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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI ANIKESH BANERJEE
The instant appeal of the assessee filed against the order of the Learned Principal Commissioner of Income-tax, Mumbai-8 (in brief, the ‘Ld.PCIT’) passed under section 263 of the Income-tax Act, 1961 (in short, ‘the Act’) for Assessment Year 2020-21, date of order 01/02/2025. The impugned order emanated from the order of the Learned Assessment Unit, Income-tax Department (in short, the “Ld.
The brief facts of the case are that the assessee filed its return of income declaring a total income of Rs.281,18,79,130/- for the impugned assessment year under the normal provisions of the Act. The case was subsequently selected for scrutiny under CASS to examine the issue of “Claim of any Other Amount Allowable as Deduction in Schedule BP” along with other issues. The assessment was ultimately completed, and the total income was assessed at Rs.284,96,70,790/-, after making an addition of Rs.3,77,91,656/- on account of cess, treating it as non- business expenditure. Consequently, tax was levied on the assessed income. Invoking the provisions of Section 263, the Ld. PCIT observed from Clause 34(a) of the Tax Audit Report (TAR) that in Column 5, under Section 195 “Other sums,” the tax auditor had reported a total payment of Rs.9,97,14,451/-. Out of this, the amount on which tax was required to be deducted and collected was reported at Rs.5,91,44,605/-. According to the Ld. PCIT, this implied that tax was not deducted on the balance amount of Rs.4,05,69,846/-, which was prejudicial to the interests of the revenue. The Ld. PCIT further observed that the Ld. AO, during assessment proceedings, had not verified this balance payment of Rs.4,05,69,846/- in respect of non-deduction of TDS. Accordingly, the Ld. PCIT invoked the provisions of section 263 of the Act and issued a notice to the assessee. The assessee duly filed its reply in compliance with the notice. After considering the submissions, the Ld. PCIT held the assessment order to be erroneous and prejudicial to the interests of the revenue and set aside the impugned assessment order for verification. Being aggrieved, the assessee has preferred the present appeal before us.
AZB and Partners 3. 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 jurisdiction, on 13/06/2025. The Ld. AR further explained that the mistake occurred due to a misconception of jurisdiction 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 AZB and Partners attempt to file the appeal within the prescribed due date, though it was filed before an incorrect authority, i.e., the Assessing Officer, instead of the ITAT. Considering that the appeal fee was duly paid within the statutory period, the bona fides of the assessee cannot be doubted. We place reliance on the judgment of the Hon’ble Supreme Court in N. Balakrishnan vs. M. Krishnamurthy, AIR 1998 SC 3222 / (1998) 7 SCC 123, dated 03/09/1998, wherein it was held as under: “Rules of limitation are not meant to destroy the rights of parties. They are meant to ensure that parties do not resort to dilatory tactics but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. The law of limitation fixes a life-span for such legal remedy. Time is precious and wasted time never revisits. During the efflux of time, newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. Thus, a life span must be fixed for each remedy. Unending period for launching a remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim interest reipublicae ut sit finis litium (it is for the general welfare that there be an end to litigation). Rules of limitation are not meant to destroy the rights of parties, but to ensure that remedies are sought within a legislatively fixed period of time.”
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
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
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 AZB and Partners relied on the order of the Hon’ble Delhi High Court in CIT vs Sunbeam Auto Ltd (2011) 332 ITR 167 (Delhi HC) where it is held that whether on facts and law view taken by the AO which was one of the possible views and therefore, assessment order passed by the Ld.AO cannot be held to be prejudicial to the interest of the revenue. He further respectfully relied on the order of co-ordinate bench of ITAT, Mumbai in the case of Narayan Tatu Rane vs ITO (2016) 70 taxmann.com 227 (Mumbai – Trib.) where the bench observed that in newly inserted Explanation 2(a) to Section 263 it does not authorize or give unfettered powers to Commissioner to revise each and every order, if in his opinion, same has been passed without making enquiry or verification which should have been made.
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 AZB and Partners assessment by going deeper into matter would not form a valid or legal basis to exercise jurisdiction under section 263-Held YES, (2) CIT v. Jain Uday Fabrics (P) Ltd. [2024] 165 taxmann.com 833 (Punjab & Haryana). (3) Pr. CIT v. Anindita Steels Ltd. [2022] 137 taxmann.com 203 (Calcutta) (4) CIT v. Goyal (P.) Family Specific Trust [1987] 35 Taxman 522/171 ITR 698 (Allahabad) 42. Lastly, it is also observed by us that neither the survey team in course of survey, nor the AO in course of assessment proceedings, has brought any adverse material on record, to prove the fact that the assessee had any income other than the business of cosmetics and the assessee has also explained the source of the income so surrendered before the survey team to have arisen out of business of cosmetics itself, and the said explanation has also been accepted by the AO after adequate enquiry and verification of documents produced before him, and he has arrived at a logical conclusion, which a prudent person, would have arrived under the circumstances, 43. Under the circumstances we are of the opinion that the AD aher careful examination of the submissions made by the assessee and after conducting detail enquiry, has taken a plausible view that the provisions of section 115BBE of the Act 61, is not applicable in the instant case and the said assessment cannot be set aside merely on the ground of inadequacy of enquiry by the AO with respect to source of surrender of income.
On this issue various High courts has laid down the law, that where the AD after applying his mind has made enquiries and has taken a plausible view and passed an AZB and Partners assessment order same cannot be disturbed by invoking the explanation 2 of section 263 merely because the view taken was not acceptable by the Ld. PCIT. (1) Gujrat High Court in the case of Pr. CIT v. National Dairy Development Board [2024] 158 taxmann.com 514/297 Taxman 306 (Gujarat), (2) Calcutta High Court in the case of Pr. CIT v. Britannia Industries Ltd. [2023] 146 taxmann.com 246 (Calcutta), (3) Bombay High Court in the case of Pr. CIT v. Shivshahi Punarvasan Prakalp Ltd. [2023] 155 taxmann.com 408/456 ITR 336 (Bombay) (4) Calcutta High Court in the case of CIT v. M. K. Foundation [2023] 148 taxmann.com 314/292 Taxman 141 (Calcutta) (5) Karnataka High Court in the case of CTT v. Chemsworth Pvt Ltd [2020] 119 taxmana.com 358/275 Taxman 408 (Karnataka) (6) Gujrat High Court in case of Pr. CIT v. S N Tradelink (P) Ltd. [2022] 145 taxmann.com 73 (Gujarat) 45. As such, after taking into consideration the entire factual aspect of the matter, and being enlightened by the judicial precedents laid down by various High Courts, on the issue, we find that in the instant case, there is no perversity or lack of enquiry on the part of the assessing officer to render the decision erroneous under explanation 2 to section 263 of the Act 61, and the order passed by the AO, is neither erroneous nor prejudicial to the interest of revenue, and we hold that the assumption of jurisdiction u/s 263 by the Ld PCIT in the instant case is not legally justified and the consequential order passed u's 263 of the Act 61, is hereby set aside.
In the result, the appeal filed by assessee is allowed.”
AZB and Partners 11. 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.”
AZB and Partners 12. 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
"Explanation 2 - For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer for the Transfer Pricing Officer, as the case may be shall be deemed to be erroneous in so far as it is prejudicial to the AZB and Partners interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or venfication which should have been made (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119, or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person].”
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 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 jurisdictional 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.