AZB AND PARTNER ,MUMBAI vs. PCIT-8, MUMBAI

The Ld. AR submitted that the appeal was filed with a delay of 45 days. An affidavit, duly affirmed by Shri Bahram Navroz Vakil, the managing partner of the assessee-firm, dated 23/07/2025, has been placed on record. As per the said affidavit, the assessee stated that the order passed under section 263 was received on 01/02/2025. However, within the prescribed due date, by mistake, the appeal petition along with Form No. 36 was filed before the Assessing Officer, Circle 16(2), Mumbai, vide letter dated 25/02/2025, though the covering letter was duly addressed to the Income Tax Appellate Tribunal, Mumbai. On realizing the mistake, the assessee immediately filed the appeal petition with Form No. 36 before the ITAT, i.e., the competent juri iction, on 13/06/2025. The Ld. AR further explained that the mistake occurred due to a misconception of juri iction by the clerk of the assessee’s office, resulting in the petition being filed before the Assessing Authority instead of the Tribunal. However, the requisite appeal fee had been paid within time on 24/02/2025. Thus, the error was purely inadvertent and unintentional.

On the other hand, the Ld. DR strongly objected, contending that since the assessee is a legal firm, such a mistake could not be considered inadvertent. It was argued that the delay was deliberate and intentional. The Ld. DR relied upon the decision of the co-ordinate bench of the ITAT, Mumbai Bench “A,” in Aditya Sapru vs. Asst. CIT, Circle 9(3)(2), (2025) 176 taxmann.com 167 (Mumbai – Trib.), where condonation of delay of 790 days was rejected despite the assessee’s contention that the delay was caused due to the mistake of its Chartered Accountant.

We have heard the rival submissions and carefully considered the material available on record. In the present case, the delay is only 45 days. The assessee did

In view of the above, we are satisfied that there exists sufficient cause for condoning the delay of 45 days. The decision relied upon by the Ld. DR is factually distinguishable and does not apply to the present case. Respectfully following the 5 AZB and Partners judgment of the Hon’ble Supreme Court, we condone the delay and admit the appeal for adjudication on merits.

The Ld. AR submitted and placed on record a paper book containing pages 1 to 34. The Ld. AR explained that the issue regarding non-deduction of TDS on the balance amount of Rs.4,05,69,846/- had arisen from the verification of the TAR. In Clause 34(a), Column 5, under Section 195 “Other sums,” the tax auditor reported total payments of Rs.9,97,14,451/-, out of which tax was required to be deducted on payments amounting to Rs.5,91,44,605/-. On the balance of Rs.4,05,69,846/-, tax was not deducted. It was contended that the entire details in this regard were duly filed before the Ld. AO in response to notice issued under section 142(1) dated 12/11/2021. The said notice specifically called for details in Point No. 6 regarding “Deduction of tax in foreign remittances” under the heads “Foreign Outward Remittance” and “Low turnover in comparison with Outward Foreign Remittance by the assessee.” In compliance, the assessee, vide letter dated 29/11/2021, submitted complete details along with Annexure-1, which contained particulars of foreign remittances. In Annexure-1, the assessee furnished the “Acknowledgement Nos.” of Form 15CA filed under Rule 37BB of the Income tax Rule,1962, being the prescribed form for furnishing information regarding payments to non-residents (other than companies) or to foreign companies. The designated remarks column also contained the specific reasons for non-deduction of TDS. It was further submitted that the assessee had paid a total sum of Rs.15,45,23,440/- and all supporting details had been duly filed before the Ld. AO in its reply. The Ld. AR also pointed out that when notice under section 263 was issued, the assessee again filed the 6 AZB and Partners very same details, which were already submitted before the Ld. AO, along with all supporting evidence before the Ld. PCIT vide letter dated 22/12/2024. 8. The Ld.AR invited our attention to the assessment order, where the Ld.AO has taken view related to the submission of the assessee in relation to deduction and non-deduction of TDS related to foreign remittance. The relevant para of the impugned assessment order is extracted below:- “(B) We are the firm of advocates and solicitors and have many foreign clients through which we earn foreign legal fees in foreign currency. Further is pertinent to note that the foreign remittance is only approx. 1.84% of the gross turnover and hence, the turnover cannot be termed as low as compared to the remittances. Accordingly, you will please appreciate that it can not be construe that Turnover is low as compared to the total remittances. Also, the foreign remittance vis-à-vis gross revenue for preceding 3 Financial year 2018-19, 2017-18 and 2016-17 was 0.99%, 1.27% and 1.68% of the turnover of the respective financial years. “

The Ld.AR further stated that in impugned revisional order of the Ld.PCIT has not pointed out any of the specific lacuna for non-deduction of TDS to the foreign entity related to the foreign remittances. He further stated that when the issue was already verified by the Ld.AO and had taken cognizance in the assessment order, the invoking of provisions of section 263 is unjustified. The Ld.AR stated that the Ld.PCIT, in his order mentioned that inadequate enquiry made by the Ld.AO related to on deduction of TDS under section 195 of the Act. He submitted that inadequate enquiry cannot be equated with lack of enquiry; hence, section 263 of the Act cannot be invoked in case of inadequate enquiry. He respectfully

He further relied on the order of co-ordinate bench of ITAT, Amritsar Bench in the case of Poonam Marwah vs ACIT (2025) 171 taxmann.com 57 (Amritsar – Trib). The relevant paragraphs 40 to 45 are extracted below:- “40. We further observe that various High courts has laid down the law that powers of revision cannot be exercised on the ground that the assessing officer should have gone deeper into the matter or should have made a more elaborate discussion. 41. Some of the judgments all expressing almost the similar views in the matter are as under: (1) CIT. Hindustan Marketing & Advertising Co. Lad (2011) 8 taxmann.com 128/196 Taman 368/341 TTR 100 (Delhi): Whether in view of the fact that ITO had made reasonably detailed enquiries, had collected relevant materials and discussed facets of case with assessee, order of Commissioner to direct fresh

The Ld. AR further stated that whether the Ld.AO has raised necessary queries and replies thereto are part of the assessment records so the provisions of section 263 cannot be invoked, even if positive satisfaction is not recorded in the assessment order. The Ld.AR relied on the order of Hon’ble Bombay High Court in case of CIT vs Gabriel India Ltd (1993) 203 ITR 108 (Bom) where it was held that, “14. We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The ITO in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of the assessee. Such decision of the ITO cannot be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter that, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interests of the revenue. Without doing so, he does not get the power to set aside the assessment. In the instant case, the Commissioner did so and it is for that reason that the Tribunal did not approve his action and set aside his order. We do not find any infirmity in the above conclusion of the Tribunal.”

The Ld. DR argued and relied on the order of the Ld.PCIT. The relevant paragraph of the impugned revisional order is extracted below:- “5.3 The submissions of the assessee during the revisionary proceedings have laid emphasis on various judicial pronouncement with respect to the proceedings u/s. 263 of the Act as well as the action of the AO with regard to the assessment completed by calling for the details in connection with the scrutiny proceedings. It is the submission of the assessee that necessary details were called for by the AO and were examined by him and accordingly the assessment was completed. In this regard what is important to point out is that the AO has not applied his mind in enquiring into the total amount of foreign remittances made and the remaining amount of TDS payment on the total remittances. It was the responsibility of the AO to look into the correct amount of TDS deductible on the total foreign remittances and take necessary action for bringing the balance amount of TDS not deducted to tax. The information pertaining to total foreign remittances and TDS deducted u/s 195 as stated earlier was available on record and it was the responsibility of the AD to have completed an error free assessment taking into account the correct amount of TDS required to be deducted u/s 195 of the Act. Failure to enquire into the above and ensure that correct rate and amount of TDS is deducted on the foreign remittances has rendered the assessment erroneous and prejudicial to the interest of revenue. In this regard Explanation 2 to section 263 of the Act is reproduced hereunder for ready reference

The Ld. DR further stated that the non-deduction of TDS related to foreign remittances not properly enquired by the Ld.AO which is erroneous and prejudicial to the interest of the revenue. In the assessment order, the Ld.AO considered the education cess and added back with the total income, but related to non deduction of TDS was not elaborately discussed and even no verification was made. He respectfully relied on the order of Addl. CIT vs Mukur Corporation (1978) 111 ITR 312 (Gujarat) where it was held that for revision of orders prejudicial to the interest of revenue for A.Y. 1965-66, it was held that “whether it is not obligatory to Commissioner acting under section 263 to enter into regular enquiry in all cases before original assessment order is cancelled and ITOs are directed to make fresh assessment. He further relied on the order of Hon’ble High Court of Himachal Pradesh Vibhadra Singh (HUF) v. PCIT (2017) 86 taxmann.com 113 (Himachal Pradesh) where it was held that where no enquiry was conducted by the AO in passing assessment order

We have heard the rival submissions and perused the material available on record. The primary issue relates to the non-verification of foreign remittances amounting to Rs.4,05,69,846/- on which TDS was allegedly not deducted by the assessee. On perusal of the record, we find that during the assessment proceedings, in compliance with the notice issued under section 142(1), the assessee had furnished complete details of the foreign remittances, along with the reasons for non-deduction of TDS and the acknowledgement numbers of Form 15CA filed under Rule 37BB. The Ld. AO, after considering the said submissions, which are duly noted in the assessment order, accepted the assessee’s explanation. Thus, the core question that arises is whether this constitutes a case of “no enquiry” or merely an “inadequate enquiry.” We find that the assessee had made full compliance, and the Ld. AO, upon due consideration and application of mind, accepted the explanation as proper. The impugned issue is specifically noted in the assessment order itself, reflecting that the Ld. AO had consciously applied his mind. In this regard, we draw support from the judgment of the Hon’ble Delhi High Court in Sunbeam Auto Ltd. (supra) as well as the decision of the Co-ordinate Bench of ITAT, Amritsar, in Poonam Marwah (supra). The law is well-settled that where an AO has made due enquiry and taken a view, the same cannot be held to be erroneous merely because the Ld. PCIT holds a different opinion. The question next arises whether the Ld. PCIT, by invoking Explanation 2(a) to section 263, was justified in revising the assessment order and treating it as “erroneous and prejudicial to the interests of the revenue.” On facts, we find that 14 AZB and Partners the Ld. AO had indeed examined the issue by raising queries under section 142(1) and considering the replies filed by the assessee. Hence, it is not a case of “no enquiry.” The ITAT, Mumbai Bench, in Narayan Tatu Rane (supra) has categorically held that the power under section 263 cannot be exercised for a mere change of opinion. The decisions relied upon by the Ld. DR of the Hon’ble Gujarat High Court and Hon’ble Himachal Pradesh High Court are factually distinguishable, as in those cases no verification had been carried out by the AO, unlike the present case. We also place reliance on the binding judgment of the Hon’ble juri ictional High Court in Gabriel India Ltd. (supra), which clearly lays down that once necessary queries are raised and replies are furnished, the assessment order cannot be revised under section 263 merely because the PCIT holds a different view. In view of the above discussion, we hold that the invocation of section 263 in the present case, without pointing out any specific lacuna in the assessment order, is unjustified. The impugned revisional order is therefore quashed. Accordingly, the appeal filed by the assessee is allowed.

In the result, the appeal filed by the assessee bearing ITA No.4105/Mum/2025 is allowed. Order pronounced in the open court on 19th day of September 2025. (VIKRAM SINGH YADAV) JUDICIAL MEMBER Mumbai, िदनांक/Dated: 19/09/2025 Pavanan

अपीलाथ /The Appellant , 2. ितवादी/ The Respondent. 3. आयकर आयु CIT 4. िवभागीय ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, JODHPUR 5. गाड फाइल/Guard file.