TaxTMI 
TaxTMI 
REVISION AGAINST THE FACELESS ASSESSMENT ORDER
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....EVISION AGAINST THE FACELESS ASSESSMENT ORDER<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Income Tax<br>Dated:- 17-9-2026<br>In Shriram Finance Ltd. [Formerly known as Shriram Transport Finance Company Limited] Versus Principal Commissioner of Income Tax, Chennai - 3 - 2026 (7) TMI 1567 - ITAT CHENNAI, the appellant company is a Non-Banking Finance Company. Shriram Finance Limited is the re- christened name of Shriram Transport Finance Company Limited. Shriram City Union Finance Limited and another entity merged with Shriram Transport Finance Company Limited with effect from 01.04.2022. After that the amalgamated company name was changed to Shriram Finance Limited. The appellant company had filed the Return of Income for the Assessmen....
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....t Year 2021-22 on 31.03.2022 disclosing income of Rs.4758.39 crores. The said return of income was taken up for scrutiny assessment under CASS to verify the substantial purchases from suppliers who are either Non-Filer(s) or have filed non-business ITR or reflected a substantially lower turnover in ITR. The assessment was completed by the e-Assessment Unit vide order dated 23.12.2022 passed under section 143(3) read with section 144B of the Income Tax Act, 1961 ('Act' for short) accepting the returned income. The Principal Commissioner of Income Tax, Chennai-3 on verification of the assessment record, formed an opinion that the assessment order passed is erroneous for non-verification of some items. The Principal Commis....
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....sioner of Income Tax observed that the appellant has claimed deduction towards 'Rent under IndAS' amounting to Rs.98.63 crores. It is stated in the cash flow Note 48 that the actual cash outflow towards lease liabilities during the financial year is 96.16 crores. Thus, there is a difference which has not been verified during the course of assessment proceedings. The assessment records for the AY 2021-22 showed that the provision for impairment of loans and loan assets written off reported in the annual accounts were Rs.3128.29 crores and Rs.1509.29 crores respectively. The appellant has, while computing the taxable income, adjusted the bad debts of Rs. 1509.61 crores against the provision of Rs.3128.29 crores and added back t....
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....he net provision of Rs.1618.36 crores. The appellant stated that as per the provisions of Sec. 36(1) (vii), the appellant is entitled to claim bad debts only to the extent it exceeds the credit balance of provision for bad debts. The Principal Commissioner of Income Tax further observed that the previous assessment year 2020-21 ITR and computation statement, there was however a balance of Rs.221.39 crores standing to the credit of the provision for bad debts account, and this was not considered for allowance of bad debts under section 36(1)(vii). Therefore, the bad debts should be restricted to Rs.1288.22 crores and excess claim of bad debts of Rs.221.39 crores are required to be withdrawn and brought to tax. In view of the above, ....
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....a show cause notice was issued to the appellant under section 263 of the Act on 12.02.2025 calling the appellant to file objection as to why the assessment order should not be treated as erroneous and prejudicial to the interests of the revenue. The appellant filed a reply on 26.02.2025 contending that the assessment order is not erroneous. The Principal Commissioner of Income Tax observed that the Assessing Officer did not cause necessary enquiries which should have been done. Therefore, the assessment order is erroneous and prejudicial to the interests of the revenue within the meaning of Clause(A) and Clause(B) of Explanation-2 to section 263 of the Act, accordingly, set-aside the assessment order to the file of Assessing Office....
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....r passed under section 263 of the Act vide order dated 25.03.2025 to redo the assessment after making necessary enquiries and after providing an opportunity of hearing to the appellant. The appellant filed the present appeal against the order of Principal Commissioner of Income Tax before the Appellate Tribunal raising the following grounds of appeal- • The order of the Principal Commissioner of Income Tax, Chennai under section 263 of the Act in DIN & Order No: ITBA/REV/F/REV5/2024-25/1075009321(1) dated 25.03.2025 is against law and facts of the case. • The Principal Commissioner of Income Tax, Chennai- 3 erred in invoking section 263 on assessment made under the provisions of section 144B as the faceless asse....
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....ssment made is not covered under section 263 and hence the order passed by the Principal Commissioner of Income Tax is bad in law. • The Principal Commissioner of Income Tax Chennai-3 erred in not appreciating the fact that only the order passed by the Assessing Officer/TPO is covered under section 263 and not faceless assessment made under the provisions of section 144B as the assessment is not made by a single officer but after consideration of the case by the following different units consisting of (i) Assessment unit (ii) Verification unit (iii) Technical Unit (iv) Review Unit 4A. Without properly appreciating the prescribed mandatory, statutory four tiers scrutiny followed before a fa....
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....celess assessment is made under section 144B, the Principal Commissioner of Income Tax erred in concluding in para 10 of his order that necessary enquiries were not made by the faceless unit without even indicating what those necessary enquiries were and on the vague footing rushing to the conclusion that the assessment made was erroneous and prejudicial to the revenue. • The Principal Commissioner of Income Tax, Chennai-3 erred in partly setting aside the assessment order under section 143(3) read with section 144B dated 23.12.2022 with direction to the Assessing Officer that the issues on hand viz (i) rent expenses and (i) provision for bad debts and loan impairments are to be verified in a detailed manner based on the submis....
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....sions, details and documents furnished by the assessee and to pass order determining the correct income. • The Principal Commissioner of Income Tax, Chennai-3 erred in not appreciating the fact that there were no excess claim of lease rent and the lease rent of Rs.98.63 crores have been claimed correctly. • The Principal Commissioner of Income Tax, Chennai-3 erred in not appreciating the fact that the appellant had already offered to tax in the assessment year 2023- 24 the excess claim of bad debts in the return of income for the assessment year 2021-22 of Rs.296.51 crores (Rs.221.40 crores in the case of Shriram Transport Finance Company Limited, the amalgamated company and Rs.75.12 crores in the case of Shriram C....
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....ity Union Finance Limited, the amalgamating company) and the appellant has also filed an application under section 154 of the Act, dated 04.03.2025 for the assessment year 21-22 requesting to rectify the mistake apparent under section 154(2) and assess the income for the AY 2021-22 and hence the Principal Commissioner of Income Tax was not correct in directing the Assessing Officer to verify the issue. • The Principal Commissioner of Income Tax, Chennai-3 erred in partly setting aside the order under section 143(3) read with section 144B as there was no under assessment of income and the order passed is not erroneous and prejudicial to the interest of the revenue. In view of the above, the appellant prayed the ITAT to set as....
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....ide the order of Principal Commissioner of Income Tax. The Revenue submitted the following before the ITAT- • The assessment order passed under section 144B is amenable to the jurisdiction under section 263 of the Act. • The issues sought to be revised by Principal Commissioner of Income Tax were never examined by the Assessing Officer. • Non-examination of the issues renders the assessment order erroneous. • As per the order of Supreme Court, an assessment order can be revised in exercising of the power vested with the Commissioner under section 263 of the Act based on the Audit Objections. The ITAT considered the submissions of both the parties. The issue in the present appea....
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....l relates to the validity of assumption of jurisdiction under section 263 by the Principal Commissioner of Income Tax. The appellant has challenged the very assumption of jurisdiction on the ground that the assessment order passed under section 144B of the Act is not amenable for jurisdiction under section 263. The ITAT did not accept the contentions of the appellant for the reason that order passed under section 144B is an order passed in exercising of the powers or in the performance of functions of the Assessing Officer assigned to him under the orders or directions issued by the Board which clearly falls under Sub- Clause(ii) of Clause(A) of Explanation(1) of sub-section(1) of the Section 263 of the Income Tax Act.&....
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....nbsp; The ITAT considered the submission of the appellant that the Principal Commissioner of Income Tax is not having power to revise the order passed in Faceless assessment passed under the supervision of the Principal Chief Commissioner. The ITAT observed that there is nothing to show that the assessment order passed under section144B of the Act is passed by Principal Chief Commissioner of Income Tax of Faceless Unit. The ITAT next considered the challenge of the appellant of the validity of assumption of jurisdiction under section 263 of the Act. The ITAT perused the notice issued to the appellant and the reply filed by the appellant. The ITAT found that no query was raised by the Assessing Officer on those issues....
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.... which are sought to be revised by the Learned Principal Commissioner of Income Tax, thus, the contention that those issues were raised by the Assessing Officer and replies filed by the Assessee were considered by the Assessing Authority is bereft of any evidence. Therefore, the same were not accepted by the ITAT. In fact, during the course of hearing of the appeal, the Learned Counsel fairly conceded that there was no examination by the Assessing Officer on those issues which are sought to be revised under section 263 of the Act. Thus, it is an undisputable fact that there were no examination or queries raised by the Assessing Officer on issues which are subject matter of revisional proceedings under section 263 of the Act. ....
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....The ITAT observed that the Assessing Officer cannot abdicate his responsibility of examining the claim for deduction before allowing it. Absence of examination of the claim made by the assessee while passing an assessment order and allowing the claim made, would render the order of the Assessing Officer erroneous coupled with the fact that it is admitting prejudicial to the interest of the revenue, exercise of revisional jurisdiction under section 263 of the Act by the ld. Commissioner of Income Tax is proper and valid. The ITAT held that the assessment order is erroneous and prejudicial to the interests of the revenue not only for non-examination of issue and patently excess claim under section .36(1)(vii) of the Act was allowed by the ....
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....Assessing Officer. Therefore, the ITAT did not find any illegality in assumption of jurisdiction under section 263 of the Act by the Principal Commissioner of Income Tax. In view of the above, the ITAT dismissed the appeal. =============<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....