JAI MATA DI OM,THANE vs. PR. COMM. OF INCOME TAX, THANE-1, THANE

IN THE INCOME-TAX APPELLATE TRIBUNAL “F” BENCH,
MUMBAI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
&
SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER

ITANo.3342/MUM/2025

(A.Y. 2021-22)

JAI MATA DI OM
D1 Building, Shop No. 11,
12, Maheshwar Residency,
Near
Pipeline,
Kasheli
Village, Thane –421 302,
Maharashtra v/s.
बनाम
Principal
Commissioner of Income Tax, Thane – 1, B-
Wing, 6th Floor, Ashar IT Park,
Road No. 16Z, Wagle Estate,
Thane(W)
–
400
604,
Maharashtra
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAMFJ0495Q
Appellant/अपीलार्थी
..
Respondent/प्रतिवादी

Appellant by :
Shri Subodh Ratnaparkhi,AR
Respondent by :
Shri Vivek Perampurna (CIT-DR)

Date of Hearing
28.08.2025
Date of Pronouncement
27.10.2025

आदेश / O R D E R

PER PRABHASH SHANKAR [A.M.] :-

The present appeal preferred by the assessee emanates from the Revision order dated 27.03.2025 passed u/s 263 of the Income-tax Act,
1961 by the Principal Commissioner of Income-tax, PCIT, Thane-1
[hereinafter referred to as “PCIT”] pertaining to assessment order passed u/s. 143(3) r.w.s. 144B of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2021-22. P a g e | 2
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Jai Mata Di OM charges paid to Shri Kalyanji B. Shah and Shri Haresh Naresh Tare were not genuine and unexplained. Hence, addition u/s. 69C of the Act was made to the extent of 50% of the Labour charges claimed to have been paid to these two parties.
5. In response to the show cause notice issued by the ld.PCIT in this regard for invoking the provisions of section 263 of the Act, the assessee contended that during the course of assessment proceedings, vide various submissions it explained to the A.O. that these payments debited in the books of account as labour charges were contract charges for construction of the residential buildings. It was submitted that in the year under consideration, the assessee firm was constructing 8 buildings comprising of 234 flats. The firm had booked sales of Rs. 8,86,41,855/- for the year under appeal. It was contended that disallowance of 50% of labour charges/contract charges resulted in an abnormal situation where the firm did not have sufficient expenditure incurred for constructing 234 residential units, which were under construction during the year.
5.1 However, the ld.PCIT in the light of Explanation 2 of Section 263 of the Act observed that the assessment order was required to be passed by making relevant enquiries and verification by the AO.
Explanation 2(a) makes it clear that any order passed without making

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Jai Mata Di OM inquiries or verification which should have been made by the Assessing
Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue. The AO in the assessment order had treated the expenses claimed by the assessee on account of Labour Charges paid to Mr. Kalyanji B. Shah and Mr. Haresh Naresh Tare as unexplained expenditure under section 69C of the Act as the same were not satisfactorily explained. However, the AO proceeded to make 50% of the gross payments of Rs.3,43,47,382/- claimed to have been made to the above parties as deemed income of the assessee u/s.69C of the Act.
When the expenditure was non-genuine and unexplained, it should have been disallowed 100% instead of 50% under Section 69C of the Act.
Accordingly, he held that the assessment order dated 21/12/2022 passed u/s. 143(3) r.ws.144B was erroneous in so far as it is prejudicial to the interest of the Revenue which was therefore, partly set aside for the limited purpose to examine the submission of the assessee made during the present proceedings and make necessary inquires and verification in regard to the labour charges of Rs.3,43,47,382/- paid to Mr.Kalyanji
B.Shah and Mr. Haresh Naresh Tare in accordance with the applicability of Sec.69C r.w.s.115BBE of the Act for such difference of income.
5.2 The ld.AR has vehemently agitated the revision order claiming that the AO made all possible enquiries were made by the AO

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Jai Mata Di OM in the matter and the ld.PCIT cannot override the assessment order. The assessee furnished details in response to a detailed show cause notice issued by the AO. Merely for the fact that two of the contractors were found not filing return or did not response to the notice u/s 133(6) of the Act is not enough to disallow the expenditure. Moreover, the assessee made TDS on such payments made which were routed through banking channels. Copies of invoices, bank statements, PANs etc. were duly submitted. Similar details were submitted before the ld.PCIT as well. It was informed to him that against the assessment order, the assessee had filed appeal before ld.CIT(A)/NFAC and appeal proceedings had commenced. Since the ld.CIT(A) is already seized with the issue, assumption of juri iction by the ld.PCIT was also contested.
5.2 On the other hand, the ld.DR has strongly relied on the revision order.
6. We have carefully examined the facts of the case. We find that as per the assessment order, the AO has discussed all the relevant facts of the case pertaining to the impugned expenses. Finally, he rejected the genuineness of the said transaction and made part disallowance at the rate of 50% thereof. Thus, we notice that a detailed enquiry is evident from the assessment order. In this case, during the assessment the AO

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Jai Mata Di OM issued query memos to the assessee, calling upon it to justify the genuineness of the expenses. The assessee responded to the same by giving necessary evidence. On perusal, the AO was not satisfied and he drew an adverse conclusion w.r.t. the said expenses after making due enquiries and investigations. We find that the impugned transaction has been duly examined and consequently, the AO disallowed 50% of the same on estimated basis rather than taxing the entire disputed expenditure u/s 69C of the Act.
6.1 We further note that the said assessment is challenged before the ld.CIT(A) and the same is pending. While this is so, we are afraid whether the same issue could be the subject matter of revision proceedings u/s 263 of the Act by seeking to look into the very same issue from a different perspective. We find that the action of the ld.PCIT is in complete disregard to the specific provisions of clause(c) of Explanation to section 263(1) of the Act, which places a clear embargo on the ld.PCIT with respect to exercise of revisionary juri iction on assessments which have been subject matter of appeal. Reliance in this regard is placed on the decision of the Hon'ble Calcutta High Court in the case of Oil India Ltd vs CIT reported in 138 ITR 836 (Cal) wherein, the hon’ble Court while interpreting the scope of powers of the Commissioner u/s 263 of the Act held that where an appeal is preferred

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Jai Mata Di OM before the Appellate Assistant Commissioner (AAC) and a subject is particularly raised, he cannot revise such an order taking into account an aspect not dealt by the AAC.
6.2. Further, we are of the considered opinion that the ld.CIT(A) having been conferred with the co-terminus powers with that of the AO has got ample power to even enhance the assessment, if circumstances so warrant. Just because the ld.CIT(A) does not exercise his enhancement powers in the instant case, even if it is to be done, that would not confer automatic revisionary power u/s 263 of the Act for the ld.PCIT. In this regard, the reliance is placed on the observations of the Hon'ble Supreme Court in the case of Jute Corporation Ltd in 187
ITR 688 and CIT v. Kanpur Coal Syndicate [1964] 53 ITR
225(SC), the Court inter alia held that under section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income-tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co- terminus with that of the Income-tax Officer. He can do what the P a g e | 8
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Income-tax Officer can do and also direct him to do what he has failed to do.......”.These observations are squarely applicable to the interpretation of section 251(1)(a)of the Act. Even otherwise, an appellate authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. The appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter.
6.3 Accordingly, we hold that the issue of disallowance of expenditure is already the subject matter of appellate proceedings before the ld.CIT(A) and hence, the same cannot be the subject matter of re- verification and re-adjudication from different perspective by the ld.PCIT under revisionary juri iction u/s 263 of the Act. Hence, the action of the ld.PCIT in invoking revisionary juri iction u/s 263 of the Act deserves to be quashed on this count also.
6.4 Moreover, a detailed inquiry made by the AO, cannot make the order erroneous. It is his prerogative to make inquiry to the extent he feels proper. The ld.PCIT by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There are plethora of judgments by various High

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Courts in this regard. The hon’ble Delhi High Court in the case of CIT
Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between
‘lack of inquiry’ and ‘inadequate inquiry’. The hon'ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. It was observed that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open.
The hon'ble Bombay High Court in case of Gabriel India Ltd. [1993]
203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner:
"The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without juri iction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity.”

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Jai Mata Di OM section 69C of the Act treating it to be unexplained expenditure. We are afraid ,even this view of the ld.PCIT may be subjected to debate as to whether the expenses duly reflected in the books of account could be brought within the purview of this section when the book results have been accepted. The ld.PCIT therefore, cannot direct the AO to take a different course of action than that adopted by him. Besides, the issue in hand is still pending for adjudication before the first appellate authority who himself is adequately empowered to take a different view of the matter. Accordingly, we set aside the order of the ld. PCIT quashing the same and allowing the grounds of appeal.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 27/10/2025. AMIT SHUKLA
PRABHASH SHANKAR
(न्याययक सदस्य /JUDICIAL MEMBER)
(लेखाकार सदस्य/ACCOUNTANT MEMBER)

Place: म ुंबई/Mumbai
ददनाुंक /Date 27.10.2025
Lubhna Shaikh / Steno

आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.

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सत्यावपि प्रवि ////
आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt.