INSIGHT PRINT COMMUNICATIONS PRIVATE LIMITED,MUMBAI vs. THE PCIT, MUMBAI-4, MUMBAI

3.3. Assessee made its submissions, relevant portion of which are reproduced in the impugned revisionary order. Contention of the assessee is that ld. AO had made enquiry on the three issues for which the case was selected for limited scrutiny. In para 3 of its submissions as reproduced in the revisionary order, assessee has mentioned “We most humbly submit that merely because, the Assessment Unit (AU) has not made any specific enquiry on record in respect of the deductibility of “Higher Education Cess” u/s. 40(a)(ii) would not mean that the AU has not applied its mind over the deductibility of its expenditure which was deductible, till the day the Finance Act, 2022 received assent from the Hon’ble President of India”. It was also submitted that under the common perception, the said amendment was declaratory and not clarificatory hence had to be applied prospectively and not retrospectively, as there was lack of clarity till the pronouncement of Insight Print Communications Pvt. Ltd. AY 2020-21 law by the Hon’ble Supreme Court in the case of JCIT vs Chambal Fertilisers & Chemicals Limited [2023] 450 ITR 164 (SC) vide order dated 14.12.2022. Accordingly, two views were possible and the AU had taken one of the possible views by allowing the claim made by the assessee. Hence the issue raised by the ld. PCIT cannot be the subject of review u/s. 263 of the Act. Assessee also contended on the jurisdictional aspect of the assessment order by submitting that it has been passed by AU who is not an authority covered by the definition of Assessing Officer u/s. 2(7A) and, therefore, is bad in law. Assessee also submitted that it had filed its return for the year under consideration on 13.02. 2021, that is much prior to the date when the assent of Hon’ble President of India was received in respect of Finance Act, 2022 whereby retrospective amendment was brought in the section 40(a)(ii).

Insight Print Communications Pvt. Ltd. AY 2020-21 amendment was retrospective in nature which got affirmed by the pronouncement of the decision in the case of Chambal Fertilisers & Chemicals Ltd. (supra). The interpretation of law was always meant non-eligibility for deduction for higher education cess u/s. 40(a)(ii).

4.1. Further, on the jurisdictional aspect also, he observed that definition of ld. Assessing Officer u/s. 2(7A) always included authorities as defined in section 144B(4) and, therefore, the impugned assessment order so passed cannot be held to be bad in law. Assessee being aggrieved by the revisionary order is in appeal before the Tribunal.

5.1. One of the reasons for selection of case of assessee for limited scrutiny includes “Business Expenses”. Thus, contention of the assessee that jurisdiction of AO shall be restricted to the issues identified for limited scrutiny goes against it as business expenditure is one of the issues which was identified for limited scrutiny and the business expense includes claim of deduction u/s.37(1) of Higher Education Cess while computing business income. Accordingly, ld. AO

Insight Print Communications Pvt. Ltd. AY 2020-21 did not exceed the jurisdiction to examine the issues identified for limited scrutiny. Issue raised by ld. PCIT for invoking the revisionary proceedings u/s. 263 is on an issue which was within the jurisdiction of the Assessing Officer, being part of scope under limited scrutiny assessment. Reliance placed by the assessee on the decision of Co- ordinate Bench in the case of Fineotex Chemical Ltd. vs PCIT in dated 04.09.2025 does not hold good as the issue raised by the ld. PCIT is the one which was within the scope of ld. AO while undertaking limited scrutiny assessment.

5.2. On the jurisdictional issue raised by the assessee that Assessment Unit (AU) is not covered within the definition of Assessing Officer u/s. 2(7A), ld. PCIT has relied on the conjoint reading of definition of Assessing Officer u/s. 2(7A) and provisions of Section 144B(4) which defines the terms AU. The conjoint reading of the two sections makes it abundantly clear that Assessing Officer was always included in the authorities as defined in Section 144B(4). In this context it is important to note that appellate and revisionary powers are creature of statute. Once the assessment order is passed, if the assessee is aggrieved by that order, it has the right to appeal before CIT(A). Similarly, if the department finds that the order passed is erroneous and prejudicial to the interest of the revenue, statute provides mechanism to the department (PCIT) to invoke revisionary powers and set aside the order of assessment subject to conditions prescribed therefor. Hence, statute provides remedies, both to the assessee as well as to the department against the assessment completed. Now, if the argument of the assessee is accepted, it will lead to a scenario where assessee on being aggrieved by the order of AU can file appeal before the first appellate forum, but department against the same order will be deprived from invoking revisionary proceedings u/s. 263 because assessment was completed

Insight Print Communications Pvt. Ltd. AY 2020-21 by AU and not the Assessing officer as argued by the assessee. This artificial distinction would take away/curtail the statutory right inferred by the legislation upon the PCIT. Accordingly, we do not ascribe to the argument made by the assessee and agree with the finding of the ld. PCIT on this aspect.

5.3. On the merits of the case, the issue raised by the ld. PCIT while invoking the revisionary proceedings is fully covered by the judgement of Chambal Fertilisers & Chemicals Ltd (supra) wherein it has been held that Education Cess is not an allowable expense for computation of taxable business income. The amendment brought in to section 40(a)(ii) r.w.s. 37(1) is applicable retrospectively and applies to the case of the assessee. Ld. PCIT has examined the issue on the claim of deduction as an expenditure of Higher Education Cess and directed the ld. AO to modify the assessment as it tantamount to assessment being erroneous in so far as prejudicial to the interest of revenue. The said direction given by the ld. PCIT is within his powers as contained in section 263.

5.4. Assessee has also contended that an appeal is pending before the ld. CIT(A) against the assessment order on the ground of it being time barred. In this regard, we note that the issue which forms the basis for the present revisionary proceedings for which assessee is in appeal before the Tribunal is different form the issue which is pending before the ld. CIT(A) and, therefore, ld. PCIT has exercised his jurisdiction well within the power of section 263.