SURBHIT IMPEX PRIVATE LIMITED ,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX -8, MUMBAI

ITA 2570/MUM/2025Status: DisposedITAT Mumbai27 October 2025AY 2018-1918 pages
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What did the Tribunal hold?

The Tribunal held that the revision order passed by the PCIT under Section 263 of the Act was not sustainable as the PCIT lacked the jurisdiction to invoke the provisions. The Tribunal reasoned that the power under Section 263 can only be exercised when the assessment order is erroneous and prejudicial to the interest of the Revenue. It is well-settled that if the Assessing Officer (AO) has made an inquiry, even if it is considered inadequate by the Commissioner, it does not give the Commissioner the power to revise the order merely because he holds a different opinion. The revisionary power can only be exercised in cases of 'lack of inquiry' and not 'inadequate inquiry'. In this case, the AO had made inquiries, issued query memos, and examined the evidence produced by the assessee, leading to his satisfaction. The PCIT failed to demonstrate how the AO's satisfaction was erroneous or how the assessment order was prejudicial to the Revenue. The Tribunal relied on the principle that if there are two possible views and the AO has taken one of them after inquiry, the revisional power cannot be exercised. The Tribunal also referred to the Hon'ble Delhi High Court's decision in CIT vs. Sunbeam Auto Ltd., which held that an inadequate inquiry by the AO does not, by itself, empower the PCIT to pass an order under Section 263. Consequently, the revision order was quashed, and the grounds of appeal of the assessee were allowed.

What were the facts?

The assessee, Surbhit Impex Private Limited, filed an appeal against a revision order passed by the Principal Commissioner of Income-tax (PCIT), Mumbai – 8, under Section 263 of the Income-tax Act, 1961. This revision order pertained to the assessment order passed under Section 147 dated March 7, 2023, for Assessment Year (AY) 2018-19. The PCIT initiated revision proceedings based on observations that the assessee had a trading liability of Rs. 3,13,65,060/- outstanding for more than three years in AY 2018-19. The PCIT concluded that this liability should have been treated as ceased and taxed in AY 2018-19, as per Section 41(1) of the Act, which the Assessing Officer (AO) had failed to do. The PCIT also noted a difference of Rs. 73,26,643/- in trade payables outstanding for more than one year, suggesting it could also be a ceased liability. The AO had accepted the assessee's contention that the liability was set off against amounts not received from debtors and the balance was offered as income in AY 2020-21.

What were the issues?

1. Whether the revision order passed by the PCIT under Section 263 of the Act is valid when the reassessment order is neither erroneous nor prejudicial to the interest of the Revenue, as argued by the assessee? The assessee contended that the reassessment was initiated for a specific issue of creditors, which the AO examined and passed a speaking order. The assessee also argued that the AO's order was a possible view considering the facts and law. 2. Whether the PCIT erred in issuing a revision notice and order when the matter was sub-judice before the Hon'ble Bombay High Court and ITAT, with the decision of the appellate authority coming in AY 2019-20, thus making the invocation of Section 41(1) for AY 2018-19 incorrect, as argued by the assessee? The assessee also argued that the liability was settled in FY 2018-19 (AY 2019-20) and the balance was offered to tax in AY 2020-21, and that a sum of Rs. 33,00,000/- was paid back, and Rs. 7,37,676/- was written off and offered to tax in AY 2019-20. The assessee further argued that the PCIT erred in observing no details were filed, whereas detailed submissions were provided. 3. Whether the PCIT erred in invoking Section 263 on an issue not forming the subject matter of reassessment, as argued by the assessee? 4. Whether the PCIT erred in invoking Section 263 when the amount shown as outstanding and acknowledged in the balance sheet cannot be assessed under Section 41(1) of the Act, as argued by the assessee? The Revenue's contentions are not explicitly recorded in the provided text.

Which sections of the Income-tax Act were involved?

Section 263,Section 147,Section 41(1),Section 148

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Before: SHRI AMIT SHUKLA & SHRI PRABHASH SHANKAR

For Appellant: Shri K. Shivaram Sr. Adv.& Shri Shashi Bekkal, AR
For Respondent: Shri Vivek Perampurna, (CIT-DR)
Hearing: 26.08.2025Pronounced: 27.10.2025

PER PRABHASH SHANKAR [A.M.] :- The present appeal arising from the Revision order u/s 263 dated 18.03.2025 is filed by the assessee against the order passed by the Principal Commissioner of Income-tax, PCIT, Mumbai – 8 [hereinafter referred to as “PCIT”] pertaining to assessment order passed u/s.147 of the Income-tax Act, 1961 [hereinafter referred to as “Act"] dated 07.03.2023 for the Assessment Year [A.Y.] 2018-19.

Page 2 A.Y. 2018-19 Surbhit Impex Private Limit

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