AQUA TECH SOLUTIONS PRIVATE LIMITED,PUNE vs. PCIT (CENTRAL)-3, MUMBAI, MUMBAI

4. On the facts and in the circumstances of the appellant's case and in law, the Ld. Principal Commissioner of Income Tax, erred on facts and in law by passing order u/s 263 of the Act directing the Assessing Officer to reframe the reassessment order dated 31.03.2023 after conducting 'necessary enquiries' ignoring the fact that the impugned reassessment order was consciously passed by the Assessing officer after in-depth examination, scrutiny and meticulous analysis of the material. information and details placed on record, which cannot be treated as improper enquiries by the Assessing Officer in absence of identification of any material/evidence by the Ld. Principal Commissioner of Income Tax on the assessment record that could be said to have been ignored by the Assessing Officer and therefore, Ld. Principal Commissioner of Income Tax, failed to appreciate that Explanation 2(a) u/s 263(1) does not justify revision of any order under the guise of endless and irrelevant enquiries without recording abject failure and lapse on part of Assessing Officer to establish both error and prejudice caused to revenue as the Assessing Officer had made adequate inquiries in this case and passed a speaking order.

3 ITA N0. 3855/Mum/2025 Aqua Tech Solutions Private Limited 5. On the facts and in the circumstances of the appellant's case and in law, the Ld. Principal Commissioner of Income Tax erred on facts and in law in passing order u/s 263 of the Act without appreciating that once the genuineness of receipts, that were limited subject matter of examination in the reassessment proceedings, was established with concrete evidence and already offered to tax by the appellant, then how could the same be treated as prejudicial to revenue by linking them to the deduction u/s 801A(4) of the Act, which was already allowed not only in previous order dated 17.05.2021, but also consistently allowed over the years and in any case, was not subject matter of "order sought to be revised.

6. On the facts and in the circumstances of the appellant's case and in law, the Ld. Principal Commissioner of Income Tax erred on facts and in law by invoking Section 263 of the Act solely due to mere change of opinion without any new material on record or without first demonstrating as to how such opinion of Ld. Assessing Officer is irrational or unsustainable in law, such an instance does not empower the Ld. PCIT u/s 263 to supersede his opinion in lieu of the lawful opinion formed by the Ld. Assessing Officer on the basis of all relevant enquiries conducted by the Assessing Officer, in view of law settled by Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. v. Commissioner of Income-tax [2000] 243 ITR 83 (SC) and followed by Jurisdictional Bombay High Court in many cases.

7. The appellant craves leave to add to, alter, amend, modify and/or delete all or any of the foregoing grounds of appeal

. view of law settled by Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. v. Commissioner of Income-tax [2000] 243 ITR

83. (SC) and followed by Jurisdictional Bombay High Court in many cases.”

2. The assessee is a company and filed the return of income for A.Y. 2018-19 on 27.10.2018 declaring total income of Rs. 1,00,91,730/-. The case was selected for scrutiny and the order u/s 143(3) was passed on 17.05.2021 accepting the income returned by the assessee. Subsequently, the assessing officer received information from DGIT (Inv.), Mumbai that the assessee is one of the companies allegedly engaged in issuing bogus invoices to M/s. Larsen & Toubro Limited. Accordingly, the assessing officer reopened the assessment by issuing of notice u/s 4 ITA N0. 3855/Mum/2025 Aqua Tech Solutions Private Limited 148. The assessing officer called on the assessee to furnish various details during the re-assessment proceedings. After perusal the details submitted by the assessee the Ld.AO passed the order u/s. 147 dated 31.03.2023 without making any additions and accepting the income return by the assessee in response to notice u/s 148. Subsequently, the PCIT issued a show-caused notice u/s 263 stating that the assessee has incorrectly claimed deduction u/s 80IA(4) of the Act and to this extend there is error which is prejudicial to the interest of the revenue. The assessee made detailed submission before the PCIT stating that during the original assessment proceedings u/s 143(3) the claimed of the assessee u/s. 80IA(4) has been verified and found to be correct. The assessee further submitted that the reasons for reopening are completely different for which no addition is made and therefore, the assessing officer would not have denied the deduction u/s 80IA(4) of the act during the re-assessment proceedings. However, the PCIT did not accept the submission of the assessee and proceeded to set aside the order u/s 147 with a direction to redo the assessment order de-novo. The relevant observations of the PCIT in this regard are reproduced below: “9.1 This interpretation by the assessee is grossly misplaced. The proceedings under Section 263 of the Act are not in the nature of change of opinion. The powers vested under this Section are much wider and wherever the competent Authority is of the opinion that the order under question is erroneous is so far as it is prejudicial to the interest of the revenue, powers vested in this Section can be invoked to set right such error and the consequent prejudice caused to revenue. 9.2 In view of the above, reliance placed by the assessee on the two (2) judicial pronouncements referred to above, are clearly distinguishable on facts and are hence of little use or consequence. 9.3 The contention of the assessee is found not tenable since the purpose of reopening was the specific information regarding non-genuine transactions with Larsen & Toubro Ltd., which was not verified by the A.O. leading to order being erroneous and the assessee had indicated profit in respect of such bogus transactions also and in respect of the entire profit, the assessee had claimed deduction u/s 801A(4) to the extent of 100% of the profits. The above has resulted 5 ITA N0. 3855/Mum/2025 Aqua Tech Solutions Private Limited in error leading to prejudice to the interest of revenue and both these conditions have been cumulatively satisfied in the instant case and therefore the conditions precedent for invoking the powers vested u/s 263 of the Act are fulfilled. 9.4 The bogus transactions, receipts from such transactions and the profit element on such contract receipts from L&T directly affects the genuineness of the corresponding purchase costs and claim of deduction u/s 801A(4) of the Act which remained unverified during the course of reassessment proceedings Hence, element of loss of revenue is present in reassessment order passed by the A.O. exhibiting non-application of mind to relevant material available on records including the information received in respect of transactions with L&T 10.1 Section 263 requires fulfillment of twin conditions namely error in an order and the consequent prejudice to the interest of revenue. In the instant case, both these conditions are fulfilled in as much as that the non seeking of details regarding transactions pertaining to L&T is evident, indicating that the order is erroneous. The fact that on such bogus transactions the assessee has availed the benefit of deduction u/s 801A(4) clearly exhibits loss of revenue which is the cause of prejudice to the revenue. 10.2 Reliance is placed on the decision of Hon'ble Gauhati High Court rendered in the case of CITVS Jawahar Bhattacharjee [2012] 341 ITR 434 (Gauhati) wherein it is held that non-application of mind to relevant material or an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of order being erroneous. 10.3 Further, Hon ble Allahabad High Court in the case of CIT Vs. Bhagwan Das [2005] 272 ITR 367, held that non-application of mind by the A.O. was prejudicial to the interest of the revenue. Similar views were given by Hon'ble Jabalpur ITAT in the case of Pratop Footwear Vs ACIT (2003) SOT 638.

11. In the present case, assessment order passed u/s 143(3) r.w.s. 147 dated 31.03.2023 Is an order passed by the A.O. and therefore, the aforesaid issues, which have not been considered by the A.O in the said reassessment order, can be brought to life in exercise of powers under Section 263 of the Act. Reliance is placed in this regard the decision of Hon'ble Gujarat High Court given in the case of New Jagat Textile Mills (P.) Ltd. Vs CIT (2006) 282 ITR 399.

6 ITA N0. 3855/Mum/2025 Aqua Tech Solutions Private Limited 3. Ld.AR submitted that the PCIT cannot invoke the provision of section 263 against the order of AO u/s 147 since, the issue of deduction u/s 80IA is already been verified during the regular assessment proceeding. The Ld.AR further submitted that the reasons for reopening was with respect to alleged bogus transaction with L&T which was concluded by AO without making any addition based on the details submitted by the assessee. The Ld.AR also submitted that when no addition has been made for the reasons for which the assessment was reopened then AO during the re-assessment proceedings would not have made any other addition even assuming that the assessee was not entitled to claim deduction u/s 80IA for year under consideration. Accordingly, Ld.AR argued that order u/s.263 passed by the PCIT is without jurisdiction and liable to be quashed.