TaxTMI 
TaxTMI 
2026 (3) TMI 1186
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....to assessment proceedings undertaken by the Assessing Officer (AO) was examined by the Principal CIT, Delhi-1, and it was observed that, prima facie, the AO had passed the order which is both erroneous and prejudicial to the interest of the revenue on several counts. Accordingly, the learned PCIT issued a show-cause notice under section 263 of the Act to the assessee on 12.12.2023, asking the assessee to explain why the assessment order passed by the AO should not be held as erroneous insofar as it is prejudicial to the interest of the Revenue. 2.1 In the aforesaid notice, the Principal CIT made a detailed observation with regard to issues relating to (i) Related Party Transactions, (ii) Platform Selling Expenses, (iii) Provision for Doubtful Advances, (iv) Aging Goods, (v) Changes in liability arising from financing activities, (vi) Trade Payables, (vii) Purchase of traded goods, and (viii) advertisement expenses and asked the assessee to explain and substantiate the same. 2.2 In response to the above show-cause notice, the assessee filed written submissions from time to time. After considering the various written submissions and arguments of the learned AR, further, the ass....
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....e assessee made no compliance. Again, vide Query No. 1 of the questionnaire dated 18.11.2022, the AO raised following query that he has observed that from the submissions dated 10.08.2022, the assessee has not submitted the details regarding platform selling fees claimed as expenses along with supporting documents. In response, the assessee submitted that it makes certain payments to Amazon Seller Services Private Limited (Amazon) for the purpose of using their e-commerce platform for the sale of goods. Such payments are termed as platform selling fees, which also include fees towards freight and shipping services that are rendered by Amazon. Therefore, the said expenditures being incurred wholly and exclusively in connection with the assessee's business of trading activities on the e-commerce platform. It was further submitted that the expenditures were incurred wholly and exclusively for the purpose of business and eligible to claimed under section 37 of the Act. The learned PCIT observed that, on perusal of the assessment order shows that the AO has accepted the submissions of the assessee without raising any query regarding the reasonableness of these expenses. The assessee has....
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....or write-off. He further observed that, besides bringing on record, even the basic details, the claim of more than Rs.19 crores of write-off was allowed without any inquiry into the genuineness of the claim. Further, he observed that the inventories mentioned in the Balance Sheet were also not investigated by the Assessing Officer with respect to their valuation of inventories. Further observed that the learned AO has not even asked for the details of expenses amounting to Rs.304.30 crores relating to inventories. He further observed that the changes in liabilities arising from financing activities, as reported in the Auditors' report, were completely overlooked by the learned AO. In this regard, he reproduced the observations of the auditor in the impugned order. Finally, he observed that on perusal of the assessment order shows that during the entire course of the assessment proceedings, absolutely no questions were asked by the learned AO on various issues. The learned AO has not verified the above said transactions. Further, he observed that the claim of huge advertisement expenses was allowed without verification by the learned AO. After discussing the above various issues in ....
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....by National Faceless Assessment Centre ('NFAC') under section 143(3) read with sections 144C(3) and 144B of the Act, which is a complete code in itself. 3. That on the facts and circumstances of the case, the impugned order having been passed by the PCIT in undue haste without: (a) considering the submissions filed, and (b) first disposing off the legal objections by passing a separate speaking order and (c) providing reasonable opportunity of being heard, is illegal, bad in law and liable to be quashed/ set aside. 4. That the PCIT erred on facts and in law in exercising revisionary powers under section 263 of the Act on various issues in the impugned order, without satisfying the twin jurisdictional conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of the Revenue and consequently, the impugned order is illegal, bad in law and liable to be quashed. 5. That the order passed by the PCIT under Section 263 setting aside the assessment order and directing the assessing officer to make de-novo assessment qua certain issues [referred to in paras 5 to 11 of the order] after making fresh enquiries is, in the abse....
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....of allowability of platform selling expenses paid to ASSPL. 9.2. That the PCIT failed to appreciate that (i) the claim of platform selling expense was duly examined and accepted in the original assessment order, after due and adequate inquiries/investigation and application of mind by the assessing officer by way of raising specific queries in respect of the aforesaid issue and (ii) ASSPL is not a related party under section 40A(2) of the Act and thus, there is no question of examining applicability of that section. Qua provision for doubtful advances 10. That on the facts and circumstances of the case and in law, the exercise of revisionary jurisdiction by the PCIT under section 263 on the issue of reversal of provision for doubtful advances, is without jurisdiction and bad in law. 10.1. Without prejudice, the PCIT erred in issuing vague/open ended directions to the assessing officer to examine the genuineness of the claim without appreciating that the appellant has claimed only reversal of provision for doubtful advances which was suo motu disallowed in assessment year 2020-21; thus, there is no question of further examining the genuineness of ....
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....sessment order was erroneous and prejudicial to the interests of the Revenue, qua such issues. Qua huge claim of advertisement expenses 13. That on the facts and circumstances of the case and in law, the exercise of revisionary jurisdiction by the PCIT under section 263 on the issue of advertisement expenses, is without jurisdiction and bad in law. 13.1. Without prejudice, the PCIT erred in issuing vague/ open ended directions to the assessing officer to examine the claim of advertisement expenses, its genuineness and applicability of withholding tax provisions thereon. 13.2. That the PCIT erred in setting aside the assessment order on aforesaid issue, without even recording any prima facie findings on merits despite detailed submission furnished by appellant, thereby, not demonstrating how and why the final assessment order was erroneous and prejudicial to the interests of the Revenue, qua such issue. The appellant craves to leave, to add, to alter, to amend, to rescind, to modify or vary the above grounds of appeal before or at the time of hearing this appeal." 5. At the time of hearing, Ld. AR of the assessee submitted as under: ....
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.... Vertex Customer Management India Private Limited: ITA No. - 606/2019 (Del) - Religare Enterprises Limited v. ACIT: (WP No. 13807/2022) (Del) - Pharmazell (India) (P.) Ltd. v. NFAC: [2024] 161 taxmann.com 484 (Mad) - Liquidhub Analytics (P.) Ltd. v. NFAC: [2025] 172 taxmann.com 742 (Pune Trib.) - Abbot India Private Limited vs ACIT [ITA No. 7778/MUM/2012 and ITA No. 2032/MUM/2014] (Kol. Trib.) 10. Specific reliance in this regard is placed on the following decisions, wherein revisionary proceedings under section 263 of the Act initiated and completed in the name of a non-existent entity was held to be invalid: - Varnika RPG Trust v. PCIT: [2021] 133 taxmann.com 32 (Del. Trib.) - Adani Power Ltd. v. PCIT [ITA No. 453/Ahd/2023] (Ahd. Trib.) - Madhuban Dealers Pvt. Ltd. v. PCIT [ITA No. 273/Kol/2022] (Kol. Trib.) 11. In so far as the corrigendum issued by the PCIT, it is respectfully submitted that an order or notice passed in the name of a non-existent entity is void from the outset (void ab initio), and this fundamental, jurisdictional defect cannot be cured by a subsequent corrigendum. Relianc....
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....O passed the order after due application of mind, as elaborated hereunder: Brief Background Facts 18. The appellant, Amazon Smart Commerce Solutions Private Limited is a private limited company incorporated in India. During the relevant previous year, the appellant was engaged in trading activities on online marketplace. 19. The appellant filed its return of income (ROI) on 13.03.2022 for relevant AY 2021-22 declaring a total income of INR 291,00,11,321. The ROI was selected for scrutiny assessment and vide order dated 15.12.2022, the returned income was accepted as such by the NaFAC 20. In the impugned revisionary proceedings, the PCIT sought to revise the AO order dated 15.12.2022, passed under section 143(3) r.w.s. 144B of the Act, on the alleged ground that the AO had erroneously failed to examine the following six (6) issues: (i) Related party transactions; (ii) Genuineness of platform selling expenses; (iii) Provision for doubtful advances; (iv) Provision for slow and ageing goods; (v) Various items in Balance Sheet and Audit Report; and (vi) Genuineness of advertisement expenses. ....
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....) [@ pages 384 to 387 of PB] Vide notice dated 18.11.2022, the appellant was asked to furnish details regarding provision for doubtful advances (@pt 3 of notice) [@ pages 388 to 391 of PB] The appellant vide reply dated 10.08.2022, provided details of expenses claimed under various heads in the relevant year including provision for doubtful advances (@pt 4 reply in response to query no. 4) [@ pages 402 to 405 of PB] The appellant vide reply dated 23.11.2022, provided complete details of disallowances of doubtful advances and debts during AY 2020-21 and the reversal of the same (@pt 3 of reply in response to query no. 3). [@ pages 392 to 399 of PB] Further, in the aforesaid response, the appellant also furnished copy of relevant extracts of ROI and computation filed for AY 2020-21, wherein the said expenses had been duly disallowed (@ pages 406 to 409 of PB) 4. Provision for slow and ageing goods Vide notice dated 28.07.2022, the appellant was asked to provide details regarding provision made for slow and ageing goods (@pt 4 of notice) [@ pages 384 to 387 of PB] Further vide notice dated 18.11.2022, the AO raised further queries regarding provisio....
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.... revisionary order, the PCIT has, at paras 5-5.2 (pages 24-26), observed that the appellant did not file Form 3CEB and the furnished audit report (forming part of audited financials) did not disclose the names of related parties to whom the payments were made. 26. Accordingly, the PCIT directed the AO (@ page 47-48) to examine related party transactions in as much as whether they were reasonable and at arm's length and applicability of section 40(a)(i)/(ia) of the Act in respect of reimbursement of expenses paid by the related parties on behalf of the assessee company. 27. In this regard, it is at the outset submitted that transfer pricing provisions were not at all applicable in the relevant assessment year in so far as the appellant had undertaken transactions only with domestic entities. Thus, there was no requirement for the appellant to file Form 3CEB and the PCIT has erroneously drawn adverse inference in this regard without even verifying basic facts. 28. In so far as the allegation of the PCIT that the audit report did not disclose the names of related parties, it is submitted that the disclosure made in "Note-26" of the audited financial statemen....
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....dit report in Form 3CD (@ point 1, page 487 of paper book), wherein full and true disclosures were made in respect of related party transactions as under: - 'Note 26' - Related Party Disclosures in the audited financial statements clearly disclosed related party transactions (@ page 38 of paper book) - 'Clause 23' of Tax Audit Report - Particulars of payments made to persons specified under section 40A(2)(b) were disclosed (@ pages 62 to 63 of paper book) - Copy of computation of income and acknowledgement of income tax return (@ pages 1 to 3 of paper book) 33. It is submitted that on the basis of the aforesaid disclosures, the AO had duly applied his mind and no adverse inference was drawn in respect of the same. Merely because the AO did not ask any specific query does not mean that there was no application of mind by the AO particularly when there were adequate disclosures in this regard which were self-explanatory in nature. The assessing officer, had after examining the aforesaid details/disclosures, passed the assessment order. 34. That apart during the revisionary proceedings before the PCIT, various pointed queries were raised in....
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....al submissions or rendering any finding thereon, proceeded to mechanically hold that the AO had failed to conduct adequate enquiries. 36. It may thus be appreciated that the PCIT has proceeded on completely incorrect facts in respect of the aforesaid issues without any application of mind, and on this count alone, the revisionary order calls for being quashed. Re (ii): Platform selling expenses 37. The PCIT, has in para(s) 6-6.3 (pages 27-29), observed that during the course of assessment proceedings, the AO failed to make inquiries to ascertain the genuineness of the platform selling expenses and reasonableness of the claim in terms of section 40A(2) of the Act. 38. Thereafter, the PCIT has himself admitted that the said issue was examined during the course of original assessment and that specific query(s) were raised in this regard by the AO vide query no. 3 and 1 of notice dated 28.07.2022 and 18.11.2022, respectively, which were duly responded to by the appellant vide reply dated 23.11.2022 (@ pages 392 to 399 of PB). 39. Despite the aforesaid categoric observation, the PCIT has proceeded to vaguely allege (para 12.4.1 at page 36) th....
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....] In response to the aforesaid query, the appellant provided a comprehensive response explaining the nature of platform selling fees and justified the deduction under section 37 of the Act (Point 1 of the reply in response to query no. 1) Vide the same reply, the appellant also submitted copies of invoices with respect to platform selling fees paid to ASSPL attached as Annexure B to the paper book. 44. It is evident from the above that specific and pointed queries were raised in respect of issue of allowability of platform selling fees and it was only after the AO extensively examined and considered the aforesaid claim made by the appellant that the AO drew no adverse inference in this regard. 45. It is submitted that at page 29, 36 and 48 of the impugned order, the PCIT has erroneously observed that "no invoices have been investigated by the AO to verify the genuineness of the claim". In this regard, it is submitted that a mere perusal of reply dated 23.11.2022, reveals that the appellant submitted 4,177 pages of invoices in relation to platform selling fees which is enclosed as Annexure B to the paper book. 46. It is therefore submitted that th....
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....iled factual submissions or rendering any finding thereon, proceeded to mechanically hold that the AO had failed to conduct adequate enquiries. 52. It may thus be appreciated that the PCIT has proceeded on completely incorrect facts in respect of the aforesaid issues without any application of mind and on this count alone, the revisionary order calls for being quashed. Re (iii): Provision for doubtful advances 53. The PCIT, has in para(s) 7-7.3 @ pages 29-30 of the impugned order, observed that during the course of assessment proceedings, the AO failed to make enquiries regarding provision made for doubtful advances. 54. Thereafter, the PCIT has admitted @ pg 29-30 of the order that the said issue was examined during the course of the original assessment and that specific query was raised in this regard by the AO vide query no. 3 of notice dated 18.11.2022 which was duly responded by the appellant vide reply dated 23.11.2022. 55. Despite the aforesaid categoric observation, the PCIT has in para 14 at page 48 of the impugned order, proceeded to allege that the AO failed to make inquiries to ascertain the genuineness of the claim made by t....
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....isallowed in the year of creation, provide the details in which year the provision was disallowed and provide Computation of Income of that year. Reply dated 23.11.2022 [@ pt 3 of reply Pages 392-399 of PB] In response to the aforesaid query, the appellant provided a comprehensive response explaining the reversal of provision for doubtful advances and justified the deduction as below: "The Assessee wishes to submit that during AY 2020-21, provision for doubtful advances and debts amounting to INR 52,287,589 was disallowed while computing total income for the said AY. In this regard, copy of computation of total income for AY 2020-21 is enclosed as Annexure 5. Further, in the ROI filed for AY 2020-21, the said disallowance has been clubbed under Sl. No. 14 of Schedule BP, the relevant extract of the Form ITR6 (highlighted in yellow) is enclosed as Annexure 6. Accordingly, during the year under consideration, upon reversal of the provision to the extent of INR 33,216,933, the same has been claimed as an allowable expenditure." The relevant extract of ITR-6 and computation of income for AY 2020-21 has been attached at pages 406 to 409 of the paper book. 6....
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....the appellant in so far as details of goods and the reason for treating it as aging goods eligible for write off was not enquired upon. 67. In this regard, it is submitted, that the appellant had, in the preceding AY 2020-21, created provision for slow and ageing goods amounting to INR 197,004,607, which was suo-moto disallowed while computing total income for the said year. In the relevant assessment year under consideration i.e., AY 2021-22, the said provision was reversed, which was consequently claimed as reduction from the total income. 68. It is submitted that during the course of original assessment proceedings, the appellant had furnished a copy of the computation of total income and return of income filed for AY 2020-21, evidencing the disallowance in the year of creation. Copies of the same were duly filed before the AO vide submission dated 23.11.2022 (@ pages 392-399 and 410-413 of paper book). 69. Accordingly, it is submitted that the claim of deduction of reversal of the provision of slow and ageing goods during the relevant year is both reasonable and justifiable. There is no factual basis to characterise the same as non-genuine. 7....
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....tion, upon reversal of the said amount of INR 197,004,607, it has been claimed as an allowable expenditure." The relevant extract of ITR-6 and computation of income for AY 2020-21 are attached at pages 410-413 of the Paper book. 71. It is evident from the above that specific and pointed queries were raised in respect of reversal of provisions of slow and ageing goods and it was only after the AO extensively examined and considered the aforesaid claim made by the appellant that the AO drew no adverse inference in this regard. 72. In so far as the allegation of the PCIT that the AO failed to make enquires with regard to details of goods and the reason for treating it as aging goods eligible for write off, it is submitted that the PCIT has completely misconstrued the facts and failed to appreciate that the appellant had neither claimed deduction on account of write off of goods or creation of provision, but the impugned transaction related to mere reversal of excess provision, which was claimed as reduction from the total income since such provision was not claimed as deduction at the time of creation in the past year(s). 73. It is therefore submitted tha....
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....review of the inventories, have not recorded any adverse remarks on the correctness of the valuation of inventories. 80. In so far as the amount of expense of INR 304.30 crores in respect of inventories (which was also separately disclosed in the aforesaid Note-6 of the audited accounts), it is submitted that the same relates to loss of damaged inventories, as explained hereunder: 81. It is submitted that the appellant is engaged in the business of trading of products through e-commerce platform. The business model of the appellant is such that goods that are proposed to be sold are maintained at Amazon warehouse and thereafter transported. The process of transportation of goods to the Amazon warehouse, its storage and further shipment of goods for delivery to the final customers results in the appellant incurring damage of inventories at various stages, which is illustrated as under: - Warehouse Damage: Inventories that are damaged in Amazon warehouses gets classified as "warehouse damaged". - Removal Shipment Damage: Inventories that are damaged by Amazon partnered carriers during its shipment from a fulfillment center ["FC"] to a seller. ....
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.... dated 20.02.2023 furnished copy of break-up of inventory items forming part of Schedule Inventory placed at page 243 of PB and details of purchases (month-wise) of inventory and the names of the top 10 suppliers every month (page 244-246 of PB). 88. It is submitted that despite the appellant furnishing detailed explanations and supporting documents during the course of revisionary proceedings, the PCIT failed to consider or even refer to these submissions in the impugned order. The PCIT, without dealing with any of the detailed factual submissions or rendering any finding thereon, proceeded to mechanically hold that the AO had failed to conduct adequate enquiries. 89. It may thus be appreciated that the PCIT has proceeded on completely incorrect facts in respect of the aforesaid issues without any application of mind, and on this count alone, the revisionary order calls for being quashed. Re (b): Genuineness of Trade Payables 90. The PCIT has, at para 9.1 of the impugned order, vaguely alleged that the AO has not made any enquiries on the genuineness of trade payables amounting to INR 2,265.04 crores as it is quite high compared to earlier year ....
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.... of the paper book. 96. It is further the respectful submission of the appellant that the trade payables recorded in the books of account for the relevant previous year were duly verified, examined, and audited by the statutory auditors during the course of the statutory audit. The auditors, after conducting a detailed review of the payables, have not recorded any adverse remarks in the audit report regarding the completeness, accuracy, or genuineness of the trade payables. All trade payable balances are fully supported by proper supplier invoices, confirmations, and relevant documentation, thereby evidencing the legitimacy and correctness of the amounts outstanding. 97. It is submitted that despite the appellant furnishing detailed explanations and supporting documents during the course of revisionary proceedings, the PCIT failed to consider or even refer to these submissions in the impugned order. The PCIT, without dealing with any of the detailed factual submissions or rendering any finding thereon, proceeded to mechanically hold that the AO had failed to conduct adequate enquiries. 98. It may thus be appreciated that the PCIT has proceeded on complete....
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....s provided by the appellant that the aforesaid claim was accepted by the AO. 105. That apart, during revisionary proceedings, specific query was raised by the PCIT regarding the aforesaid issue and vide reply dated 28.12.2023, the appellant furnished a comprehensive response in relation to the borrowings (@ pt C.5 (b) of the reply at page 124 of the paper book). The appellant duly explained the computation which has been reproduced below: Particulars Amount [INR in crores] Remarks Opening balance as on 1 April 2020 788.81 Note 7 and 13 of FS Add: Increase during the year (including interest of INR 19.43 crores accrued during the year) 1,952.61 The Assessee has debited interest on borrowings amounting to INR 19.43 crores to the statement of profit and loss under 'Note 22 - Finance costs' of FS. Since the borrowings has been incurred for meeting day to day business operations/ working capital required, the expenditure incurred on such borrowings is incurred wholly and exclusively for the purpose of business operations, therefore the same has been claimed as genuine business expenditure under section 37 of the Act. Since the said expenditure....
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....eciation and amortization debited to profit and loss account' of Schedule BP. 108 In view of the aforesaid, it is submitted that the appellant has disallowed the expenditure towards lease liabilities [i.e., depreciation and interest expenses] debited to the statement of profit and loss and has only claimed the actual payments made towards lease liabilities. 109 It is further the respectful submission of the appellant that all expenses incurred were duly vouched i.e., duly checked, verified and audited by the statutory auditors, while conducting audit of books of account for the relevant previous year. No adverse remarks have been pointed by the auditors in the audit report issued for the relevant previous year with respect to expenses claimed by the appellant. Each and every expense incurred by the appellant is supported by proper bills/ vouchers. 110 It is submitted that despite the appellant furnishing detailed explanations and supporting documents during the course of revisionary proceedings, the PCIT failed to consider or even refer to these submissions in the impugned order. The PCIT, without dealing with any of the detailed factual submissions or re....
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....e considered as scrap sales of goods. Upon sale of such goods, the entire amount is offered to tax as revenue from sale of scrap. 118. In this regard, it is submitted that full and complete disclosure in respect of the aforesaid fact was made in the audited financials of the appellant (furnished before the AO vide reply dated 12.07.2022) as under: - Note 16 to the Audited Financial Statements - Revenue from contract with customers - Para 2.1(h) of Notes to Accounts of Financial Statement - provides the policy adopted by the appellant for sales return, discounts and scrap sales. 119. That apart, during the section 263 revisionary proceedings, specific query was raised by the PCIT regarding the aforesaid issue and vide reply dated 28.12.2023, the appellant furnished a comprehensive response in relation to the details of basis of sales return, valuation and policy of discounts (@ pt C.5 (d) of the reply at pages 128 to 131 of the paper book). 120 The aforesaid submission was reiterated vide reply dated 10.01.2024 (@Sl. No. 8 of the reply at page 193 of the paper book). 121 It is further the respectful submission of the appellant th....
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....ments - Purchase of traded goods" (filed before AO vide reply dated 12.07.2022 @ page 487 of the paperbook). 128 It is respectfully submitted that the increase in purchases must be viewed in conjunction with the corresponding increase in revenue. As evident from the financial statements, the appellant's revenue from operations during the relevant AY has grown approximately 1.5 times that of the preceding AY, whereas the purchase of traded goods have increased by approximately 1.4 times. The same is tabulated hereunder: 129 Particulars Revenue from operations Purchase of traded goods Reference AY 2021-22 16,624 14,626 [A] AY 2020-21 11,412 10,505 [B] Ratio 1.46 times 1.39 times [C] =[A]/[B] 130 It is evident from the above table that the rise in purchases is a direct and proportionate consequence of the expansion in the scale of operations and the increase in the volume of goods sold by the appellant. Since the appellant is engaged in the business of trading and selling products through e-commerce platform, the volume of purchases naturally moves in line with the scale of sales made during the year. ....
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....s directly linked to generating revenue on the platform. Therefore, the advertisement expenses have been incurred wholly and exclusively for the purpose of business, which is deductible under section 37 of the Act. 138 In this regard, it is submitted that vide "Note 23 to the Audited Financial Statements - Other Expenses", full and complete disclosure in respect of the aforesaid expenditure was made in the audited financials of the appellant (furnished before the AO vide reply dated 12.07.2022 (@ page 487 of the PB). 139 That apart, during revisionary proceedings, specific query was raised by the PCIT regarding the aforesaid issue vide notice dated 12.12.2023 and vide reply dated 28.12.2023, the appellant furnished a comprehensive response in relation to the expenses incurred on advertisements (@ pt C.5 (f) of the reply at pages 132 to 133 of the PB). 140 Further, the appellant furnished copies of invoices in relation to advertisement expenses running into 9,657 pages, attached as Annexure A of the PB. 141 In so far as applicability of TDS provisions on advertisement expenses, it is submitted that the same was never confronted to the appellant du....
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....ction and bad in law. Re: (b) View taken by assessing officer is a plausible view in law 147 On perusal of the above, it is submitted that apart from the fact that there was no error whatsoever, in the AO order, the view adopted therein, for all the aforesaid issues dealt in extenso supra was, in any case, a plausible view and thereby no interference is called for in terms of section 263 of the Act. The view taken by the assessing officer cannot, by any stretch of argument, be regarded as unsustainable in law, so as to be regarded as "erroneous" warranting exercise of revisionary jurisdiction. 148 It is trite law that if the view taken by the assessing officer is a plausible view in law, the assessment order passed cannot be regarded as "erroneous", much less prejudicial to the interests of the Revenue. It has been consistently held by the Courts that if the assessing officer has adopted one of the courses permissible in law which has resulted in loss of revenue, or where two views are possible and the assessing officer has taken one view with which the Commissioner does not agree, the exercise of revisionary power under section 263 of the Act would not b....
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....he assessment order may be regarded as "erroneous", but that would not be so in the latter case where enquiry had actually been conducted by the concerned officer, even though the PCIT may not agree with the nature and manner of conducting enquires. 154 As a necessary corollary, when on a particular issue, the AO conducted certain enquiries during the course of proceedings, such order cannot, it is submitted, be regarded as erroneous so as to exercise revisionary jurisdiction under section 263 of the Act. 155 In simple words, where an issue has been examined by the AO, the PCIT cannot set aside the assessment merely because according to the PCIT enquiries should have been conducted in a particular manner and/ or further enquiries ought to have been conducted by the AO. PCIT cannot substitute his opinion in place of that of the AO as to the manner and the form in which the enquiries should have been conducted during the course of assessment. - PCIT v. NYA International: [2025] 173 taxmann.com 102 (Guj.) - Revenue's SLP dismissed in [2025] 173 taxmann.com 103 (SC) - PCIT v. Clix Finance India (P.) Ltd.: [2025] 473 ITR 650 (Delhi) - CIT vs.....
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.... Narayana Pai : 98 ITR 422 (Kar) * J.P.Srivastava And Sons (Kanpur) Ltd. v. CIT, UP: 111 ITR 326 (All) * S.B.Sankar v. State of Kerala and Another: 171 ITR 689 (All) * CIT v. Kanda Rice Mills: 178 ITR 446 (P&H) * CIT, Patiala v. Chawla Trunk House: 139 ITR 182 (P&H) 158 In the facts of the present case, the Pr. CIT, in respect of all the issues, have merely held that further enquiry and examination is required, without even recording as to how the assessment order sought to be revised is erroneous on such issues; no error whatsoever has been pointed out regarding the said claims made by the appellant and allowed by the assessing officer after due examination. The exercise of revisionary powers under section 263 of the Act on such grounds is clearly impermissible in law. Re (e): Explanation 2 to section 263 relied upon by PCIT 159 In the impugned order passed under section 263 of the Act, the PCIT has harped upon Explanation 2 to section 263 of the Act to hold that non-conduct of proper enquiry by the AO renders the order erroneous and prejudicial to the interest of the Revenue. 160 In this regard, it is submitt....
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....he light of the aforesaid settled legal position, it is the respectful submission of the appellant that the impugned order under section 263 of the Act is without jurisdiction and bad in law, since the pre-requisite twin conditions for invoking jurisdiction under the said section have not been fulfilled qua the order of the AO. Re (f): Assessment completed by NaFAC cannot be subjected to revisionary proceedings 166 It is of utmost important to note that in the present case the assessment order dated 15.12.2022 was passed by the NaFAC under section 143(3) r.w.s. 144B of the Act and not by the Jurisdictional Assessing Officer (JAO). It is submitted that the order so passed by the NaFAC cannot be subjected to revisionary proceedings under section 263 of the Act for the reasons stated hereunder: 167 It is respectfully submitted that procedure of faceless assessment under the Faceless Assessment Scheme notified as per section 144B is a complete code in itself. The said section and the faceless assessment scheme, it is submitted, contains a robust mechanism for completion of assessment inasmuch as the assessment is subjected to various inbuilt checks and balanc....
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.... fact, it is pertinent to note that section 263 nowhere refers to an assessment order passed by the NaFAC under section 144B of the Faceless Assessment Scheme to be subjected to revisionary jurisdiction. It only confers revisionary jurisdiction to revise any order passed by the 'Assessing Officer' or the 'Transfer Pricing Officer'. 174 Thus, it is submitted that the PCIT has erred in invoking revisionary jurisdiction under section 263 of the Act qua assessment completed by NaFAC under section 143(3) r.w.s. 144B of the Act, which is a complete code in itself. Re (g): Other Jurisdictional Issues 175 Independent of the above, it is further submitted that the impugned revisionary order is illegal, bad in law and liable to be quashed/ set aside inasmuch as the same has been passed by the PCIT in undue haste and without: a) affording a reasonable opportunity of being heard; b) considering the submissions filed (explained issue wise supra); and c) first disposing off the legal objections by passing a separate speaking order [refer NIIT Ltd vs. UOI WP(C) No.4722/2008 and 172-177/2009 (Del)] 176 In view of the above, it is submi....
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.... day) to correct a palpable mistake or an "Inadvertent punching error," it is considered a valid exercise of administrative/quasijudicial rectification. 2. Reliance on Precedents: The Tribunal relied on Madras High Court rulings which suggest that a corrigendum issued to rectify errors in the preamble or specific calculations in an assessment order is legal and valid. 3. Procedural vs. Substantive: The Tribunal viewed the corrigendum as a corrective measure for a mistake in the original order rather than an illegal substitution of a finalized judicial thought." 6.1 With regard to the cases relied upon by the learned AR, particularly the Vedanta Limited case, he submitted that it is the case related to a transfer pricing issue, and the AO had not rectified the defect with notice and all other cases relied by the Ld. AR distinguishable the facts of the present case. 7. In the rejoinder, the learned AR submitted that the Mahagun Realtors case is not deviated from the decision in the Maruti Suzuki case, and he brought to our notice page 30 of the Mahagun Realtors decision. With regard to the decision relied upon by the learned DR in the case of Skylight Hospital....
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.... against the revisionary order is valid or not is the issue raised before us. We observed that Ld AR vehemently argued that an order or notice passed in the name of a nonexistent entity is void from the outset void ab initio and this fundamental jurisdictional defect cannot be cured by a subsequent corrigendum. As discussed above, we noticed that the notice issued by the Ld PCIT on 12.12.2023 is proper since the erstwhile entity was in existence at the time of issue of notice. With regard to the revisionary order, the amalgamation scheme was sanctioned only on 15.01.2024 with effect from 01.04.2022, the present order being the first order passed subsequent to the approval of the scheme. No doubt the Ld PCIT initially made a mistake by passing the order in the name of the non-existent entity; however, he observed that there is fatal error in passing the impugned order, he rectified the same by passing the corrigendum on the next date itself. Therefore, in our considered view the corrigendum passed is proper. Further, we observed that the decision relied by the assessee are, on the decision of Vijay Television (P) Ltd (supra), the decision rendered by the Hon'ble Madras High Court on....
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....he term 'erroneous' was brought in the section itself in the form of explanation, it is enough to prove that the AO had passed the order without making inquiries or verification which should have been made. In the given case, we observed that the assessing officer had asked several information by issue of questionnaires and assessee also submitted the same time to time. However, the assessment was completed without making any enquiries which he should have made, we observed from the detailed observations and detailed submissions made by the assessee during the revisionary proceedings. It clearly shows that the AO had not applied his mind during the assessment proceedings and merely accepted the various documents submitted by the assessee either not understood the nature of the business of the assessee or by negligence. Therefore, after considering the detailed findings and submissions of the assessee, in our view the order passed by the AO without making enquiries which he should have is erroneous. 13. The next issue is whether the order passed is prejudicial to the interest of revenue, we observed that in the issue of provision for doubtful advances and provision for slow and a....
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....mitted that the related party transactions are disclosed under clause 23 of the tax audit report, mere submission without proper enquiry by the AO, particularly the assessee had disclosed the transactions party wise, nature and payment details, it is the duty of the AO to verify whether they are reasonable and within the range of the industry. Therefore, even in one of the above transactions are not properly verified as the AO supposed to have verified, which is erroneous as well as prejudicial to the interest of the revenue. In our considered view, there exist twin conditions of failure in the order passed u/s 143(3) of the Act. Therefore, we are inclined to reject the plea of the assessee and the case law relied by the assessee are distinguishable to the fact in the present case particularly after the insertion of the definition of erroneous in so far as it is prejudicial to the interest of revenue in the Act itself. 15. Further, Ld. AR made elaborate submissions that the AO had made specific enquiries and the assessee had responded, similarly the assessee had submitted the various information during the revisionary proceedings. After considering the detailed submissions, no d....
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....provision of this Act, the assessment, reassessment or recomputation under sub-section (3) of section 143 or under section 144 or under section 147, as the case may be, with respect to the cases referred to in sub-section (2), shall be made in a faceless manner as per the following procedure, namely:- xxx (i) the National Faceless Assessment Centre shall assign the case selected for the purposes of faceless assessment under this section to a specific assessment unit through an automated allocation system; xxx (ii) the National Faceless Assessment Centre shall intimate the assessee that assessment in his case shall be completed in accordance with the procedure laid down under this section; (iii) a notice shall be served on the assessee, through the National Faceless Assessment Centre, under sub-section (2) of section 143 or under subsection (1) of section 142 and the assessee may file his response to such notice within the date specified therein, to the National Faceless Assessment Centre which shall forward the same to the assessment unit; (iv) where a case is assigned to the assessment unit, under clause (i), it may make a requ....
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...., under section 144, giving him an opportunity to showcause on a date and time as specified in such notice as to why the assessment in his case should not be completed to the best of its judgment; (x) the assessee shall, within the time specified in the notice referred to in clause (ix) or such time as may be extended on the basis of an application in this regard, file his response to the National Faceless Assessment Centre which shall forward the same to the assessment unit; (xi) where the assessee fails to file response to the notice served under clause (ix) within the time specified therein or within the extended time, if any, the National Faceless Assessment Centre shall intimate such failure to the assessment unit; (xii) the assessment unit shall, after taking into account all the relevant material available on the record, prepare, in writing,- (a) an income or loss determination proposal, where no variation prejudicial to assessee is proposed and send a copy of such income or loss determination proposal to the National Faceless Assessment Centre; or (b) in any other case, a show cause notice stating the variations prejudicial to th....
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....iew report, accept or reject some or all of the modifications proposed therein and after recording reasons in case of rejection of such modifications, prepare a draft order; (xx) the assessment unit shall send such draft order prepared under sub-clause (a) of clause (xvi) or under clause (xix) to the National Faceless Assessment Centre; (xxi) in case of an eligible assessee, where there is a proposal to make any variation which is prejudicial to the interest of such assessee, as mentioned in sub-section (1) under section 144C, the National Faceless Assessment Centre shall serve the draft order referred to in clause (xx) on the assessee; (xxii) in any case other than that referred to in clause (xxi), the National Faceless Assessment Centre shall convey to the assessment unit to pass the final assessment order in accordance with such draft order, which shall thereafter pass the final assessment order and initiate penalty proceedings, if any, and send it to the National Faceless Assessment Centre; (xxiii) upon receiving the final assessment order as per clause (xxii), the National Faceless Assessment Centre shall serve a copy of such order and notic....
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....ix), as the case may be, serve a copy of such order and notice for initiating penalty proceedings, if any, on the assessee, along with the demand notice, specifying the sum payable by, or the amount of refund due to, the assessee on the basis of such assessment; (xxxi) the National Faceless Assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the provisions of this Act; (xxxii) if at any stage of the proceedings before it, the assessment unit having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of accounts, multiplicity of transactions in the accounts or specialised nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary to do so, it may, upon recording its reasons in writing, refer the case to the National Faceless Assessment Centre stating that the provisions of sub-section (2A) of section 142 may be invoked and such case shall be dealt with in accordance with the provisions of sub-sectio....
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....FAC, RU will prepare the report and send the same to the NFAC. The NFAC will forward the review report to the AU. i. The AU shall, after considering such review report, accept or reject some or all of the modifications proposed therein and after recording the reasons in case of rejection prepare a draft order. The AU shall send the draft order to NFAC. j. The procedure for eligible assessee is slightly different to the normal assessment proceedings. With regard to eligible assessee, the draft assessment order will be sent to them and upon receipt of response from such assessee, final assessment order will be prepared on the direction of NFAC by the AU. With regard to other assessee, draft assessment order is served on the assessee and upon receipt of acceptance of the variations proposed in such draft order, NFAC will direct the AU to pass final assessment order. The above said final assessment order shall be served on the assessee. 20. From the above, we observed that the NFAC is the intermediary between the AU and the other service providers to complete the assessment proceedings. The NFAC is being controlled by the PCCIT as an administrator or controller. Th....