by the Hon’ble High Court Madras in the case of Narmada Infrastructure Construction Enterprise (supra), the coordinate bench of ITAT, Mumbai in the case ofJorabat Shillong Expressway v. Dy. CIT (Mumbai – Trib.)/ITA no. 6012/Mum/2025 and others, including A.Y. 2022-23, order dated 23.04.2026, has elaborately dealt with this judgment to bring out distinguishable aspects vis-a-vis claim of depreciation on intangible asset under section 32(1)(ii) and CBDT Circular no. 09/2014. Coordinate Bench noted that the question placed before the Hon’ble Court was whether the ‘toll bridge’ and the ‘toll road’ can be considered as ‘tangible’ or ‘intangible’ asset and whether the assessee can claim depreciation on such toll road and toll bridge. It was observed that the issue whether the concessionaire right which the assessee acquired as an intangible asset can be subject to depreciation over the concession period, was never a subject matter of consideration before the Hon’ble Court. It thus, held that the decision of Hon’ble Madras High Court is factually distinguishable. Relevant paragraph in this respect is reproduced below;

“As could be seen from the above, the question posed before the Hon’ble High Court was whether the toll bridge and toll road can be considered as ‘tangible’ or ‘intangible asset’ and whether the assessee can claim deprecation on such toll road and toll bridge. While deciding the issue, the Hon’ble Madras High Court followed the decision of Hon’ble Bombay High Court in case of North Karnataka Expressway Ltd. v. ACIT (supra) and held that since, the assessee is not owner of the toll bridge/ toll road, it cannot claim depreciation. Thus, it is quite clear that the issue whether the concessionaire right which the assessee acquired as an intangible asset can be subject to deprecation over the concession period, was never a subject matter of consideration before the Hon’ble High Court. In fact, in case of North Karnataka Expressway Ltd. v. ACIT (supra), the Hon’ble Bombay High Court has kept the issue of claim of deprecation on intangible asset open. Thus, in our view, the decision of Hon’ble Madras High Court discussed above is factually distinguishable, hence, not applicable to assessee’s case. Thus, on a conspectus of the judicial precedents cited before us, the sequitur is, the right granted to an assessee to collect toll/annuity during the concession period in respect of a toll road constructed on DBOFT or BOT basis is an intangible asset u/s.32(1)(ii) of the Act. Hence, depreciation is allowable on such asset at the specified rate. Even otherwise also, the CBDT through Circular No. 9/2014 has allowed amortization of the expenditure over the concession period. Therefore, in any case of the matter, the assessee will get the deduction either by way of deprecation or through amortization. Thus, there can only be a timing difference. Therefore, in our considered view, the issue is otherwise revenue neutral.”

15.7. At this juncture, we is worth making reference to certain judicial pronouncements which have upheld the claim of depreciation as made by the assessee in the present case:

Progressive Construction Ltd. (Supra), being order dated 14.02.2017, passed by the Special Bench of Tribunal at Hyderabad in ITA No.1845/Hyd/2014 and Ors. The issue as arisen for consideration of the Tribunal is referred to in para 1 at page 31 and the Revenue’s submissions opposing the assessee’s claim for depreciation has been referred to in para 9 at page 41. An analysis of the relevant clauses from the concession agreement is in para 10 at pages 42 to 44 and their conclusion with respect to existence of an intangible asset in the nature of a license is in paras 13 and 14 at pages 48 to 50. Alternatively, assuming that the right could not be treated as in the nature of license, discussion to the effect that it would qualify as ‘any other business or commercial right of a similar nature’ is in paras 15 to 18 at pages 50 to 55. The consideration with respect to status of Circular No.9/2014 has been discussed in paras 19 and 20 at pages 55 and 56, wherein, the Special Bench has found that the said CBDT Circular is for the benefit of the assessee. The benefit in terms of the said Circular can be granted only when an assessee makes a claim in terms of it. The benefit of the Circular cannot be thrust upon the assessee, if it is not claimed.

ii.

Bangalore International Airport Ltd. v. Dy. CIT (Karnataka)/[2023] 457 ITR 229 (Karnataka) which in turn had followed judgment of the Hon’ble High Court of Delhi in the case of Areva T & D India Ltd. v. Dy. CIT (Delhi) in the manner in which the principle relating to noscitur a socii or ejusdem generis is to be applied. In this case, the assessee had entered into a concession agreement with Ministry of Civil Aviation for development of an airport. Therein, the Hon’ble High Court emphasized on the aspect that under the said agreement the assessee had obtained a legally enforceable right. Further, the lease right obtained thereunder constituted an intangible asset as it was transferable.

iii.

Addl. CIT v. Mumbai International Airport (P.) Ltd. (Mumbai) was also concerned with a case where by virtue of Operations Management Development Agreement, the assessee had acquired right for an initial term of 30 years which could be extended for another period of 30 years. In this case also, the Tribunal upheld the submissions of the assessee holding that the license enabled the assessee to collect charges from users of the airport premises. That the rights as acquired by the assessee were in the nature of a license to carry out the necessary activities at the airport premises which has been held to be a business or commercial right in the form of a license and therefore an intangible asset.

16. In the conspectus of the above deliberation, taking into account the provisions of the Act as contained in section 32(1)(ii), definition of license, judicial precedents relied upon by the ld. CIT DR and those by ld. Counsel for the assessee, we find that the issue on the claim of depreciation as made by the assessee under section 32(1)(ii) by considering intangible asset for the rights acquired under the concession agreement and that proposed of CBDT in its Circular no. 09/2014 by way of amortization of expenditure over the concession period, there is only a timing difference, when the entirety of the claim is taken into account. To put is differently, claim in this respect is a revenue neutral claim except for difference in the timing.

17. With the issue of claim of depreciation having been examined by us in the above paragraphs, we find that in the present case before us which is on the revisionary order passed under section 263, we have already deliberated in detail on the law enunciated under section 263 whereby it is important that both the conditions are met i.e. an order being erroneous insofar as prejudicial to the interest of Revenue. If one of the requirements is not met while invoking the revisionary proceedings, the order passed thereafter, stands vitiated. In the present case before us, when ld. PCIT based his entire action on CBDT Circular no. 09/2014 by holding that it is mandatory for Assessing Officer to follow the CBDT Circular which even if is accepted as such, though the same is not binding on the Appellate Authority nor on the assessee, yet the assessment order set aside by him can at best be held to be erroneous but certainly not prejudicial to the interest of revenue as the effect bears only a timing difference and is a revenue natural transaction. In view of this also, the impugned revisionary order is held to be bad in law. For this view, we respectfully refer to the decision of Coordinate Bench in Jorabat Shilong Expressways (supra) for which the relevant para is already extracted above.

18. To bring completeness in our adjudication on the issue in hand, we also refer to the opening para of the impugned revisionary order wherein ld. PCIT has mentioned about the initial issues raised by the audit objection which adequately demonstrates that the jurisdiction under section 263 has been assumed based on an audit objection without independent application of mind. It is a settled position in law that assumption of revisionary jurisdiction based on an audit objection is not permissible for which reference is made to the following judicial pronouncements:

(i)

CIT v. Sohana Woollen Mills [2008] 296 ITR 238 (Punjab & Haryana)

(ii)

Neetu Hurkat v. PCIT [IT Appeal No. 957 (Ahd) of 2024, dated 14.11.2025].

(iii)

Zensar Technologies Ltd. v. PCIT [IT Apeeal No. 4349 (Mum) of 2025, dated 12.02.2026].

18.1 . We refer to the decision in the case of Zensar Technologies Ltd. (supra) which dealt with the issue of audit objection in para 15 & 16 is extracted below. The coordinate bench held that exercise of power under section 263 based on audit objection is vitiated. The revisionary order was quashed and set aside.

“A second plank of assessee’s challenge to the impugned order is based on the fact that the revisionary authority has exercised jurisdiction u/s. 263 of the Act merely based on audit objection. Though, neither in the show cause notice issued u/s. 263 of the Act or in the order passed under that provision, learned PCIT has referred to the audit objection, however, in the assessment order passed in pursuance to the directions of learned PCIT, the Assessing Officer has clearly and in no uncertain terms stated that the audit objection has suggested for disallowance of deduction u/s. 10AA of the Act on account of non-allocation of R&D expenses to SEZ units.

The aforesaid observation of the Assessing Officer in the order giving effect to the directions of learned PCIT, prima facie, demonstrates that the genesis of the revisionary proceeding for disallowance of a part of R&D expense was based on audit objection. Thus, the decision to invoke the provisions of Section 263 of the Act, qua the issue of disallowance of R&D expense is not an independent decision of learned PCIT but is greatly influenced by the audit objection. That being the case, the exercise of power u/s. 263 of the Act, in our considered opinion is vitiated, hence, unsustainable. Accordingly, we quash and set aside the impugned order passed u/s. 263 of the Act and restore the order of assessment dated 21.09.2022.”

19. Also, it is not a case of lack of enquiry at the end of ld. AO on dealing with the issue raised by the ld. PCIT which is evident from the issue for which case of the assessee was taken up for scrutiny assessment under section 143(3) where in one of the three issues includes ‘investment in intangible assets and claim of depreciation’. Ld. AO had issued notice under section 142(1) raising specific queries on this issue, as placed in the paper book at page nos. 76 to 78 against which assessee furnished detailed reply supported by corroborative documentary evidences which are also placed in the paper book from page no. 79 onwards.

19.1. We have perused these records both, the notices issued under section 142, running in several pages as well as the replies with supporting evidences. From the perusal of records, we note that ld. AO elaborately dealt with the issue as raised by the ld. PCIT. Notices u/s 142(1) running into several pages, detailing the queries and mentioning specific requirements for compliance by the assessee themselves demonstrates that ld. AO has gone into details of the issue by raising queries on multiple aspects, requiring the assessee to explain the same with corroborative evidences. We note that ld. AO accepted the explanations furnished by the assessee though he did not make any specific mention in the assessment order. We have already taken note on certain fundamental principles propounded in various judgments in the above paragraphs. In furtherance to the same, it is important to take note of the decision of Hon’ble Jurisdictional High Court of Bombay in the case of Aroni Commercials Ltd. v. Dy. CIT (Bombay), wherein Hon’ble Court observed that once a query is raised during the assessment proceedings and assessee had replied, it follows that query raised was a subject of consideration of ld. AO while completing the assessment. It is not necessary that an assessment order should contain reference and / or discussion to disclose its satisfaction in respect of the query raised. Relevant extract in this regard is as under:

“14…………………………….However, according to Mr. Chhotaray, learned Counsel for the revenue the aforesaid issue now raised has not been considered earlier as the same is not referred to in the assessment order dated 12 October 2010 passed for A.Y. 2008-09. We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings………………………..”

20. We find it worth summarizing the issues on which findings have been arrived relating to the issue raised by the ld. PCIT for invoking the revisionary proceedings as well as on passing of the impugned revisionary order. The issues so addressed through this order are listed under:

Case of complete scrutiny whereby the issue considered by the ld. PCIT has already been examined in detail by the ld. AO. It is not a case of lack of enquiry.

Revisionary proceedings initiated are based on audit objection is not permissible

Mandatory compliance of CBDT circular no. 09/2014 dated 23.04.2014 by the ld. AO as contemplated by the ld. PCIT, making the assessment order erroneous and prejudicial to the interest of Revenue

Claim of depreciation on WDV when depreciation has been allowed in the preceding two years in respect of rights acquired by the assessee under a concessionaire agreement in the form of a license granted by NHAI, recognized as an intangible asset u/s 32(1)(ii)

Rights acquired under a concessionaire agreement in the form of a license granted by NHAI is an intangible asset within the meaning of section 32(1)(ii)

Twin conditions of section 263 as to order to be both, erroneous and prejudicial to the interest of revenue, to be satisfied for a valid revision

Binding nature of CBDT circular on the assessee and appellate authorities

Claim of assessee either by way of depreciation on intangible asset or by way of amortization of expenditure incurred over the period of concessionaire agreement is a revenue neutral transaction with only timing difference

21. Keeping the above detailed discussing both, on the facts and law, we are of the view that on the issue raised by the ld. PCIT in the impugned order, no action u/s 263 is justifiable. The setting aside of the assessment order by ld. PCIT is bad in law. Thus, impugned order cannot be sustained under the facts and circumstances of the present case as well as judicial precedents dealt herein above. We therefore, quash the impugned order u/s 263 and allow the grounds raised by the assessee.

22. In the result, appeal filed by the assessee is allowed.