HARI KRISHNA EXPORTS PRIVATE LIMITED ,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX -5 , MUMBAI

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ITA 1858/MUM/2025Status: DisposedITAT Mumbai08 October 2025AY 2020-2114 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Principal Commissioner of Income-tax erred in invoking jurisdiction under Section 263 of the Income Tax Act, 1961. The Tribunal found that the Assessing Officer had applied his mind to the issues during the assessment proceedings. Citing judicial precedents, including the Bombay High Court in CIT vs. Nirav Modi and the Delhi High Court in PCIT vs. Clix Finance India (P) Ltd., the Tribunal emphasized that the AO's view, if it is a possible view arrived at after due inquiry, cannot be interfered with under Section 263 merely because the CIT believes another view is correct. The Tribunal noted that the PCIT had not pointed out any definite or specific error in the assessment order and that the issues raised were duly examined by the AO. Therefore, the twin conditions for invoking Section 263 were not met. Consequently, the Tribunal set aside the order of the PCIT and restored the original assessment order passed by the AO.

What were the facts?

The assessee, Hari Krishna Exports Private Limited, engaged in manufacturing and export of cut and polished diamonds, filed its return for Assessment Year 2020-21 declaring a total income of Rs. 2,92,66,46,240/-. The assessment was completed under Section 143(3) read with Section 144B of the Income Tax Act, 1961, at the same declared income on 13/09/2022. The Principal Commissioner of Income-tax (PCIT), Mumbai-5, initiated revision proceedings under Section 263 of the Act, alleging the assessment order was erroneous and prejudicial to the interest of the revenue. The PCIT's notice cited two specific issues: disallowance of Rs. 234,64,31,679/- remitted to foreign companies for identification and grading charges due to non-deduction of TDS under Section 195, and the need to verify labour charges of Rs. 1,81,38,63,366/-. The PCIT issued multiple notices for hearings and submissions between October 2024 and February 2025.

What were the issues?

1. Whether the Principal Commissioner of Income-tax erred in invoking jurisdiction under Section 263 of the Income Tax Act, 1961, to revise the assessment order dated 13/09/2022, holding it to be erroneous and prejudicial to the interest of the revenue? Assessee's Contention: The assessee argued that the Assessing Officer (AO) had applied his mind to the issues during the assessment proceedings. The AO's view was a possible view and not demonstrably erroneous. The assessee relied on judicial pronouncements, including the Bombay High Court's decision in CIT vs. Nirav Modi and the Delhi High Court's decision in PCIT vs. Clix Finance India (P) Ltd., which held that inadequacy of inquiry by the AO does not automatically warrant invocation of Section 263 powers, and that the CIT must point out a definite error. The assessee contended that the twin conditions of Section 263 were not fulfilled. Revenue's Contention: The revenue, through the PCIT, contended that the assessment order was erroneous and prejudicial to the interest of the revenue because the AO had failed to disallow foreign remittances for identification and grading charges due to non-deduction of TDS under Section 195, and had not adequately verified labour charges. The revenue believed these omissions made the assessment order flawed.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 144B,Section 195,Section 40(a)(i)

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Cases cited in this judgment(4)Show list

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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY, HONBLE & SHRI NARENDRA KUMAR BILLAIYA, HONBLE

For Appellant: Shri Nitesh Joshi, A/R
For Respondent: Shri Ritesh Misra, CIT D/R
Hearing: 30/09/2025Pronounced: 10/10/2025

आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent 2. संबंिधत आयकर आयु� / Concerned Pr. CIT 3. आयकर आयु� अपील 4. ( ) / The CIT(A)- िवभागीय �ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 5. गाड� फाई/ Guard file. 6.

आदेशानुसार/ BY ORDER TRUE COPY

Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai

Initial Date 1. Draft dictated on 30/09/2025 Sr.PS

2.

Draft placed before author 07/10/2025 Sr.PS 3. Draft proposed & placed JM/AM before the second member 4. Draft discussed/approved JM/AM by Second Member. 5. Approved Draft comes to /10/2025 Sr.PS/PS the Sr.PS/PS 6. File pronounced on /10/2025 Sr.PS 7. File sent to the Bench Clerk /10/2025 Sr.PS 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. 11. Dictation Pad is enclosed Yes

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