WADHWAGROUP HOLDINGS PRIVATE LIMITED,MUMBAI vs. PCIT (CENTRAL), MUMBAI-3, MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 28.03.2026 passed by the learned Principal Commissioner of Income-Tax (Central), Mumbai-3, [in short 'the learned PCIT'], for assessment year 2022-23, wherein the assessment order passed by the Assessing Officer came to be revised. The grounds raised in appeal are reproduced as under:

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“1. The Principal Commissioner of Income Tax (Central), Mumbai 1. The Principal Commissioner of Income Tax (Central), Mumbai -3, [hereinafter 1. The Principal Commissioner of Income Tax (Central), Mumbai referred to as ‘PCIT’] erred in passing order u/s to as ‘PCIT’] erred in passing order u/s 263 of the Income 263 of the Income-tax Act, 1961 (hereinafter referred as ‘the Act’ or ‘IT Act’) and directing the Assistant referred as ‘the Act’ or ‘IT Act’) and directing the Assistant referred as ‘the Act’ or ‘IT Act’) and directing the Assistant Commissioner of Income tax Commissioner of Income tax Central Circle 5(4), Mumbai (hereinafter referred to Central Circle 5(4), Mumbai (hereinafter referred to as ‘AO’) to pass a fresh assessment as ‘AO’) to pass a fresh assessment order after making proper order after making proper enquiries as per applicable law. The Appellant submits that the order passed by the PCIT u/s 263 The Appellant submits that the order passed by the PCIT u/s 263 The Appellant submits that the order passed by the PCIT u/s 263 is bad in law, ultra ultra-virus, without jurisdiction, against the principles of natural virus, without jurisdiction, against the principles of natural justice and otherwise justice and otherwise void. 2. The PCIT erred in passing the order under se 2. The PCIT erred in passing the order under section 263 of the Act on an ction 263 of the Act on an assumption that lack of inquiry is sufficient to constitute an erroneous and lack of inquiry is sufficient to constitute an erroneous and lack of inquiry is sufficient to constitute an erroneous and prejudicial order without prejudicial order without establishing the existence of both conditions prescribed establishing the existence of both conditions prescribed under the said provision, viz., under the said provision, viz., that the assessment order is (a) erro that the assessment order is (a) erroneous, and (b) prejudicial to the interests of revenue. prejudicial to the interests of revenue. The Appellant submits that all the details The Appellant submits that all the details and evidences were on and evidences were on record and the AO has applied his mind and considered has applied his mind and considered all the material on record while passing the all the material on record while passing the assessment order u/s 143(3) of the assessment order u/s 143(3) of the IT Act and hence the order sought to be revised on the Act and hence the order sought to be revised on the ground of alleged lack of ground of alleged lack of enquires cannot be termed as erroneous and prejudicial to the interest of the enquires cannot be termed as erroneous and prejudicial to the enquires cannot be termed as erroneous and prejudicial to the revenue. 3. The PCIT erred in holding that during the course of proceedings u/s 263 of the 3. The PCIT erred in holding that during the course of proceedings u/s 263 of the 3. The PCIT erred in holding that during the course of proceedings u/s 263 of the Act, the Appellant has made submissions on the merits of the issues and the Appellant has made submissions on the merits of the issues and the Appellant has made submissions on the merits of the issues and the same is not required same is not required to be examined by him. The PCIT violated the principles of to be examined by him. The PCIT violated the principles of natural justice and failed to natural justice and failed to apply his mind to material going to the very root of apply his mind to material going to the very root of his jurisdiction under his jurisdiction under Sec.263 of the Act holding the order passed erroneous and Act holding the order passed erroneous and liable to be quashed. liable to be quashed. The Appellant submits that during the course of proceedings The Appellant submits that during the course of proceedings u/s 263 of the Act it has u/s 263 of the Act it has made detailed letter along with paper book giving made detailed letter along with paper book giving reference and reproducing the reference and reproducing the submissions made by it during the course of s made by it during the course of assessment proceedings u/s 143(3) of the assessment proceedings u/s 143(3) of the Act for each and every issue pointed Act for each and every issue pointed by PCIT. Thus, the contention of the PCIT that the by PCIT. Thus, the contention of the PCIT that the Appellant has made Appellant has made submissions on merits during proceedings u/s 263 of the Act is factually submissions on merits during proceedings u/s 263 of the Act is submissions on merits during proceedings u/s 263 of the Act is incorrect. 4. The PCIT invoked the revisionary powers under section 263 of the Act on the 4. The PCIT invoked the revisionary powers under section 263 of the Act on the 4. The PCIT invoked the revisionary powers under section 263 of the Act on the following aspects: a) The AO did not examine and verify the receipts from sale of flats and project a) The AO did not examine and verify the receipts from sale of flats and project a) The AO did not examine and verify the receipts from sale of flats and project management consultancy fees amounting to Rs. 50 crores appearing under the management consultancy fees amounting to Rs. 50 crores appearing un management consultancy fees amounting to Rs. 50 crores appearing un income head ‘Revenue from Operations’ (Note 20 of audited financial statements). head ‘Revenue from Operations’ (Note 20 of audited financial statements). head ‘Revenue from Operations’ (Note 20 of audited financial statements). b) The AO did not make enquiry in respect of increase in current year expenditure b) The AO did not make enquiry in respect of increase in current year expenditure b) The AO did not make enquiry in respect of increase in current year expenditure namely, municipal charges namely, municipal charges – Rs. 3036.92 lakhs and provisions for unfinished Rs. 3036.92 lakhs and provisions for unfinished work – Rs. 1095.20 lakhs debited under the head Cost of construction (Note 22 of . 1095.20 lakhs debited under the head Cost of construction (Note 22 of . 1095.20 lakhs debited under the head Cost of construction (Note 22 of audited financial statements) as compared to immediately preceding year. financial statements) as compared to immediately preceding year. financial statements) as compared to immediately preceding year. c) The claim in respect of interest on delayed statutory payments of Rs. 191.13 c) The claim in respect of interest on delayed statutory payments of Rs. 191.13 c) The claim in respect of interest on delayed statutory payments of Rs. 191.13 lakhs debited under the head debited under the head - Finance Cost (Note 24 of audited financial Finance Cost (Note 24 of audited financial

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statements) has been allowed by the AO without considering the provisions of been allowed by the AO without considering the provisions of been allowed by the AO without considering the provisions of Section 43B of the Act. Act. d) The AO has allowed the claim in respect of increase in certain expenditure d) The AO has allowed the claim in respect of increase in certain expenditure d) The AO has allowed the claim in respect of increase in certain expenditure debited under the head ‘Other expenses’ (Note 26 of audited financial statement) under the head ‘Other expenses’ (Note 26 of audited financial statement) under the head ‘Other expenses’ (Note 26 of audited financial statement) viz – legal fees – Rs. 157 lakhs; rent Rs. 157 lakhs; rent – Rs. 337.5 lakhs; brokerage Rs. 337.5 lakhs; brokerage – Rs. 397.77 lakhs; sundry balance written off balance written off – Rs. 778.68 lakhs incurred during current year Rs. 778.68 lakhs incurred during current year as compared to immed immediately preceding year without seeking any explanation iately preceding year without seeking any explanation thereof. e) The AO has not verified the payments outstanding to MSME amounting to e) The AO has not verified the payments outstanding to MSME amounting to e) The AO has not verified the payments outstanding to MSME amounting to Rs.361.74 lakhs to examine the allowability u/s 43B and other relevant Rs.361.74 lakhs to examine the allowability u/s 43B and other relevant Rs.361.74 lakhs to examine the allowability u/s 43B and other relevant provisions of the Act without appreciating the fa Act without appreciating the fact that the provisions of Section ct that the provisions of Section 43B(h) came into effect from 1 April 2024 and thus not applicable for the year effect from 1 April 2024 and thus not applicable for the year effect from 1 April 2024 and thus not applicable for the year under appeal. f) The AO has not verified the allowability of statutory liabilities such as TDS – Rs. f) The AO has not verified the allowability of statutory liabilities such as TDS f) The AO has not verified the allowability of statutory liabilities such as TDS 1818.94 lakhs, PF – – Rs. 3.77 lakhs, property tax – Rs. 719.35 lakhs; GST Rs. 719.35 lakhs; GST – Rs. 3.92 lakhs; professional tax lakhs; professional tax – Rs. 1.11 lakhs accounted under the head ‘Other Rs. 1.11 lakhs accounted under the head ‘Other liabilities’ (Note 18 of audited financial statements). (Note 18 of audited financial statements). g) The AO has without examination accepted the claim in respect of ‘Provisions for g) The AO has without examination accepted the claim in respect of ‘Provisions for g) The AO has without examination accepted the claim in respect of ‘Provisions for employee benefits’ (Note 19 of audited financial statement) with regards to (a) ployee benefits’ (Note 19 of audited financial statement) with regards to (a) ployee benefits’ (Note 19 of audited financial statement) with regards to (a) provision for gratuity (non current provisions provision for gratuity (non current provisions – Rs. 121.88 lakhs and current Rs. 121.88 lakhs and current provision – Rs. 7.71 lakhs); and (b) provision for leave encashment (non current Rs. 7.71 lakhs); and (b) provision for leave encashment (non current Rs. 7.71 lakhs); and (b) provision for leave encashment (non current provisions – Rs. 12.89 lakhs and current provisions .89 lakhs and current provisions – Rs. 11.25 lakhs). Rs. 11.25 lakhs). h) The payment and receipts including inter corporate deposits were not h) The payment and receipts including inter corporate deposits were not h) The payment and receipts including inter corporate deposits were not examined for applicability of Section 2(22)(e) of the Act. applicability of Section 2(22)(e) of the Act. i) The details regarding work in progress were accepted by the AO without i) The details regarding work in progress were accepted by the AO witho i) The details regarding work in progress were accepted by the AO witho making enquiry. The Appellant submits that all the details pertaining to the above issues were The Appellant submits that all the details pertaining to the above issues were The Appellant submits that all the details pertaining to the above issues were available before the AO during the course of assessment proceedings and available before the AO during the course of assessment proceedings and available before the AO during the course of assessment proceedings and subsequently referred/ reproduced before PCIT during the proceedings u/s 263 of subsequently referred/ reproduced before PCIT during the proceedings u/s 263 of subsequently referred/ reproduced before PCIT during the proceedings u/s 263 of the Act. The AO, after thorough examination of the said details have accepted the ct. The AO, after thorough examination of the said details have accepted the ct. The AO, after thorough examination of the said details have accepted the claim of the Appellant. Thus, the action of PCIT in directing the AO to examine the of the Appellant. Thus, the action of PCIT in directing the AO to examine the of the Appellant. Thus, the action of PCIT in directing the AO to examine the said issues by exercising revisionary powers u/s 263 of the Act is incorrect and issues by exercising revisionary powers u/s 263 of the Act is incorrect and issues by exercising revisionary powers u/s 263 of the Act is incorrect and unsustainable in law and needs to be quashed. in law and needs to be quashed.” 2. Briefly stated facts of the case are that Briefly stated facts of the case are that the assessee filed its he assessee filed its return return return of of of income income income on on on 07.11.2022 07.11.2022 07.11.2022 declaring declaring declaring a a a loss loss loss of of of (-) Rs.7,14,07,911/-. The return was selected for scrutiny and notices . The return was selected for scrutiny and notices . The return was selected for scrutiny and notices under sections 143(2) and 142(1) of the under sections 143(2) and 142(1) of the Income-tax tax Act, 1961 (in

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short the Act) were issued. After considering the material furnished were issued. After considering the material furnished were issued. After considering the material furnished by the assessee, the assessment was completed under section by the assessee, the assessment was completed under sec by the assessee, the assessment was completed under sec 143(3) of the Act vide order dated 31.03.2024, determining the 143(3) of the Act vide order dated 31.03.2024, determining the 143(3) of the Act vide order dated 31.03.2024, determining the assessed income at Rs.193,11,56,588/ assessed income at Rs.193,11,56,588/-. The additions made in the The additions made in the assessment included deemed rental income of Rs.26,47,260/-, assessment included deemed rental income of Rs.26,47,260/ assessment included deemed rental income of Rs.26,47,260/ disallowance disallowance of of sub-leasing sub leasing charges charges of of Rs.1,71,43,984/-, Rs.1,71,43,984/ disallowance of interest claimed under section 36(1)(iii) amounting owance of interest claimed under section 36(1)(iii) amounting owance of interest claimed under section 36(1)(iii) amounting to Rs.191,55,01,472/ to Rs.191,55,01,472/- and treatment of CAM charges amounting to and treatment of CAM charges amounting to Rs.15,48,52,512/- as rental income instead of business income as rental income instead of business income. as rental income instead of business income

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“4. It is seen from the records that the assessment order U/s 143(3) of the Income It is seen from the records that the assessment order U/s 143(3) of the Income It is seen from the records that the assessment order U/s 143(3) of the Income Tax Act, 1961, was passed on 31.03.2024. While doing so, however, it is Tax Act, 1961, was passed on 31.03.2024. While doing so, however, it is Tax Act, 1961, was passed on 31.03.2024. While doing so, however, it is observed from the records that on various issues, either detail was not sought or observed from the records that on various issues, either detail was not sought or observed from the records that on various issues, either detail was not sought or that the claim of expenditure was accepted without verification/incomplete the claim of expenditure was accepted without verification/incomplete the claim of expenditure was accepted without verification/incomplete examination/verification, a few of which are listed hereunder: examination/verification, a few of which are listed hereunder: examination/verification, a few of which are listed hereunder: 1. Note 20 to the Profit & Loss Account 20 to the Profit & Loss Account - Revenue from Operations Revenue from Operations

Perusal of the "Profit & Loss Account relevant to AY Perusal of the "Profit & Loss Account relevant to AY 2022-23, more specifically, 23, more specifically, Note 20, thereto, related to 'Revenue from Operations', which comprises of 4 Note 20, thereto, related to 'Revenue from Operations', which comprises of 4 Note 20, thereto, related to 'Revenue from Operations', which comprises of 4 verticals, viz. (i) Sale of Flats, (ii) Lease Rental income, (iii) CAM charges received verticals, viz. (i) Sale of Flats, (ii) Lease Rental income, (iii) CAM charges received verticals, viz. (i) Sale of Flats, (ii) Lease Rental income, (iii) CAM charges received (net) and (iv) Project Management Consultancy Fees. (net) and (iv) Project Management Consultancy Fees. While few questions have been asked regarding the first 3, no question has been uestions have been asked regarding the first 3, no question has been uestions have been asked regarding the first 3, no question has been asked regarding the receipt on account of Sale of Flats and on account activity. of asked regarding the receipt on account of Sale of Flats and on account activity. of asked regarding the receipt on account of Sale of Flats and on account activity. of project management consultancy (50crs). The assessing Officer has accepted this project management consultancy (50crs). The assessing Officer has accepted this project management consultancy (50crs). The assessing Officer has accepted this vertical without any ex vertical without any examination regarding the nature services rendered, the amination regarding the nature services rendered, the persons to whom such services are rendered, amounts billed to each entity, persons to whom such services are rendered, amounts billed to each entity, persons to whom such services are rendered, amounts billed to each entity, details of expenditure incurred in respect of this vertical or in relation to each details of expenditure incurred in respect of this vertical or in relation to each details of expenditure incurred in respect of this vertical or in relation to each entity to whom such services were rendered, entity to whom such services were rendered, its relevance to the business of the its relevance to the business of the assessee and allowability vis assessee and allowability vis-à-vis the receipt etc. As such this item of receipt is vis the receipt etc. As such this item of receipt is accepted without verification, both on the count of receipt and on the expenditure accepted without verification, both on the count of receipt and on the expenditure accepted without verification, both on the count of receipt and on the expenditure incurred in relation to this receipt. incurred in relation to this receipt. II. Note 22 to the Profit & Loss Account o the Profit & Loss Account-cost of construction cost of construction

Under this head, the assessee has debited Municipal charges and Taxes at Under this head, the assessee has debited Municipal charges and Taxes at Under this head, the assessee has debited Municipal charges and Taxes at 3036.92 lakhs (FY 2021 3036.92 lakhs (FY 2021-22) as against 765.88 lakhs in the immediately 22) as against 765.88 lakhs in the immediately preceding period (FY 2020 preceding period (FY 2020-21) for which the assessing officer ha 21) for which the assessing officer has carried out no examination nor has he sought any explanation regarding the nature of the examination nor has he sought any explanation regarding the nature of the examination nor has he sought any explanation regarding the nature of the expenses involved its allowability in relation to the provisions of the Income Tax expenses involved its allowability in relation to the provisions of the Income Tax expenses involved its allowability in relation to the provisions of the Income Tax Act, or the reasons for the steep increase in the expenditure under the said head, Act, or the reasons for the steep increase in the expenditure under the said head, Act, or the reasons for the steep increase in the expenditure under the said head, during Fin. Year 2021 during Fin. Year 2021-22, as compared to that incurred in Fin Year 2020 22, as compared to that incurred in Fin Year 2020-21. Similarly under the head provisions/(reversal) for unfinished work the assessee Similarly under the head provisions/(reversal) for unfinished work the Similarly under the head provisions/(reversal) for unfinished work the has indicated a figure of 1,095.20 lakhs for Fin. Year 2021 has indicated a figure of 1,095.20 lakhs for Fin. Year 2021-22, as against rupees 22, as against rupees Nil, for the immediately preceding previous year i.e. Fin. Year 2020 diately preceding previous year i.e. Fin. Year 2020-21, which too diately preceding previous year i.e. Fin. Year 2020 has been accepted without any question or examination. has been accepted without any question or examination. Also, specific queries have prima faci specific queries have prima facie have been not raised nor have details been e have been not raised nor have details been sought / item of expenditure examined, with regard t sought / item of expenditure examined, with regard to the correctness of the o the correctness of the expenses, allowability of the entire expense and its direct correlation to the expenses, allowability of the entire expense and its direct correlation to the expenses, allowability of the entire expense and its direct correlation to the business of the assessee/receipts declared or which is likely to be declared in business of the assessee/receipts declared or which is likely to be declared in business of the assessee/receipts declared or which is likely to be declared in future from the projects carried out by the assessee. future from the projects carried out by the assessee. III. Note 24 to the Profit & Loss Account e Profit & Loss Account-finance cost

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Under this head, the assessee has debited interest on delayed payment of Under this head, the assessee has debited interest on delayed payment of Under this head, the assessee has debited interest on delayed payment of statutory dues of 191.13 lakhs. No question has been asked nor has the issue statutory dues of 191.13 lakhs. No question has been asked nor has the issue statutory dues of 191.13 lakhs. No question has been asked nor has the issue been examined with the relation to the allowability of such expenditure / been examined with the relation to the allowability of such expenditu been examined with the relation to the allowability of such expenditu disallowance to be made vis disallowance to be made vis-a-vis section 43B of the income tax act 1961 vis section 43B of the income tax act 1961 IV. Note 26 to the Profit & Loss Account IV. Note 26 to the Profit & Loss Account - other expenses other expenses

Assessee has debited legal expenses to the extent of 157.00 lakhs (Fin Year Assessee has debited legal expenses to the extent of 157.00 lakhs (Fin Year Assessee has debited legal expenses to the extent of 157.00 lakhs (Fin Year 2021-22), as against 33.49 lakhs in the imme 22), as against 33.49 lakhs in the immediately preceding previous year (i.e. diately preceding previous year (i.e. Fin Year 2020-21), which indicates a steep increase in expenditure. No 21), which indicates a steep increase in expenditure. No 21), which indicates a steep increase in expenditure. No examination has been carried out regarding the nature of the expenditure or the examination has been carried out regarding the nature of the expenditure or the examination has been carried out regarding the nature of the expenditure or the allowability of it or its relevance to the business carried out by the assesse, while allowability of it or its relevance to the business carried out by allowability of it or its relevance to the business carried out by accepting the same. Similarly, Rent paid has been indicated at 337.50 lakhs (Fin Year 2021-22) as Similarly, Rent paid has been indicated at 337.50 lakhs (Fin Year 2021 Similarly, Rent paid has been indicated at 337.50 lakhs (Fin Year 2021 against rupees nil in the immediately preceding previous year (i.e. Fin Year 2020- against rupees nil in the immediately preceding previous year (i.e. Fin Year 2020 against rupees nil in the immediately preceding previous year (i.e. Fin Year 2020 21). Assessee has indicated brokerage on sale of 397.77 Assessee has indicated brokerage on sale of 397.77 lakhs (Fin Year 2021 lakhs (Fin Year 2021-22) as against 134.23 lakhs in the immediately preceding previous year (i.e. (Fin Year against 134.23 lakhs in the immediately preceding previous year (i.e. (Fin against 134.23 lakhs in the immediately preceding previous year (i.e. (Fin 2020-21)). Neither in the case of rent nor in the case of brokerage expenses has the Neither in the case of rent nor in the case of brokerage expenses has the Neither in the case of rent nor in the case of brokerage expenses has the assessing officer called for details or examined the relevance of the expenditure to assessing officer called for details or examined the relevance assessing officer called for details or examined the relevance the business and the allowability of the same vis the business and the allowability of the same vis-a-vis the expenditure and the vis the expenditure and the business of the assessee. The assessing officer has also not gone into the business of the assessee. The assessing officer has also not gone into the business of the assessee. The assessing officer has also not gone into the reasons why there is a substantial increase in expenditure in the period under reasons why there is a substantial increase in expenditure in the period under reasons why there is a substantial increase in expenditure in the period under assessment (AY 2022 assessment (AY 2022-23) as compared to that in the immediately preceding 23) as compared to that in the immediately preceding period (AY 2021-22) Sundry balance written off is 778.68 lakhs (Fin Year 2021 Sundry balance written off is 778.68 lakhs (Fin Year 2021-22) as against 120.62 22) as against 120.62 lakhs for the immediately preceding year (i.e. (Fin Year 2020-21). Though the lakhs for the immediately preceding year (i.e. (Fin Year 2020 lakhs for the immediately preceding year (i.e. (Fin Year 2020 increase in expenditure is almost 5 times, details of the balances written off, the ase in expenditure is almost 5 times, details of the balances written off, the ase in expenditure is almost 5 times, details of the balances written off, the allowability of such Balances written off has not been examined vis-a-vis the allowability of such Balances written off has not been examined vis allowability of such Balances written off has not been examined vis provisions of the Income Tax Act. provisions of the Income Tax Act. V Note 17 to the Profit & Loss Account trade payables-outstanding for V Note 17 to the Profit & Loss Account trade payables V Note 17 to the Profit & Loss Account trade payables various periods beyond due date for payment in the case of MSME various periods beyond due date for payment in the case of MSME various periods beyond due date for payment in the case of MSME Neither have details been called for in respect of the amount of 361.74 lakhs nor Neither have details been called for in respect of the amount of 361.74 lakhs nor Neither have details been called for in respect of the amount of 361.74 lakhs nor has the allowability of the same been tested regarding the allowability of such has the allowability of the same been tested regarding the allowability of such has the allowability of the same been tested regarding the allowability of such expenditure vis-a-vis sec vis section 43B of the income tax act VI. Note 18 to the Profit & Loss Account VI. Note 18 to the Profit & Loss Account - other liabilities other liabilities-current Under this item amounts have been indicated as liabilities in respect of statutory Under this item amounts have been indicated as liabilities in respect of statutory Under this item amounts have been indicated as liabilities in respect of statutory payments on account of the following payments on account of the following Tax deducted at source Tax deducted at source 1 818.94 lakhs

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Professional tax 1.11 lakhs Provident fund 3.77 lakhs Property tax payable Property tax payable 07 19.35 lakhs GST payable 3.92 lakhs The allowability of such expenditure has not been examined in the light of the The allowability of such expenditure has not been examined in the light of the The allowability of such expenditure has not been examined in the light of the provision of section 43B or as the case maybe provision of section 43B or as the case maybe section 36 of the income tax act section 36 of the income tax act 1961. VII. Note 19 to the Profit & Loss Account VII. Note 19 to the Profit & Loss Account - provisions under the head provisions under the head The assessee has indicated the following figures under non The assessee has indicated the following figures under non-current provisions for current provisions for employee benefits – Gratuity 121.88 lakhs Leave encashment 12.89 lakhs Also, under Current provisions for employee benefits, the assessee has indicated Also, under Current provisions for employee benefits, the assessee has indicated Also, under Current provisions for employee benefits, the assessee has indicated the following figures: the following figures: Gratuity 7.71 lakhs Leave and encashment Leave and encashment 11.25 Lacks The allowability of such provisions has not been examined nor has any The allowability of such provisions has not been examined nor has any The allowability of such provisions has not been examined nor has any query/question asked on the issues. As such the issues have been accepted query/question asked on the issues. As such the issues have been accepted query/question asked on the issues. As such the issues have been accepted without any examination. without any examination. VIII. The assessee has had financial transactions with related parties in the form VIII. The assessee has had financial transactions with related parties in the form VIII. The assessee has had financial transactions with related parties in the form of payment of interest, receiving and giving inter of payment of interest, receiving and giving inter-corporate deposits etc corporate deposits etc. The applicability of section 2(22)(e) has not been examined nor has any query raised applicability of section 2(22)(e) has not been examined nor has any query raised applicability of section 2(22)(e) has not been examined nor has any query raised regarding such deemed income. Details have also not been called for, in this regarding such deemed income. Details have also not been called for, in this regarding such deemed income. Details have also not been called for, in this regard.

IX. Details regarding the work in progress and examination of the same prima IX. Details regarding the work in progress and examination of the same prima IX. Details regarding the work in progress and examination of the same prima facie appear to have not been carried out and the same appears to have been appear to have not been carried out and the same appears to have been appear to have not been carried out and the same appears to have been accepted without examination. accepted without examination.” 4. The assessee controverted the allegation and placed before the The assessee controverted the allegation and placed before the The assessee controverted the allegation and placed before the learned PCIT the relevant notices issued by the Assessing Officer learned PCIT the relevant notices issued by the Assessing Officer learned PCIT the relevant notices issued by the Assessing Officer under section 142(1), the specific queries raised therein and the under section 142(1), the specific queries raised therein and the under section 142(1), the specific queries raised therein and the corresponding replies and documents furnished during the corresponding replies and documents furnished during the corresponding replies and documents furnished during the assessment proceedings. ssment proceedings. The learned PCIT, however, rejected the The learned PCIT, however, rejected the assessee's explanation principally on the premise that the assessee's explanation principally on the premise that the assessee's explanation principally on the premise that the

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assessment record did not demonstrate adequate enquiry into the assessment record did not demonstrate adequate enquiry into the assessment record did not demonstrate adequate enquiry into the aforesaid matters. He relied upon aforesaid matters. He relied upon Rampyari Devi Saraogi v. CIT Rampyari Devi Saraogi v. CIT, Malabar Industrial Co. Ltd. v. CIT, (2000) (1968) 67 ITR 84 (SC) ITR 84 (SC), Malabar Industrial Co. Ltd. v. CIT Gee Vee Enterprises v. Addl. CIT, (1975) 99 243 ITR 83 (SC) and and Gee Vee Enterprises v. Addl. CIT ITR 375 (Delhi) and set aside the assessment with a direction to and set aside the assessment with a direction to and set aside the assessment with a direction to the Assessing Officer to pass a fresh assessment order after making the Assessing Officer to pass a fresh assessment order after making the Assessing Officer to pass a fresh assessment order after making due enquiries. Relevant finding of the learned PCIT is reproduced as Relevant finding of the learned PCIT is reproduced as Relevant finding of the learned PCIT is reproduced as under:-

“5. The undersigned has carefully perused the assessment records, the SCN 5. The undersigned has carefully perused the assessment records, the SCN 5. The undersigned has carefully perused the assessment records, the SCN issued, and the submissions of the assessee. On detailed consideration, it is issued, and the submissions of the assessee. On detailed consideration, it is issued, and the submissions of the assessee. On detailed consideration, it is observed that in the observed that in the detailed show cause notice dated 18.03.2025 issued by my detailed show cause notice dated 18.03.2025 issued by my predecessor the following aspects were pointed out the assessee: predecessor the following aspects were pointed out the assessee: predecessor the following aspects were pointed out the assessee: i. Revenue from Operations (Note 20 P&L): i. Revenue from Operations (Note 20 P&L): The AO did not examine The AO did not examine receipts from Sale of Flats and Project Management Consultancy fees (Rs50 crores). No from Sale of Flats and Project Management Consultancy fees ( from Sale of Flats and Project Management Consultancy fees ( verification of nature of services, identity of parties, or related expenditures was verification of nature of services, identity of parties, or related verification of nature of services, identity of parties, or related undertaken. ii. Cost of Construction (Note 22 P&L): ii. Cost of Construction (Note 22 P&L): Large increases in Municipal Large increases in Municipal charges for FY 2021-22 at Rs 3036.92 lakhs vs Rs765.88 lakhs in FY 2020 22 at Rs 3036.92 lakhs vs Rs765.88 lakhs in FY 2020- 21and 22 at Rs 3036.92 lakhs vs Rs765.88 lakhs in FY 2020 provisions for unfinished work Rs 1,095.20 lakhs vs Nil in previous year were provisions for unfinished work Rs 1,095.20 lakhs vs Nil in previous year provisions for unfinished work Rs 1,095.20 lakhs vs Nil in previous year accepted without inquiry. accepted without inquiry. iii. Finance Cost (Note 24 P&L): iii. Finance Cost (Note 24 P&L): Interest on delayed statutory payments of Interest on delayed statutory payments of Rs191.13 lakhs was allowed without considering Section 43B compliance. Rs191.13 lakhs was allowed without considering Section 43B compliance. Rs191.13 lakhs was allowed without considering Section 43B compliance. iv. Other Expenses (Note 26 P&L): iv. Other Expenses (Note 26 P&L): Sharp increases in Legal Fees Rs157 Sharp increases in Legal Fees Rs157 lakhs vs Rs.33.49 lakhs, Rent Rs 337.50 lakhs vs Nil, Brokerage 397.77 33.49 lakhs, Rent Rs 337.50 lakhs vs Nil, Brokerage 397.77 33.49 lakhs, Rent Rs 337.50 lakhs vs Nil, Brokerage 397.77 lakhs vs Rs134.23 lakhs, Sundry Balance Written Off Rs778.68 lakhs vs 120.62 lakhs. Rs134.23 lakhs, Sundry Balance Written Off Rs778.68 lakhs vs Rs134.23 lakhs, Sundry Balance Written Off Rs778.68 lakhs vs v. Trade Payables (Note 17 P v. Trade Payables (Note 17 P&L) & Other Liabilities (Note 18 P&L): &L) & Other Liabilities (Note 18 P&L): No verification was carried out regarding payments to MSME vendors, Outstanding verification was carried out regarding payments to MSME vendors, verification was carried out regarding payments to MSME vendors, amounts for MSME Rs361.74 lakhs not verified for allowability under section 43B amounts for MSME Rs361.74 lakhs not verified for allowability amounts for MSME Rs361.74 lakhs not verified for allowability statutory dues, TDS, PF, GST, etc., for allowability unde statutory dues, TDS, PF, GST, etc., for allowability under relevant provisions. relevant provisions. vi. Other Liabilities (Note 18 P&L) vi. Other Liabilities (Note 18 P&L) Statutory liabilities (TDS Rs1,818.94 Statutory liabilities (TDS Rs1,818.94 lakhs, PF Rs3.77 lakhs, Property Tax Rs719.35 lakhs, GST Rs3.92 lakhs, professional PF Rs3.77 lakhs, Property Tax Rs719.35 lakhs, GST Rs3.92 lakhs, PF Rs3.77 lakhs, Property Tax Rs719.35 lakhs, GST Rs3.92 lakhs, Tax Rs1.11 lakhs) accepted without verifying allowability. Tax Rs1.11 lakhs) accepted without verifying allowability.

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vii. Provisions for Employee Benefits (Note 19 P&L): s for Employee Benefits (Note 19 P&L): Gratuity and leave encashment provisions were accepted without detailed scrutiny. Non-current encashment provisions were accepted without detailed scrutiny. Non encashment provisions were accepted without detailed scrutiny. Non provisions: Gratuity Rs. provisions: Gratuity Rs.121.88 lakhs, Leave Encashment Rs. 12.89 lakhs; 121.88 lakhs, Leave Encashment Rs. 12.89 lakhs; Current provisions: Gratuity Rs Current provisions: Gratuity Rs.7.71 lakhs, Leave Encashment Rs.11.25 lakhs Encashment Rs.11.25 lakhs accepted without examination. accepted without examination. viii. viii. Related Related Party Party Transactions: Transactions : Payments Payments and and receipts receipts including including intercorporate deposits were not examined for applicability of Section 2(22)(e). intercorporate deposits were not examined for applicability of Section 2(22)(e). intercorporate deposits were not examined for applicability of Section 2(22)(e). ix. Work in Progress / Project Accounting: ix. Work in Progress / Project Accounting: Details regarding work in regarding work in progress were accepted without inquiry. were accepted without inquiry. 5.1 It was also pointed out that in the ensuing assessment proceedings AO called 5.1 It was also pointed out that in the ensuing assessment proceedings AO called 5.1 It was also pointed out that in the ensuing assessment proceedings AO called for no explanation for large deviations increases of claims on these aspects from for no explanation for large deviations increases of claims on these aspects from for no explanation for large deviations increases of claims on these aspects from previous years. Legal fees, rent, previous years. Legal fees, rent, brokerage, and sundry balances written off were brokerage, and sundry balances written off were not examined. 6. In the present proceedings submissions have been made on the merits of these 6. In the present proceedings submissions have been made on the merits of 6. In the present proceedings submissions have been made on the merits of issues. In the present proceedings I need not go into the merits of these aspects issues. In the present proceedings I need not go into the merits of these issues. In the present proceedings I need not go into the merits of these as it is settled jurisprudence as it is settled jurisprudence that “lack of inquires” before passing of an that “lack of inquires” before passing of an assessment order itself makes the order erroneous and prejudicial to the interest assessment order itself makes the order erroneous and prejudicial to the interest assessment order itself makes the order erroneous and prejudicial to the interest of revenue. In this regard reliance is placed on the following decisions: revenue. In this regard reliance is placed on the following decisions: revenue. In this regard reliance is placed on the following decisions: 1.Rampyari Devi Saraogi v CIT 67 ITR 84(SC) 1.Rampyari Devi Saraogi v CIT 67 ITR 84(SC) –

In this case the Hon'ble SC has held as under case the Hon'ble SC has held as under –

"There was ample material to show that the Income "There was ample material to show that the Income-tax Officer tax Officer made the assessments in undue hurry ... the assessee made a assessments in undue hurry ... the assessee made a declaration giving the facts declaration giving the facts regarding initial capital, the ornaments regarding initial capital, the ornaments and presents received at and presents received at the time of marriage, other gifts received marriage, other gifts received from her father-in-law, etc., which should have put law, etc., which should have put any Income-tax Officer on his guard. But the Income tax Officer without tax Officer on his guard. But the Income tax Officer without making tax Officer on his guard. But the Income tax Officer without any inquiries to satisfy himself passed the assessment any inquiries to satisfy himself passed the assessment order.” order.” 2.Malabar Industrial Company Ltd v CIT (2000) 243 ITR 83(SC) Industrial Company Ltd v CIT (2000) 243 ITR 83(SC) Industrial Company Ltd v CIT (2000) 243 ITR 83(SC)

In this case the Hon'ble SC has held as under In this case the Hon'ble SC has held as under –

"10. In the instant case, the Commissioner noted that the ITO passed the order of "10. In the instant case, the Commissioner noted that the ITO "10. In the instant case, the Commissioner noted that the ITO nil assessment without application of mind. without application of mind. Indeed, the High Court recorded Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all apply his mind to the case in all the finding that the perspective and the order perspective and the order passed by him was erroneous. It appears that passed by him was erroneous. It appears that the resolution passed by the board of the appellant passed by the board of the appellant-company was not passed by the board of the appellant- placed before the Assessing Officer. Thus, ther before the Assessing Officer. Thus, there was no material to e was no material to support the claim of the appellant that the said amount represented support the claim of the appellant that the said amount support the claim of the appellant that the said amount compensation for loss of agricultural income. He compensation for loss of agricultural income. He accepted the entry in accepted the entry in the statement of the account filed by the the statement of the account filed by the appellant in the absence of any appellant in the absence of any

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supporting material an supporting material and without making any inquiry. On these facts, the . On these facts, the conclusion that the order of the ITO was erroneous is irresistible. We are, the order of the ITO was erroneous is irresistible. We are, the order of the ITO was erroneous is irresistible. We are, therefore, of the opinion that the High Court has rightly held that the exercise of therefore, of the opinion that the High Court has rightly held that therefore, of the opinion that the High Court has rightly held that the jurisdiction by the Commissioner under sec the jurisdiction by the Commissioner under section 263(1) was justified.” 263(1) was justified.” 3.Gee Vee Enterprise vs Addl CIT 99 ITR 375 (Delhi) 3.Gee Vee Enterprise vs Addl CIT 99 ITR 375 (Delhi) In this case the Hon'ble HC has held as under In this case the Hon'ble HC has held as under – "The position and function of the Income "The position and function of the Income-tax Officer is very different from that of a different from that of a civil court. The statements made in a civil court. The statements made in a pleading proved by the minimum amount of pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil accepted by a civil court in the absence of any rebuttal. The civil accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the court is neutral. It simply gives decision on the basis of the pleading and evidence pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but is not only an adjudicator but which comes before it. also an investigator. He also an investigator. He cannot remain passive in the face of a return cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to apparently in order but calls for further inquiry. It is his duty to apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the ascertain the truth of the facts stated in the return when the ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. of the case are such as to provoke an inquiry. The of the case are such as to provoke an inquiry. meaning to be given to the word "erroneous" in section meaning to be given to the word "erroneous" in section 263 emerges out of 263 emerges out of this context. It is because it is incumbent this context. It is because it is incumbent on the Income on the Income-tax Officer to further investigate the facts further investigate the facts stated in the return when c stated in the return when circumstances would make such an would make such an inquiry prudent that the word "erroneous" in section inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order includes the failure to make such an inquiry. The order becomes includes the failure to make such an inquiry. The order erroneous because such an inquiry has not been erroneous because such an inquiry has not been made and not because made and not because there is anything wrong with the or there is anything wrong with the order if all the facts stated therein are if all the facts stated therein are assumed to be correct.” assumed to be correct.” (emphasis supplied) 6.1 In this regard reliance is also placed on the following 6.1 In this regard reliance is also placed on the following decisions decisions 1. Real Value Appliances Ltd. vs Canara Bank (1998) 5 SCC 554 Value Appliances Ltd. vs Canara Bank (1998) 5 SCC 554 Value Appliances Ltd. vs Canara Bank (1998) 5 SCC 554 In this case the Hon'ble SC has explai In this case the Hon'ble SC has explained the meaning of the word inquiry ned the meaning of the word inquiry as under: “According to the New Standard Dictionary, the word `inquiry' includes “According to the New Standard Dictionary, the word `inquiry' “According to the New Standard Dictionary, the word `inquiry' `investigation' into facts, causes, effects and relations investigation' into facts, causes, effects and relations generally; `to investigation' into facts, causes, effects and relations inquire', according to the same dictionary inquire', according to the same dictionary means `to exert oneself means `to exert oneself to discover something discover something. Chamber's 20th Century Dictionary lays down that the Century Dictionary lays down that the meaning of the term `to meaning of the term `to inquire' is "to ask, to seek" and the meaning of the term inquire' is "to ask, to seek" and the meaning of the term `inquiry' is given as: "search for knowledge; investigation : a question". given as: "search for knowledge; investigation : a question". given as: "search for knowledge; investigation : a question". 2.Tuneshwar Prasad Sin 2.Tuneshwar Prasad Singh vs State Of Bihar AIR 1978 Pat 225, gh vs State Of Bihar AIR 1978 Pat 225, In this case the Hon'ble HC has also explained the meaning of the word Hon'ble HC has also explained the meaning of the word inquiry as under: inquiry as under: “The dictionary meaning of the term 'inquiry', however, is, “The dictionary meaning of the term 'inquiry', however, is, according to the New according to the New Standard Dictionary, investigation into Standard Dictionary, investigation into facts, causes, effects and relations causes, effects and relations generally and 'to inquire' generally and 'to inquire' has been defined to mean in the same dictionary 'to has been defined to mean in the same dictionary 'to exert oneself to discover something'. "Inquiry is a road to truth", said Gladstone. to discover something'. "Inquiry is a road to truth", said Gladstone. to discover something'. "Inquiry is a road to truth", said Gladstone. The Chambers's Twentieth Century Dictionary lays down the meaning of the term The Chambers's Twentieth Century Dictionary lays down the The Chambers's Twentieth Century Dictionary lays down the

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'to inquire' as "to ask; to seek" and the term 'to inquire' as "to ask; to seek" and the term 'inquiry' as the "search for 'inquiry' as the "search for knowledge; investigation; a question". knowledge; investigation; a question". 7. In view of the above decisions and in view of the show-cause dated 7. In view of the above decisions and in view of the show 7. In view of the above decisions and in view of the show 18.03.2025, I hold that the order vide DIN No. 18.03.2025, I hold that the order vide DIN No. ITBA/AST/S/143(3)/2023 ITBA/AST/S/143(3)/2023- 24/1063757538(1) dated 31.03.2024 is erroneous in so far as it is prejudicial to 24/1063757538(1) dated 31.03.2024 is erroneous in so far as it is prejudicial to 24/1063757538(1) dated 31.03.2024 is erroneous in so far as it is prejudicial to the interests of the revenue within the meaning of Section 263 of the Income interests of the revenue within the meaning of Section 263 of the Income-tax interests of the revenue within the meaning of Section 263 of the Income Act, 1961. The assessment order dated 31.03.2024 is therefore set asid 1961. The assessment order dated 31.03.2024 is therefore set asid 1961. The assessment order dated 31.03.2024 is therefore set aside to the file of the Assessing Officer. In view of the above, the AO is directed to pass a Assessing Officer. In view of the above, the AO is directed to pass a Assessing Officer. In view of the above, the AO is directed to pass a fresh assessment order after conducting due inquires and after affording the assessment order after conducting due inquires and after affording the assessment order after conducting due inquires and after affording the assessee due opportunity of being heard. opportunity of being heard.” 5. Before us, learned counsel for the Before us, learned counsel for the assessee submitted that the assessee submitted that the very factual foundation of the order under section 263 is erroneous. very factual foundation of the order under section 263 is erroneous. very factual foundation of the order under section 263 is erroneous. According to him, the Assessing Officer had specifically called for According to him, the Assessing Officer had specifically called for According to him, the Assessing Officer had specifically called for information on the very matters which have subsequently been information on the very matters which have subsequently been information on the very matters which have subsequently been characterised by the learned P characterised by the learned PCIT as matters not enquired into. CIT as matters not enquired into. The learned counsel for the assessee submitted that assessee filed learned counsel for the assessee submitted that assessee filed learned counsel for the assessee submitted that assessee filed detailed reply on 10th February 2025 explaining to the PCIT that all detailed reply on 10th February 2025 explaining to the PCIT that all detailed reply on 10th February 2025 explaining to the PCIT that all items which are listed in the notice had been duly asked by AO, items which are listed in the notice had been duly asked by AO, items which are listed in the notice had been duly asked by AO, explained to him, and explained to him, and considered by him. The learned counsel for considered by him. The learned counsel for the assessee filed a detailed tabulation before us setting out, issue- the assessee filed a detailed tabulation before us setting out, issue the assessee filed a detailed tabulation before us setting out, issue wise, the date of the notice under section 142(1), the relevant query wise, the date of the notice under section 142(1), the relevant query wise, the date of the notice under section 142(1), the relevant query number, the page where the query appears, and the corresponding number, the page where the query appears, and the corresponding number, the page where the query appears, and the corresponding pages containing the assessee's reply and supporting material. For taining the assessee's reply and supporting material. For taining the assessee's reply and supporting material. For ready reference, said chart is reproduced as under: ready reference, said chart is reproduced as under:-

Notice u/s 142(1) issued by the Reply filed by the assessee AO Reply filed by the assessee Issue on which section Issue on which section on the issue Sr. 263 has No been invoked Ackno Cove been invoked Date of Questi Specific Page No wledge ring notice on detail ment letter 1 Revenue from operation 9/4/2023 11 169 173 174 183 Revenue from operation

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Project management Project management 2/9/2024 2 187 190 192 198 consultancy services consultancy services 2 Cost of construction 9/4/2023 12 169 209 210 211 Cost of construction charges Municipal charges 3 Finance cost 9/4/2023 14(iv) 169 240 241 246 Interest on delayed Interest on delayed 2/9/2024 8 187 payment of statutory payment of statutory dues 4 Other Expenses 9/4/2023 12 169 247 248 249 Legal Expenses 299-300 Rent paid 300 Brokerage 302-303 Sundry balance written Sundry balance written 306 off 5 Trade Payables 9/4/2023 9 168 271 273 275 Other Liabilities - 6 - current 1. TDS has been paid entire before filing of return Tax deducted at source 94 & 281 Tax deducted at source and disclosed in TAR 2. Unpaid profession tax was disallowed in 130, 131 and Professional tax computation of income and disclosed in TAR 282 3. Unpaid property tax was disallowed in Property Tax 282 computation of income and disclosed in TAR 4. GST has been paid in the month of April only GST Payable 282 and disclosed in TAR Provisions under the Provisions under the head Current & Non-current current Unpaid gratuity and leave encashment was 7 109 & 283 disallowed in return and disclosed in TAR provisions 112, 131 & 1. Gratuity 284 2. Leave Encashement 2. Leave Encashement Financial tranaction on 8 9/4/2023 7 167 285 287 289 with related parties with related parties Shareholding patter of Shareholding patter of 9/4/2023 19(iv) 171 292 293 297 assessee and subsidiary assessee and subsidiary companies 9 WIP 9/4/2023 18(iii) 171 292 293 295

5.1 The learned counsel for the assessee submitted that, out of the The learned counsel for the assessee submitted that, out of the The learned counsel for the assessee submitted that, out of the revenue from operations disclosed in Note 20 to the audited revenue from operations disclosed in Note 20 to the audited revenue from operations disclosed in Note 20 to the audited financial statements, financial financial statements, statements, the Assessing the Assessing the Assessing Officer Officer Officer had had specifically had specifically specifically

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examined the treatment of CAM charges claimed by the assessee as examined the treatment of CAM charges claimed by the assessee as examined the treatment of CAM charges claimed by the assessee as business income and, not agreeing with the assessee's treatment, ss income and, not agreeing with the assessee's treatment, ss income and, not agreeing with the assessee's treatment, had treated the same as income from other sources. According to had treated the same as income from other sources. According to had treated the same as income from other sources. According to the learned counsel, this fact itself demonstrated beyond doubt that the learned counsel, this fact itself demonstrated beyond doubt that the learned counsel, this fact itself demonstrated beyond doubt that the details furnished by the assessee had been duly considered and the details furnished by the assessee had been duly considered a the details furnished by the assessee had been duly considered a examined by the Assessing Officer and that, upon such examined by examined by the Assessing Officer and the Assessing Officer and that, that, upon such upon such examination, he had not accepted the assessee's treatment of the examination, he had not accepted the assessee's treatment of the examination, he had not accepted the assessee's treatment of the said receipts. It was, therefore, contended that the proceedings said receipts. It was, therefore, contended that the proceedings said receipts. It was, therefore, contended that the proceedings under section 263 of the Act could not be sustained on the under section 263 of the Act could not be sustained on the under section 263 of the Act could not be sustained on the allegation that the revenue from operations had not been examined that the revenue from operations had not been examined that the revenue from operations had not been examined by the Assessing Officer. Further, the learned counsel submitted by the Assessing Officer. Further, the learned counsel submitted by the Assessing Officer. Further, the learned counsel submitted that, after considering the details relating to interest expenditure, that, after considering the details relating to interest expenditure, that, after considering the details relating to interest expenditure, the Assessing Officer had made a substantial disallowance of the Assessing Officer had made a substantial disallowance of the Assessing Officer had made a substantial disallowance of approximately Rs.193 crores, which, according to him, further oximately Rs.193 crores, which, according to him, further oximately Rs.193 crores, which, according to him, further demonstrated that the items reflected in the Profit and Loss demonstrated that the items reflected in the Profit and Loss demonstrated that the items reflected in the Profit and Loss Account had not been accepted mechanically but had been duly Account had not been accepted mechanically but had been duly Account had not been accepted mechanically but had been duly examined during the course of assessment proceedings. He examined during the course of assessment proceedings. He examined during the course of assessment proceedings. He accordingly submitted that the order passed under section 263 of ed that the order passed under section 263 of ed that the order passed under section 263 of the Act deserved to be quashed the Act deserved to be quashed 5.2 The learned counsel further submitted that the returns filed The learned counsel further submitted that the returns filed The learned counsel further submitted that the returns filed by the assessee had been subjected to assessment proceedings from by the assessee had been subjected to assessment proceedings from by the assessee had been subjected to assessment proceedings from Assessment Year 2014 Assessment Year 2014-15 onwards. He submitted t 15 onwards. He submitted that, in each of the preceding years, the assessee had earned similar construction the preceding years, the assessee had earned similar construction the preceding years, the assessee had earned similar construction revenue and had claimed similar expenditure as deduction. revenue and had claimed similar expenditure as deduction. revenue and had claimed similar expenditure as deduction.

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According to him, after verification of the accounts and supporting According to him, after verification of the accounts and supporting According to him, after verification of the accounts and supporting details, assessments had been completed in the preceding years details, assessments had been completed in the p details, assessments had been completed in the p and additions on similar issues had been made by the Assessing and additions on similar issues had been made by the Assessing and additions on similar issues had been made by the Assessing Officer, as had been done in the assessment order passed under Officer, as had been done in the assessment order passed under Officer, as had been done in the assessment order passed under section 143(3) of the Act dated 31st March 2024 for the year under section 143(3) of the Act dated 31st March 2024 for the year under section 143(3) of the Act dated 31st March 2024 for the year under consideration. It was, therefore, contended that initiation of consideration. It was, therefore, contended that consideration. It was, therefore, contended that revisionary proceedings on issues which had been examined and revisionary proceedings on issues which had been examined and revisionary proceedings on issues which had been examined and dealt with in the preceding assessment years, without pointing out dealt with in the preceding assessment years, without pointing out dealt with in the preceding assessment years, without pointing out any deviation or distinguishing feature in the year under any deviation or distinguishing feature in the year under any deviation or distinguishing feature in the year under consideration, was without merit. The learned counsel accordingly consideration, was without merit. The learned counsel consideration, was without merit. The learned counsel submitted that the order passed under section 263 of the Act submitted that the order passed under section 263 of the Act submitted that the order passed under section 263 of the Act deserved to be quashed. deserved to be quashed. The learned counsel further submitted that Explanation 2 to Explanation 2 to 5.3 The learned counsel further submitted that section 263 of the Act section 263 of the Act had not been invoked either in the show had not been invoked either in the show- cause notice or in the order passed under section 263 of the Act. cause notice or in the order passed under section 263 of the Act. cause notice or in the order passed under section 263 of the Act. According to him, merely stating that the Assessing Officer had not According to him, merely stating that the Assessing Officer had not According to him, merely stating that the Assessing Officer had not verified certain details would not, by itself, amount to invocation of verified certain details would not, by itself, amount to invocation of verified certain details would not, by itself, amount to invocation of Explanation 2 to section 263. In support of the contention, he n 2 to section 263. In support of the contention, he n 2 to section 263. In support of the contention, he referred to the judgment of the Hon'ble Bombay High Court in the referred to the judgment of the Hon'ble Bombay High Court in the referred to the judgment of the Hon'ble Bombay High Court in the case of CIT v. Impact Foundation (India) CIT v. Impact Foundation (India), 186 taxmann.com 134 186 taxmann.com 134 (Bom.). The learned counsel submitted that, in the said case, the . The learned counsel submitted that, in the said case, the . The learned counsel submitted that, in the said case, the show-cause notice issued under section 263 had been reproduced notice issued under section 263 had been reproduced notice issued under section 263 had been reproduced in paragraph 2 of the judgment. In sub in paragraph 2 of the judgment. In sub-paragraph (iii) thereof, the paragraph (iii) thereof, the PCIT had observed that PCIT had observed that “The AO has passed order without the very “The AO has passed order without the very

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basis verification of the above facts and therefore the order is basis verification of the above facts and therefore the order is basis verification of the above facts and therefore the order is dicial to the interest of the revenue.” However, after considering However, after considering prejudicial to the interest of the revenue.” the submissions of the assessee, the PCIT had referred to the submissions of the assessee, the PCIT had referred to the submissions of the assessee, the PCIT had referred to Explanation 2 to section 263 for the first time in the order passed Explanation 2 to section 263 for the first time in the order passed Explanation 2 to section 263 for the first time in the order passed under section 263. The learned counsel submitted that, on these under section 263. The learned counsel submitted that, on these under section 263. The learned counsel submitted that, on these facts, the Hon'ble Bombay High Court, in paragraph 13 of its facts, the Hon'ble Bombay High Court, in paragraph 13 of its facts, the Hon'ble Bombay High Court, in paragraph 13 of its judgment, had held as under: judgment, had held as under:

"13. We are also in agreement with the submissions made on behalf of the . We are also in agreement with the submissions made on behalf of the . We are also in agreement with the submissions made on behalf of the Respondent-Assessee that prior to the invocation of the provisions of Explanation 2 Assessee that prior to the invocation of the provisions of Explanation 2 Assessee that prior to the invocation of the provisions of Explanation 2 to Section 263 of the Act, the show-cause notice was required to specify that the to Section 263 of the Act, the show cause notice was required to specify that the aforesaid Explanation is to be invoked against the Assessee, and n is to be invoked against the Assessee, and if the show- n is to be invoked against the Assessee, and cause notice does not mention that the Explanation is to be invoked, then the cause notice does not mention that the Explanation is to be invoked, then the cause notice does not mention that the Explanation is to be invoked, then the provisions of Section 263 of the Act cannot apply. As the Respondent provisions of Section 263 of the Act cannot apply. As the Respondent-Assessee was not confronted with the aforesaid Explanation, hence, such an order, without was not confronted with the aforesaid Expla nation, hence, such an order, without confronting the Respondent-Assessee with the invocation of Explanation 2 to confronting the Respondent Assessee with the invocation of Explanation 2 to Section 263 was not appropriate and sustainable in law. We are therefore in Section 263 was not appropriate and sustainable in law. We are therefore in Section 263 was not appropriate and sustainable in law. We are therefore in agreement with learned Counsel on behalf of the Respondent-Assessee on this agreement with learned Counsel on behalf of the Respondent agreement with learned Counsel on behalf of the Respondent issue. " 5.4 Relying upon the aforesaid decision, the learned counsel Relying upon the aforesaid decision, the learned counsel Relying upon the aforesaid decision, the learned counsel submitted that, in the facts of the present case also, recourse to submitted that, in the facts of the present case also, recourse to submitted that, in the facts of the present case also, recourse to Explanation 2 to section 263 could not be sustained. Explanation 2 to section 263 could not be sustained. Explanation 2 to section 263 could not be sustained.

5.5 The learned counsel for the assessee further submit The learned counsel for the assessee further submit The learned counsel for the assessee further submitted that the learned PCIT had not spelt out in the order passed under the learned PCIT had not spelt out in the order passed under the learned PCIT had not spelt out in the order passed under section 263 as to how the assessment order was erroneous so as how the assessment order was erroneous so as how the assessment order was erroneous so as to render it prejudicial to the interests of the Revenue. He, to render it prejudicial to the interests of the Revenue to render it prejudicial to the interests of the Revenue therefore, contended that the essential jurisdictional requirements therefore, contended that the essential jurisdictional requir therefore, contended that the essential jurisdictional requir of section 263 had not been satisfied and that the order passed of section 263 had not been satisfied and that the order passed of section 263 had not been satisfied and that the order passed thereunder was bad in law and deserved to be quashed. In support thereunder was bad in law and deserved to be quashed. In support thereunder was bad in law and deserved to be quashed. In support

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of the aforesaid proposition, he placed reliance on paragraph 5 of of the aforesaid proposition, he placed reliance on paragraph 5 of of the aforesaid proposition, he placed reliance on paragraph 5 of the judgment of the Hon'ble Supreme Court in the judgment of the Hon'ble Supreme Court in Malabar Malabar Industrial Co. Ltd. v. CIT, 243 ITR 83 (SC) 243 ITR 83 (SC), and paragraph 8 of the judgment , and paragraph 8 of the judgment CIT v. Gabriel India Ltd., of the Hon'ble Bombay High Court in of the Hon'ble Bombay High Court in CIT v. Gabriel India Ltd. 203 ITR 108 (Bom.). . 5.6 The learned counsel further submitted that, after considering The learned counsel further submitted that, after considering The learned counsel further submitted that, after considering the submissions of the assessee, the learned PCIT had merely set the submissions of the assessee, the learned PCIT had merely set the submissions of the assessee, the learned PCIT had merely set aside the assessment order dated 31.03.2024 to the file of the aside the assessment order dated 31.03.2024 to the file of the aside the assessment order dated 31.03.2024 to the file of the Assessing Officer with a direction to pass a fresh assessment order Assessing Officer with a direction to pass a fresh assessment orde Assessing Officer with a direction to pass a fresh assessment orde after conducting due enquiries and after affording the assessee an after conducting due enquiries and after affording the assessee an after conducting due enquiries and after affording the assessee an opportunity of being heard. According to the learned counsel, the opportunity of being heard. According to the learned counsel, the opportunity of being heard. According to the learned counsel, the learned PCIT could not remit the matter to the Assessing Officer for learned PCIT could not remit the matter to the Assessing Officer for learned PCIT could not remit the matter to the Assessing Officer for de de novo novo assessment assessment undertaking a without without himself himself first fir conducting the necessary enquiry and recording a finding that the conducting the necessary enquiry and recording a finding that the conducting the necessary enquiry and recording a finding that the assessment order was erroneous and prejudicial to the interests of assessment order was erroneous and prejudicial to the interests of assessment order was erroneous and prejudicial to the interests of the Revenue. He submitted that, as required under section 263 of the Revenue. He submitted that, as required under section 263 of the Revenue. He submitted that, as required under section 263 of the Act, the PCIT was required to examine the material on record the Act, the PCIT was required to examine the material the Act, the PCIT was required to examine the material and arrive at a conclusion that the order passed by the Assessing and arrive at a conclusion that the order passed by the Assessing and arrive at a conclusion that the order passed by the Assessing Officer was not sustainable in law; particularly where the alleged Officer was not sustainable in law; particularly where the alleged Officer was not sustainable in law; particularly where the alleged error was founded upon the allowability of claims made by the error was founded upon the allowability of claims made by the error was founded upon the allowability of claims made by the assessee. 5.7 The learned counsel accordingly submi The learned counsel accordingly submitted that, in the tted that, in the absence of any independent enquiry or finding by the learned PCIT absence of any independent enquiry or finding by the learned PCIT absence of any independent enquiry or finding by the learned PCIT demonstrating the error in the assessment order, the mere setting demonstrating the error in the assessment order, the mere setting demonstrating the error in the assessment order, the mere setting

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aside of the assessment to the file of the Assessing Officer for aside of the assessment to the file of the Assessing Officer for aside of the assessment to the file of the Assessing Officer for making further enquiries amounted to an e making further enquiries amounted to an exercise of jurisdiction xercise of jurisdiction not contemplated under section 263 of the Act. He, therefore, not contemplated under section 263 of the Act. He, therefore, not contemplated under section 263 of the Act. He, therefore, submitted that the order passed under section 263 deserved to be submitted that the order passed under section 263 deserved to be submitted that the order passed under section 263 deserved to be quashed. In support of his contention, he referred to paragraph 16 quashed. In support of his contention, he referred to paragraph 16 quashed. In support of his contention, he referred to paragraph 16 of the judgment of the Hon'ble Delhi H of the judgment of the Hon'ble Delhi High Court in igh Court in ITO v. D.G. Housing Projects Ltd., 343 ITR 329 (Delhi), wherein the Hon'ble Housing Projects Ltd. , wherein the Hon'ble High Court held as under: High Court held as under:

"16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to . Thus, in cases of wrong opinion or finding on merits, the CIT has to come to . Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting the conclusion and himself decide that the order is erroneo the conclusion and himself decide that the order is erroneo necessary enquiry, if required and necessary, before the order under Section 263 necessary enquiry, if required and necessary, before the order under Section 263 necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous In such cases, the order of the Assessing Officer will be erroneous In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be because the order passed is not sustainable in law and the said finding must b because the order passed is not sustainable in law and the said finding must b recorded. CIT cannot remand the matter to the Assessing Officer to decide whether recorded. CIT cannot remand the matter to the Assessing Officer to decide whether recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous." the findings recorded are erroneous." 5.8 Before us, the learned cou Before us, the learned counsel for the assessee relied on nsel for the assessee relied on Malabar Industrial Co. Limited vs. Commissioner of Income Tax Malabar Industrial Co. Limited vs. Commissioner of Income Tax Malabar Industrial Co. Limited vs. Commissioner of Income Tax [2000] 109 Taxman 66 (SC), Income Tax Officer v. D.G. Housing [2000] 109 Taxman 66 (SC), Income Tax Officer v. D.G. Housing [2000] 109 Taxman 66 (SC), Income Tax Officer v. D.G. Housing Projects Projects Projects Limited Limited Limited [2012] [2012] [2012] taxmann.com taxmann.com taxmann.com 587 587 587 (Delhi), (Delhi), (Delhi), Commissioner of Income Tax v. Gabriel India Limited [1993] 71 Commissioner of Income Tax v. Gabriel India Limited [1993] 71 Commissioner of Income Tax v. Gabriel India Limited [1993] 71 Taxman 585 (Bom), Com Taxman 585 (Bom), Commissioner of Income Tax (E) v. Impact missioner of Income Tax (E) v. Impact Foundation (India) [2026] 186 taxmann.com 134 (Bom), Foundation (India) [2026] 186 taxmann.com 134 (Bom), Foundation (India) [2026] 186 taxmann.com 134 (Bom), Commissioner of Income Tax v. Vikas Polymers [2010] 194 Commissioner of Income Tax v. Vikas Polymers [2010] 194 Commissioner of Income Tax v. Vikas Polymers [2010] 194 Taxman 57 (Delhi), Monika Gupta vs. Pr. Commissioner of Taxman 57 (Delhi), Monika Gupta vs. Pr. Commissioner of Taxman 57 (Delhi), Monika Gupta vs. Pr. Commissioner of Income Tax in ITA No.2858 and 2859/DEL/2017, Principal Income Tax in ITA No.2858 and 2859/DEL/2017, Principa Income Tax in ITA No.2858 and 2859/DEL/2017, Principa Commissioner of Income Tax v. V Commissioner of Income Tax v. V-Con Integrated Solutions P. Con Integrated Solutions P. Ltd. [2025] 173 taxmann.com 774 (SC), Ltd. [2025] 173 taxmann.com 774 (SC),

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5.9 He submitted that the aforesaid decisions supported the He submitted that the aforesaid decisions supported the He submitted that the aforesaid decisions supported the proposition that the jurisdiction under section 263 could not be proposition that the jurisdiction under section 263 could not be proposition that the jurisdiction under section 263 could not be exercised merely because the A exercised merely because the Assessing Officer was alleged to have ssessing Officer was alleged to have made inadequate enquiry, unless the twin statutory conditions of made inadequate enquiry, unless the twin statutory conditions of made inadequate enquiry, unless the twin statutory conditions of the assessment order being erroneous and prejudicial to the the assessment order being erroneous and prejudicial to the the assessment order being erroneous and prejudicial to the interests of the Revenue were independently satisfied and duly interests of the Revenue were independently satisfied and duly interests of the Revenue were independently satisfied and duly demonstrated by the revisional demonstrated by the revisional authority. 5.10 The learned Departmental Representative, on the other hand, The learned Departmental Representative, on the other hand, The learned Departmental Representative, on the other hand, relied on the order of the PCIT. relied on the order of the PCIT. 6. We have heard the rival submissions and carefully perused the We have heard the rival submissions and carefully perused the We have heard the rival submissions and carefully perused the material available on record, including the assessment order, the material available on record, including the assessment order, the material available on record, including the assessment order, the notice issued under section 263, the replies furnished by the der section 263, the replies furnished by the der section 263, the replies furnished by the assessee before the learned PCIT and, in particular, the notices assessee before the learned PCIT and, in particular, the notices assessee before the learned PCIT and, in particular, the notices issued by the Assessing Officer under section 142(1) during the issued by the Assessing Officer under section 142(1) during the issued by the Assessing Officer under section 142(1) during the course of assessment proceedings along with the corresponding course of assessment proceedings along with the corresponding course of assessment proceedings along with the corresponding replies and supporting material furnished by the assessee. ing material furnished by the assessee. ing material furnished by the assessee. 6.1 The exercise of jurisdiction under section 263 of the Act has to The exercise of jurisdiction under section 263 of the Act has to The exercise of jurisdiction under section 263 of the Act has to be examined with reference to the assessment record as it existed be examined with reference to the assessment record as it existed be examined with reference to the assessment record as it existed before the Assessing Officer. before the Assessing Officer. The question is not whether the The question is not whether the Assessing Officer could have made a more elaborate enquiry, nor Assessing Officer could have made a more elaborate enquiry, nor Assessing Officer could have made a more elaborate enquiry, nor whether the learned PCIT could have asked additional questions whether the learned PCIT could have asked additional questions whether the learned PCIT could have asked additional questions had he himself been assessing the income. The question which had he himself been assessing the income. The question which had he himself been assessing the income. The question which requires determination is whether, o requires determination is whether, on the facts of the present case, n the facts of the present case,

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the assessment order can legitimately be characterised as the assessment order can legitimately be characterised as the assessment order can legitimately be characterised as erroneous and prejudicial to the interests of the Revenue on the erroneous and prejudicial to the interests of the Revenue on the erroneous and prejudicial to the interests of the Revenue on the ground that the Assessing Officer ground that the Assessing Officer failed to make enquiry into the failed to make enquiry into the matters identified by the learned matters identified by the learned PCIT. The answer has The answer has necessarily to be found from the assessment record itself. necessarily to be found from the assessment record itself. necessarily to be found from the assessment record itself. 6.2 The legal position governing the exercise of revisional The legal position governing the exercise of revisional The legal position governing the exercise of revisional jurisdiction under section 263 is well settled. The Hon'ble Supreme jurisdiction under section 263 is well settled. The Hon'ble Supreme jurisdiction under section 263 is well settled. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT Malabar Industrial Co. Ltd. v. CIT, 243 ITR 83 (SC) ITR 83 (SC), has held that the Commissioner can exercise jurisdiction under section held that the Commissioner can exercise jurisdiction under section held that the Commissioner can exercise jurisdiction under section 263 only when the order of the Assessing Officer is both erroneous 263 only when the order of the Assessing Officer is both erroneous 263 only when the order of the Assessing Officer is both erroneous and prejudicial to the interests of the Revenue. Both conditions and prejudicial to the interests of the Revenue. Both conditions and prejudicial to the interests of the Revenue. Both conditions ourt in CIT v. Gabriel must coexist. The Hon'ble Bombay High C The Hon'ble Bombay High Court in India Ltd., 203 ITR 108 (Bom.) 203 ITR 108 (Bom.), has further held that an incorrect , has further held that an incorrect assumption of facts or an incorrect application of law would satisfy assumption of facts or an incorrect application of law would satisfy assumption of facts or an incorrect application of law would satisfy the requirement of an erroneous order; but an order cannot be the requirement of an erroneous order; but an order cannot be the requirement of an erroneous order; but an order cannot be treated as erroneous merely because treated as erroneous merely because the Commissioner does not the Commissioner does not agree with the conclusion reached by the Assessing Officer. Where agree with the conclusion reached by the Assessing Officer. Where agree with the conclusion reached by the Assessing Officer. Where the Assessing Officer has made an enquiry and taken a possible the Assessing Officer has made an enquiry and taken a possible the Assessing Officer has made an enquiry and taken a possible view, the Commissioner cannot invoke section 263 merely to view, the Commissioner cannot invoke section 263 merely to view, the Commissioner cannot invoke section 263 merely to substitute his own view. substitute his own view. We are also conscious of the distinction cious of the distinction between a case of lack of enquiry lack of enquiry and one of inadequate enquiry inadequate enquiry. Where the Assessing Officer has made no enquiry at all into an Where the Assessing Officer has made no enquiry at all into an Where the Assessing Officer has made no enquiry at all into an issue which required examination, the matter stands on a different issue which required examination, the matter stands on a different issue which required examination, the matter stands on a different footing. However, where the assessme footing. However, where the assessment record demonstrates that nt record demonstrates that

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the Assessing Officer had raised a query, called for information, the Assessing Officer had raised a query, called for information, the Assessing Officer had raised a query, called for information, received the assessee's explanation and supporting material and received the assessee's explanation and supporting material and received the assessee's explanation and supporting material and thereafter completed the assessment, the mere fact that the thereafter completed the assessment, the mere fact that the thereafter completed the assessment, the mere fact that the assessment order does not contain a de assessment order does not contain a detailed discussion on that tailed discussion on that issue cannot, by itself, lead to the conclusion that there was no issue cannot, by itself, lead to the conclusion that there was no issue cannot, by itself, lead to the conclusion that there was no enquiry. The Hon'ble Delhi High Court in The Hon'ble Delhi High Court in ITO v. D.G. Housing ITO v. D.G. Housing Projects Ltd., 343 ITR 329 (Delhi) 343 ITR 329 (Delhi), has explained this distinction , has explained this distinction and held that, where the Commissione and held that, where the Commissioner considers the enquiry to be r considers the enquiry to be inadequate, he is required to himself examine the material and inadequate, he is required to himself examine the material and inadequate, he is required to himself examine the material and arrive at a finding that the order is erroneous; he cannot merely set arrive at a finding that the order is erroneous; he cannot merely set arrive at a finding that the order is erroneous; he cannot merely set aside the assessment and remit the matter to the Assessing Officer aside the assessment and remit the matter to the Assessing Officer aside the assessment and remit the matter to the Assessing Officer to find out whether the as to find out whether the assessment order was erroneous. sessment order was erroneous. The recent decision in CIT (Exemptions) v. Impact Foundation (India) CIT (Exemptions) v. Impact Foundation (India) CIT (Exemptions) v. Impact Foundation (India), ITXA No.126 of 2024, judgment dated 04.05.2026, is also instructive. judgment dated 04.05.2026, is also instructive. judgment dated 04.05.2026, is also instructive. The Hon'ble High Court held that where the assessment record The Hon'ble High Court held that where the assessment record The Hon'ble High Court held that where the assessment record demonstrated that the AO had made enquiries and considered the demonstrated that the AO had made enquiries and considered the demonstrated that the AO had made enquiries and considered the material furnished by the assessee, the Commissioner could not material furnished by the assessee, the Commissioner could not material furnished by the assessee, the Commissioner could not invoke section 263 m invoke section 263 merely with a view to initiating a fresh or fishing erely with a view to initiating a fresh or fishing enquiry without demonstrating that the view taken by the AO was enquiry without demonstrating that the view taken by the AO was enquiry without demonstrating that the view taken by the AO was erroneous and unsustainable in law. erroneous and unsustainable in law. The same principle finds The same principle finds Con Integrated Solutions Pvt. Ltd., support from PCIT v. V PCIT v. V-Con Integrated Solutions Pvt. Ltd. (2025) 476 ITR 526 ( (2025) 476 ITR 526 (SC), where the Revenue's challenge to the , where the Revenue's challenge to the Punjab & Haryana High Court judgment was dismissed by the Punjab & Haryana High Court judgment was dismissed by the Punjab & Haryana High Court judgment was dismissed by the Hon'ble Supreme Court. The underlying decision emphasised that Hon'ble Supreme Court. The underlying decision emphasised that Hon'ble Supreme Court. The underlying decision emphasised that where the Assessing Officer had raised comprehensive queries, the where the Assessing Officer had raised comprehensive queries, the where the Assessing Officer had raised comprehensive queries, the

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assessee had furnished the assessee had furnished the requisite material and the PCIT had not requisite material and the PCIT had not identified the further enquiry which was required, exercise of identified the further enquiry which was required, exercise of identified the further enquiry which was required, exercise of section 263 was not justified. section 263 was not justified. 6.3 Keeping the aforesaid principles in view, Keeping the aforesaid principles in view, Keeping the aforesaid principles in view, we proceed to examine each of the nine issues independently each of the nine issues independently, since it is on , since it is only such an examination which would establish whether the allegation such an examination which would establish whether the allegation such an examination which would establish whether the allegation of non-enquiry made by the learned PCIT is factually sustainable. enquiry made by the learned PCIT is factually sustainable. enquiry made by the learned PCIT is factually sustainable. The mere issuance of a notice under section 142(1) would not, by The mere issuance of a notice under section 142(1) would not, by The mere issuance of a notice under section 142(1) would not, by itself, establish that an effective enquiry was undertaken. What is itself, establish that an effective enquiry was undertake itself, establish that an effective enquiry was undertake material is whether the query was germane to the issue, whether material is whether the query was germane to the issue, whether material is whether the query was germane to the issue, whether the assessee furnished a response and supporting material, and the assessee furnished a response and supporting material, and the assessee furnished a response and supporting material, and whether the assessment record demonstrates consideration of the whether the assessment record demonstrates consideration of the whether the assessment record demonstrates consideration of the matter by the Assessing Officer. We have, therefore, examined each matter by the Assessing Officer. We have, therefore, e matter by the Assessing Officer. We have, therefore, e of the issues identified by the learned PCIT with reference to the of the issues identified by the learned PCIT with reference to the of the issues identified by the learned PCIT with reference to the contemporaneous assessment record. contemporaneous assessment record.

Revenue from operations Revenue from operations — Sale of flats and project Sale of flats and project management consultancy management consultancy

6.4 The first issue identified by the learned PCIT relates to the The first issue identified by the learned PCIT relates to the The first issue identified by the learned PCIT relates to the revenue from operations disclosed in Note 20 to the audited revenue from operations disclosed in Note 20 to the audited revenue from operations disclosed in Note 20 to the audited financial statements. According to the learned PCIT, the Assessing financial statements. According to the learned PCIT, the Assessing financial statements. According to the learned PCIT, the Assessing Officer had not examined the receipts from sale of flats and project Officer had not examined the receipts from sale of flats and projec Officer had not examined the receipts from sale of flats and projec management consultancy fees management consultancy fees forming part of “Revenue from forming part of “Revenue from Operations” disclosed in Note 20 of the audited financial statements Operations” disclosed in Note 20 of the audited financial statements Operations” disclosed in Note 20 of the audited financial statements

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and had accepted the disclosed revenue without making necessary and had accepted the disclosed revenue without making necessary and had accepted the disclosed revenue without making necessary enquiry. According to the learned PCIT, no enquiry was made According to the learned PCIT, no enquiry was made According to the learned PCIT, no enquiry was made regarding the nature of services, identity of parties, amounts billed, arding the nature of services, identity of parties, amounts billed, arding the nature of services, identity of parties, amounts billed, expenditure incurred in relation thereto and the relevance of the expenditure incurred in relation thereto and the relevance of the expenditure incurred in relation thereto and the relevance of the receipts to the assessee's business. receipts to the assessee's business.

6.4.1 We have examined the assessment record. The Assessing We have examined the assessment record. The Assessing We have examined the assessment record. The Assessing Officer issued notice u Officer issued notice under section 142(1) dated 04.09.2023. Under nder section 142(1) dated 04.09.2023. Under Query No. 11, the assessee was specifically required to furnish , the assessee was specifically required to furnish , the assessee was specifically required to furnish party-wise details of contract receipts and sales exceeding Rs.1 wise details of contract receipts and sales exceeding Rs.1 wise details of contract receipts and sales exceeding Rs.1 crore, including the name, address and PAN of the concerned crore, including the name, address and PAN of the concerned crore, including the name, address and PAN of the concerned he assessee furnished a list comprising 118 parties. In response, t In response, the assessee furnished a list comprising parties, which was placed before the Assessing Officer. , which was placed before the Assessing Officer. , which was placed before the Assessing Officer. The relevant query appears at paper query appears at paper-book page 169 and the corresponding book page 169 and the corresponding party-wise details are placed at pages 176 to 180. The enquiry was wise details are placed at pages 176 to 180. The enquiry was wise details are placed at pages 176 to 180. The enquiry was not confined to a bare request for figures. not confined to a bare request for figures. Further, in the Further, in the subsequent notice under section 142(1) dated 09.02.2024, the subsequent notice under section 142(1) dated 09.02.2024, subsequent notice under section 142(1) dated 09.02.2024, Assessing Officer specifically called upon the assessee to furnish Assessing Officer specifically called upon the assessee to furnish Assessing Officer specifically called upon the assessee to furnish details concerning the details concerning the method of revenue recognition adopted in the method of revenue recognition adopted in the real-estate business, reconcile income with Form 26AS, furnish estate business, reconcile income with Form 26AS, furnish estate business, reconcile income with Form 26AS, furnish project-wise details of unsold flats and completion ce wise details of unsold flats and completion ce wise details of unsold flats and completion certificates, and furnish area-wise and flat wise and flat-wise classification of opening and closing wise classification of opening and closing stock. Further, the assessee was required to explain the different Further, the assessee was required to explain the different Further, the assessee was required to explain the different business verticals and the deployment of interest business verticals and the deployment of interest-bearing and own bearing and own funds across those verticals. It was funds across those verticals. It was also specifically required to also specifically required to

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furnish rent agreements and reconciliation of rental income, CAM furnish rent agreements and reconciliation of rental income, CAM furnish rent agreements and reconciliation of rental income, CAM charges and electricity reimbursements. charges and electricity reimbursements. Thus, the assertion Thus, the assertion of ld PCIT that the Assessing Officer proceeded to accept the revenue that the Assessing Officer proceeded to accept the revenue that the Assessing Officer proceeded to accept the revenue from operations without making from operations without making any enquiry is not borne out by the any enquiry is not borne out by the record. The fact that the assessment order may not reproduce each record. The fact that the assessment order may not reproduce each record. The fact that the assessment order may not reproduce each question and each answer does not erase the enquiry actually question and each answer does not erase the enquiry actually question and each answer does not erase the enquiry actually undertaken during the assessment proceedings. undertaken during the assessment proceedings. More importantly, More importantly, the Assessing Officer did no the Assessing Officer did not mechanically accept the assessee's t mechanically accept the assessee's treatment of every component of revenue. treatment of every component of revenue. In the assessment order, In the assessment order, the Assessing Officer specifically examined the treatment of CAM the Assessing Officer specifically examined the treatment of CAM the Assessing Officer specifically examined the treatment of CAM charges and treated the same as income from other sources instead charges and treated the same as income from other sources instead charges and treated the same as income from other sources instead of business income as of business income as claimed by the assessee, resulting in an claimed by the assessee, resulting in an Rs.15,48,52,512/-. Rs.15,48,52,512/ addition of It It demonstrates demonstrates that that the the classification of receipts forming part of revenue from operations classification of receipts forming part of revenue from operations classification of receipts forming part of revenue from operations was not accepted mechanically. The Assessing Officer examined the was not accepted mechanically. The Assessing Officer examined the was not accepted mechanically. The Assessing Officer examined the nature of the receipts and nature of the receipts and took a view different from that of the took a view different from that of the assessee in respect of CAM charges. assessee in respect of CAM charges. In these circumstances, the In these circumstances, the allegation of absence of enquiry absence of enquiry with respect to revenue from with respect to revenue from operations cannot be sustained. operations cannot be sustained. We accordingly find that the We accordingly find that the factual foundation for invoki factual foundation for invoking section 263 on this issue is not ng section 263 on this issue is not established.

Cost of construction Cost of construction — Municipal charges and provision for Municipal charges and provision for unfinished work

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6.5 The second issue relates to the increase in expenditure under The second issue relates to the increase in expenditure under The second issue relates to the increase in expenditure under the head “Cost of Construction”, particularly municipal charges of the head “Cost of Construction”, particularly municipal charges of the head “Cost of Construction”, particularly municipal charges of Rs.3,036.92 Rs.3,036.92 lakhs lakhs and and provision provision for for unfinished unfinished work work of of Rs.1,095.20 lakhs. The learned PCIT considered that the Assessing . The learned PCIT considered that the Assessing . The learned PCIT considered that the Assessing Officer had accepted the expenditure merely on the basis of the r had accepted the expenditure merely on the basis of the r had accepted the expenditure merely on the basis of the financial statements without examining the reasons for the financial statements without examining the reasons for the financial statements without examining the reasons for the substantial increase over the immediately preceding year. substantial increase over the immediately preceding year. substantial increase over the immediately preceding year.

6.5.1 We find from the assessment record that that the We find from the assessment record that that the We find from the assessment record that that the Assessing Officer had spe Assessing Officer had specifically called for information concerning cifically called for information concerning the assessee's method of revenue recognition and valuation of work- the assessee's method of revenue recognition and valuation of work the assessee's method of revenue recognition and valuation of work in-progress. In the notice under section 142(1) dated 09.02.2024, progress. In the notice under section 142(1) dated 09.02.2024, progress. In the notice under section 142(1) dated 09.02.2024, the assessee was required to explain the method of accounting and the assessee was required to explain the method of accounting and the assessee was required to explain the method of accounting and the accounting standard followed for recognition of revenue from its g standard followed for recognition of revenue from its g standard followed for recognition of revenue from its real-estate business. The assessee was also required to state estate business. The assessee was also required to state estate business. The assessee was also required to state whether the Percentage Completion Method was followed and, if so, whether the Percentage Completion Method was followed and, if so, whether the Percentage Completion Method was followed and, if so, to furnish the complete computation of work to furnish the complete computation of work-in in-progress and revenue recognition. The same notice further required project The same notice further required project-wise details of unsold flats, completion certificates and area-wise and details of unsold flats, completion certificates and area details of unsold flats, completion certificates and area flat-wise classification of opening and closing stock. The assessee wise classification of opening and closing stock. The assessee wise classification of opening and closing stock. The assessee admittedly furnished its response to the said notice vide letter dated admittedly furnished its response to the said notice vide letter admittedly furnished its response to the said notice vide letter 27.02.2024, placed at paper 27.02.2024, placed at paper-book pages 193-194. Further, the 194. Further, the chart chart chart furnished furnished furnished before before before us us us specifically specifically specifically identifies identifies identifies “Cost “Cost “Cost of of of Construction” as an issue examined pursuant to notice dated Construction” as an issue examined pursuant to notice dated Construction” as an issue examined pursuant to notice dated

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04.09.2023, Query No.12, with the corresponding material placed 04.09.2023, Query No.12, with the corresponding material placed 04.09.2023, Query No.12, with the corresponding material placed at paper-book pages 169, 209, 210 and 211. book pages 169, 209, 210 and 211.

6.5.2 In our considered view, the mere increase in an In our considered view, the mere increase in an In our considered view, the mere increase in an expenditure head in comparison with the preceding year cannot, by expenditure head in comparison with the preceding year cannot, by expenditure head in comparison with the preceding year cannot, by itself, establish that the expenditure is erroneous or inadmissible. itself, establish that the expenditure is erroneous or inadmissible. itself, establish that the expenditure is erroneous or inadmissible. Once the Assessing Officer Once the Assessing Officer has called for the underlying information has called for the underlying information relating to revenue recognition, project accounting, valuation of relating to revenue recognition, project accounting, valuation of relating to revenue recognition, project accounting, valuation of work-in-progress and cost of construction, the factual premise of progress and cost of construction, the factual premise of progress and cost of construction, the factual premise of the learned PCIT requires something more than a comparison of two the learned PCIT requires something more than a comparison of two the learned PCIT requires something more than a comparison of two figures appearing in the financial statements. ng in the financial statements. The learned PCIT has The learned PCIT has not identified any particular component of the municipal charges or not identified any particular component of the municipal charges or not identified any particular component of the municipal charges or provision for unfinished work which was inadmissible under law provision for unfinished work which was inadmissible under law provision for unfinished work which was inadmissible under law and nevertheless allowed by the Assessing Officer. Nor has any and nevertheless allowed by the Assessing Officer. Nor has any and nevertheless allowed by the Assessing Officer. Nor has any independent nt finding been nt finding finding been been recorded recorded recorded demonstrating demonstrating demonstrating that the that the that the conclusion reached by the Assessing Officer was factually or legally conclusion reached by the Assessing Officer was factually or legally conclusion reached by the Assessing Officer was factually or legally unsustainable. We, therefore, find that the allegation of complete We, therefore, find that the allegation of complete We, therefore, find that the allegation of complete absence of enquiry on this issue is not supported by the absence of enquiry on this issue is not supported by the absence of enquiry on this issue is not supported by the assessment record. rd. Accordingly, this ground of revision also Accordingly, this ground of revision also proceeds on an incorrect factual premise. proceeds on an incorrect factual premise.

Interest on delayed statutory payments Interest on delayed statutory payments

6.6 The third issue concerns interest on delayed statutory The third issue concerns interest on delayed statutory The third issue concerns interest on delayed statutory payments amounting to Rs.191.13 lakhs, which, according to the payments amounting to , which, according to the

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learned PCIT, was allowed without examining the provisions of PCIT, was allowed without examining the provisions of PCIT, was allowed without examining the provisions of section 43B of the Act. section 43B of the Act.

6.6.1 The assessment record shows that finance cost was The assessment record shows that finance cost was The assessment record shows that finance cost was specifically covered by the notice under section 142(1) dated specifically covered by the notice under section 142(1) dated specifically covered by the notice under section 142(1) dated 04.09.2023 under Query No.14(iv) Query No.14(iv). The corresponding materi . The corresponding material furnished by the assessee is identified at paper furnished by the assessee is identified at paper-book pages 169, book pages 169, 240, 241 and 246. A further specific query concerning interest on A further specific query concerning interest on A further specific query concerning interest on delayed statutory dues was raised in the notice dated 09.02.2024, delayed statutory dues was raised in the notice dated 09.02.2024, delayed statutory dues was raised in the notice dated 09.02.2024, at Query No.8, and the assessee's response is placed at page 187. at Query No.8, and the assessee's response is placed at at Query No.8, and the assessee's response is placed at

6.6.2 We further note that the Assessing Officer had made a We further note that the Assessing Officer had made a We further note that the Assessing Officer had made a substantial examination of the assessee's claim relating to finance substantial examination of the assessee's claim relating to finance substantial examination of the assessee's claim relating to finance cost and had made a disallowance of Rs.191,55,01,472/-under cost and had made a disallowance of Rs.191,55,01,472/ cost and had made a disallowance of Rs.191,55,01,472/ section 36(1)(iii) of the Act. section 36(1)(iii) of the Act. The record, therefore, does not support oes not support the proposition that the finance the proposition that the finance-cost claims were simply accepted cost claims were simply accepted without examination. without examination.

Other expenses — — Legal fees, rent, brokerage and sundry Legal fees, rent, brokerage and sundry balances written off balances written off

6.7 The learned PCIT next referred to four items under Note 26: The learned PCIT next referred to four items under Note 26: The learned PCIT next referred to four items under Note 26: (i) Rs.337.50 lakhs); (iii) legal expenses (Rs.157 lakhs Rs.157 lakhs); (ii) rent(Rs.337.50 lakhs brokerage(Rs.397.77 lakhs Rs.397.77 lakhs); and (iv) sundry balances written off sundry balances written off The learned PCIT observed that these items had (Rs.778.68 lakhs). The learned PCIT observed that these items had The learned PCIT observed that these items had

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increased substantially over the preceding year and that the increased substantially over the preceding year and that the increased substantially over the preceding year and that the Assessing Officer had not sought any explanation in respect thereof. sing Officer had not sought any explanation in respect thereof. sing Officer had not sought any explanation in respect thereof.

6.7.1 The chart furnished by the assessee before us identifies The chart furnished by the assessee before us identifies The chart furnished by the assessee before us identifies “Other Expenses” as having been examined pursuant to notice “Other Expenses” as having been examined pursuant to notice “Other Expenses” as having been examined pursuant to notice under section 142(1) dated 04.09.2023, Query No.12. The under section 142(1) dated 04.09.2023, Query No.12. The under section 142(1) dated 04.09.2023, Query No.12. The corresponding material is placed at paper corresponding material is placed at paper-book pages 169 and 247 book pages 169 and 247 to 249, with specific supporting details at pages 299 fic supporting details at pages 299-300 in respect fic supporting details at pages 299 of legal expenses and page 300 in respect of rent, and further pages of legal expenses and page 300 in respect of rent, and further pages of legal expenses and page 300 in respect of rent, and further pages 302-303 and 306 in respect of brokerage and sundry balances 303 and 306 in respect of brokerage and sundry balances 303 and 306 in respect of brokerage and sundry balances written off. These details formed part of the assessment record These details formed part of the assessment record These details formed part of the assessment record before the Assessing ssessing Officer. Officer. The The learned learned PCIT PCIT has has not not demonstrated that any particular item out of the aforesaid demonstrated that any particular item out of the aforesaid demonstrated that any particular item out of the aforesaid expenditure was fictitious, capital in nature, unrelated to the expenditure was fictitious, capital in nature, unrelated to the expenditure was fictitious, capital in nature, unrelated to the business or otherwise inadmissible under the Act. The mere fact business or otherwise inadmissible under the Act. The mere fact business or otherwise inadmissible under the Act. The mere fact that expenditure had incre that expenditure had increased over the preceding year cannot, ased over the preceding year cannot, without more, render the assessment order erroneous. without more, render the assessment order erroneous. without more, render the assessment order erroneous.

6.7.2 The The The allegation, allegation, allegation, therefore, therefore, therefore, is is is not not not consistent consistent consistent with with with the the the assessment record. It is important to It is important to emphasize that that the volume or depth of enquiry is not to be judged by the depth of enquiry is not to be judged by the number of sentences number of sentences ultimately appearing in the assessment order ultimately appearing in the assessment order. An assessment order . An assessment order is the culmination of the proceedings; the record of assessment is the culmination of the proceedings; the record of assessment is the culmination of the proceedings; the record of assessment comprises the notices issued, the replies furnished, the documents comprises the notices issued, the replies furnished, the documents comprises the notices issued, the replies furnished, the documents produced and the material considered b produced and the material considered by the Assessing Officer. y the Assessing Officer. If

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the Assessing Officer had specifically called for the relevant details the Assessing Officer had specifically called for the relevant details the Assessing Officer had specifically called for the relevant details and the assessee had furnished the same, the mere absence of a and the assessee had furnished the same, the mere absence of a and the assessee had furnished the same, the mere absence of a separate discussion of each component in the assessment order separate discussion of each component in the assessment order separate discussion of each component in the assessment order cannot establish that no enquiry cannot establish that no enquiry was undertaken. was undertaken. In these circumstances, we find that the learned PCIT has proceeded circumstances, we find that the learned PCIT has proceeded circumstances, we find that the learned PCIT has proceeded principally on the basis of the quantum of expenditure appearing in principally on the basis of the quantum of expenditure appearing in principally on the basis of the quantum of expenditure appearing in the financial statements, without demonstrating that the Assessing the financial statements, without demonstrating that the Assessing the financial statements, without demonstrating that the Assessing Officer had failed to make enquiry i Officer had failed to make enquiry into the expenditure or that the nto the expenditure or that the view taken by him was legally unsustainable. The allegation of non- view taken by him was legally unsustainable. The allegation of non view taken by him was legally unsustainable. The allegation of non enquiry is, therefore, not borne out from the record. enquiry is, therefore, not borne out from the record.

Outstanding MSME dues Outstanding MSME dues

6.8 The learned PCIT has next referred to outstanding MSME The learned PCIT has next referred to outstanding MSME The learned PCIT has next referred to outstanding MSME trade payables of Rs.361.74 lakhs and observed that their trade payables of Rs.361.74 lakhs and observed that their trade payables of Rs.361.74 lakhs and observed that their allowability had not been examined with reference to section 43B. allowability had not been examined with reference to section 43B. allowability had not been examined with reference to section 43B.

6.8.1 The assessment record, however, shows that “Trade Payables” The assessment record, however, shows that “Trade Payables” The assessment record, however, shows that “Trade Payables” was specifically covered by notice under section 142(1) dated ically covered by notice under section 142(1) dated ically covered by notice under section 142(1) dated 04.09.2023, Query No.9 Query No.9, and the corresponding material is placed , and the corresponding material is placed at paper-book pages 168, 271, 273 and 275. book pages 168, 271, 273 and 275.

There is another important aspect. The present assessment year is There is another important aspect. The present assessment year is There is another important aspect. The present assessment year is AY 2022-23. The specific clause (h) of section 43B, dealing with . The specific clause (h) of section 43B, dealing with . The specific clause (h) of section 43B, dealing with sums payable by an assessee to a micro or small enterprise beyond sums payable by an assessee to a micro or small enterprise beyond sums payable by an assessee to a micro or small enterprise beyond the period stipulated under the MSMED Act, was inserted by the the period stipulated under the MSMED Act, was inserted by the the period stipulated under the MSMED Act, was inserted by the

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Finance Act, 2023 with effect from Finance Act, 2023 with effect from 01.04.2024, and therefore , and therefore operates prospectively from AY 2024 ospectively from AY 2024-25. The learned PCIT himself The learned PCIT himself acknowledges this position in the impugned proceedings, yet acknowledges this position in the impugned proceedings, yet acknowledges this position in the impugned proceedings, yet nevertheless treats the alleged non nevertheless treats the alleged non-verification of the MSME verification of the MSME balances as a basis for revision. balances as a basis for revision. In the absence of section 43B(h) In the absence of section 43B(h) being applicable to the year under consideration, the learned PCIT ble to the year under consideration, the learned PCIT ble to the year under consideration, the learned PCIT could not premise prejudice to the Revenue merely upon non- could not premise prejudice to the Revenue merely upon non could not premise prejudice to the Revenue merely upon non application application of of that that provision. provision. The The learned learned PCIT PCIT has has not not demonstrated any other provision under which the outstanding demonstrated any other provision under which the outstanding demonstrated any other provision under which the outstanding amount of Rs.361.74 lakhs, amount of Rs.361.74 lakhs, merely by reason of being payable to merely by reason of being payable to MSMEs, was inadmissible in AY 2022 MSMEs, was inadmissible in AY 2022-23. Consequently, the 23. Consequently, the allegation of prejudice to the Revenue on the basis of section allegation of prejudice to the Revenue on the basis of section allegation of prejudice to the Revenue on the basis of section 43B(h), insofar as the assessment year under consideration is 43B(h), insofar as the assessment year under consideration is 43B(h), insofar as the assessment year under consideration is concerned, cannot be sustained. concerned, cannot be sustained.

Statutory liabilities

6.9 The learned PCIT has further referred to The learned PCIT has further referred to statutory statutory liabilities shown under Note 18, comprising TDS of Rs.1,818.94 lakhs, shown under Note 18, comprising TDS of Rs.1,818.94 lakhs, shown under Note 18, comprising TDS of Rs.1,818.94 lakhs, professional tax of Rs.1.11 lakhs, provident fund of Rs.3.77 lakhs, professional tax of Rs.1.11 lakhs, provident fund of Rs.3.77 lakhs, professional tax of Rs.1.11 lakhs, provident fund of Rs.3.77 lakhs, property tax of Rs.719.35 lakhs and G property tax of Rs.719.35 lakhs and GST of Rs.3.92 lakhs. .3.92 lakhs. The learned PCIT observed that the Assessing Officer had not verified learned PCIT observed that the Assessing Officer had not verified learned PCIT observed that the Assessing Officer had not verified the allowability of these liabilities. the allowability of these liabilities.

6.9.1 The assessee, however, specifically demonstrated during the The assessee, however, specifically demonstrated during the The assessee, however, specifically demonstrated during the assessment proceedings that:(i) the entire TDS liability had been assessment proceedings that:(i) the entire TDS liability had been assessment proceedings that:(i) the entire TDS liability had been

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paid before filing of the return and was disclosed in the tax audit paid before filing of the return and was disclosed in the tax audit paid before filing of the return and was disclosed in the tax audit report; (ii) unpaid professional tax had been disallowed in th (ii) unpaid professional tax had been disallowed in the (ii) unpaid professional tax had been disallowed in th computation of income and disclosed in the tax audit report;(iii) computation of income and disclosed in the tax audit report;(iii) computation of income and disclosed in the tax audit report;(iii) unpaid property tax had been disallowed in the computation; unpaid property tax had been disallowed in the computation; unpaid property tax had been disallowed in the computation; and(iv) GST payable had been paid in April and the position had and(iv) GST payable had been paid in April and the position had and(iv) GST payable had been paid in April and the position had been disclosed in the tax audit report. been disclosed in the tax audit report. The relevant material is The relevant material is identified in the assessee's chart at paper identified in the assessee's chart at paper-book pages 94 and 281 in book pages 94 and 281 in respect of TDS, pages 130 respect of TDS, pages 130-131 and 282 in respect of professional 131 and 282 in respect of professional tax, page 282 in respect of property tax and page 282 in respect of tax, page 282 in respect of property tax and page 282 in respect of tax, page 282 in respect of property tax and page 282 in respect of GST. Thus, this is not a case where the Assessing Officer merely GST. Thus, this is not a case where the Assessing Off GST. Thus, this is not a case where the Assessing Off accepted a balance-sheet figure without the relevant computation sheet figure without the relevant computation sheet figure without the relevant computation being placed before him. The assessee had specifically explained the being placed before him. The assessee had specifically explained the being placed before him. The assessee had specifically explained the treatment treatment treatment of of of the the the liabilities liabilities liabilities and and and the the the corresponding corresponding corresponding disallowances/payments. disallowances/payments. The learned PCIT has not identified The learned PCIT has not identified any particular liability which was actually claimed and allowed as particular liability which was actually claimed and allowed as particular liability which was actually claimed and allowed as deduction contrary to the statutory provisions. In the absence of deduction contrary to the statutory provisions. In the absence of deduction contrary to the statutory provisions. In the absence of such finding, the mere existence of outstanding statutory liabilities such finding, the mere existence of outstanding statutory liabilities such finding, the mere existence of outstanding statutory liabilities cannot establish that the assessment order was erroneous and cannot establish that the assessment order was erron cannot establish that the assessment order was erron prejudicial to the interests of the Revenue. prejudicial to the interests of the Revenue.

Provision Provision for for employee employee benefits benefits — gratuity gratuity and and leave leave encashment

6.10 The learned PCIT has next referred to provisions for gratuity The learned PCIT has next referred to provisions for gratuity The learned PCIT has next referred to provisions for gratuity and leave encashment amounting in aggregate to the amounts and leave encashment amounting in aggregate to the amounts and leave encashment amounting in aggregate to the amounts

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specified in Note 19 of the financial statements and held that the Note 19 of the financial statements and held that the Note 19 of the financial statements and held that the provisions had been accepted without examination. provisions had been accepted without examination.

6.10.1 The assessee's chart demonstrates that the treatment of The assessee's chart demonstrates that the treatment of The assessee's chart demonstrates that the treatment of unpaid gratuity and leave encashment was specifically considered unpaid gratuity and leave encashment was specifically considered unpaid gratuity and leave encashment was specifically considered in the computation of in the computation of income and that the unpaid amounts were income and that the unpaid amounts were disallowed in the return itself. The corresponding material is disallowed in the return itself. The corresponding material is disallowed in the return itself. The corresponding material is identified at paper- -book pages 109, 112, 131, 283 and 284. book pages 109, 112, 131, 283 and 284. Consequently, the very premise that the Assessing Officer allowed Consequently, the very premise that the Assessing Officer allowed Consequently, the very premise that the Assessing Officer allowed the entire provision without the entire provision without considering its tax treatment is not considering its tax treatment is not borne out by the record. borne out by the record. Thus, the relevant issue had not escaped Thus, the relevant issue had not escaped the assessment process. The learned PCIT has not identified any the assessment process. The learned PCIT has not identified any the assessment process. The learned PCIT has not identified any specific amount which was otherwise inadmissible and had specific amount which was otherwise inadmissible and had specific amount which was otherwise inadmissible and had nevertheless been allowed by th nevertheless been allowed by the Assessing Officer. In the absence e Assessing Officer. In the absence of such finding, the allegation of non of such finding, the allegation of non-enquiry cannot be sustained enquiry cannot be sustained merely because the assessment order does not contain a separate merely because the assessment order does not contain a separate merely because the assessment order does not contain a separate discussion discussion discussion concerning concerning concerning each each each component component component of of of employee employee-benefit employee provisions.

Related-party transa party transactions and section 2(22)(e)

6.11 The learned PCIT has also held that financial transactions The learned PCIT has also held that financial transactions The learned PCIT has also held that financial transactions with related parties, including receipt and payment of inter- with related parties, including receipt and payment of inter with related parties, including receipt and payment of inter corporate deposits, had not been examined from the perspective of s corporate deposits, had not been examined from the perspective of s corporate deposits, had not been examined from the perspective of s

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6.11.1 The assessment record again The assessment record again belies the allegation of belies the allegation of complete non-enquiry. enquiry. The assessee's chart identifies “Financial The assessee's chart identifies “Financial transactions with related parties” as an issue specifically covered by transactions with related parties” as an issue specifically covered by transactions with related parties” as an issue specifically covered by Query No.7 in the notice under section 142(1) dated 04.09.2023. in the notice under section 142(1) dated 04.09.2023. in the notice under section 142(1) dated 04.09.2023. The corresponding material is placed at paper The corresponding material is placed at paper-book pages 167, 285, book pages 167, 285, 287 and 289. In addition, the Assessing Officer specifically called 287 and 289. In addition, the Assessing Officer specifically called 287 and 289. In addition, the Assessing Officer specifically called for the shareholding pattern of the assessee and its subsidiary shareholding pattern of the assessee and its subsidiary shareholding pattern of the assessee and its subsidiary companies under Query No.19(iv), with the relevant materi under Query No.19(iv), with the relevant materi under Query No.19(iv), with the relevant material placed at pages 171, 292, 293 and 297. This enquiry is directly relevant to at pages 171, 292, 293 and 297. This enquiry is directly relevant to at pages 171, 292, 293 and 297. This enquiry is directly relevant to the applicability of section 2(22)(e), since the statutory provision the applicability of section 2(22)(e), since the statutory provision the applicability of section 2(22)(e), since the statutory provision requires examination of the nature of the transaction, the status of requires examination of the nature of the transaction, the status of requires examination of the nature of the transaction, the status of the lending company, accumulated profit the lending company, accumulated profits and the relevant s and the relevant shareholding/substantial shareholding/substantial-interest conditions. The learned PCIT has The learned PCIT has not identified any particular transaction which, despite the not identified any particular transaction which, despite the not identified any particular transaction which, despite the aforesaid material being before the Assessing Officer, was wrongly aforesaid material being before the Assessing Officer, was wrongly aforesaid material being before the Assessing Officer, was wrongly treated as outside the scope of section 2( treated as outside the scope of section 2(22)(e). Nor has he recorded 22)(e). Nor has he recorded a finding that the statutory conditions were, in fact, satisfied in a finding that the statutory conditions were, in fact, satisfied in a finding that the statutory conditions were, in fact, satisfied in respect of any specified transaction. respect of any specified transaction. The learned PCIT has not The learned PCIT has not identified any particular inter identified any particular inter-corporate deposit or other transaction corporate deposit or other transaction which satisfied the statut which satisfied the statutory conditions of section 2(22)(e) and ory conditions of section 2(22)(e) and which was nevertheless wrongly excluded by the Assessing Officer. which was nevertheless wrongly excluded by the Assessing Officer. which was nevertheless wrongly excluded by the Assessing Officer. In these circumstances, the allegation that the applicability of In these circumstances, the allegation that the applicability of In these circumstances, the allegation that the applicability of section 2(22)(e) was completely ignored is not supported by the section 2(22)(e) was completely ignored is not supported by the section 2(22)(e) was completely ignored is not supported by the assessment record.

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Work-in-progress

6.12 Lastly, the learned PCIT has alleged that details concerning Lastly, the learned PCIT has alleged that details concerning Lastly, the learned PCIT has alleged that details concerning work-in-progress were accepted without enquiry. progress were accepted without enquiry.

6.12.1 This allegation is contradicted by the very questionnaire This allegation is contradicted by the very questionnaire This allegation is contradicted by the very questionnaire issued by the Assessing Officer. issued by the Assessing Officer. The notice under section 142( The notice under section 142(1) dated 09.02.2024 specifically required the assessee to explain the dated 09.02.2024 specifically required the assessee to explain the dated 09.02.2024 specifically required the assessee to explain the method of accounting and accounting standard adopted for revenue method of accounting and accounting standard adopted for revenue method of accounting and accounting standard adopted for revenue recognition, state whether the Percentage Completion Method was recognition, state whether the Percentage Completion Method was recognition, state whether the Percentage Completion Method was being followed and, if so, furnish the complete calculation of being followed and, if so, furnish the complete calculati being followed and, if so, furnish the complete calculati valuation of WIP and revenue recognition. The same notice required valuation of WIP and revenue recognition. The same notice required valuation of WIP and revenue recognition. The same notice required project-wise details of unsold flats, completion certificates and area wise details of unsold flats, completion certificates and area wise details of unsold flats, completion certificates and area- wise and flat-wise classification of opening and closing stock. wise classification of opening and closing stock. wise classification of opening and closing stock. Further, the assessee's chart identifies “WIP” as an issue Further, the assessee's chart identifies “WIP” a Further, the assessee's chart identifies “WIP” a specifically covered by specifically covered by Query No.18(iii) in the notice dated in the notice dated 04.09.2023, with the relevant material placed at pages 171, 292, 04.09.2023, with the relevant material placed at pages 171, 292, 04.09.2023, with the relevant material placed at pages 171, 292, 293 and 295. The assessee thereafter furnished its reply to the 293 and 295. The assessee thereafter furnished its reply to the 293 and 295. The assessee thereafter furnished its reply to the subsequent questionnaire vide letter dated 27.02.2024. The record, subsequent questionnaire vide letter dated 27.02.2024. subsequent questionnaire vide letter dated 27.02.2024. therefore, clearly demonstrates that the valuation of work-in- therefore, clearly demonstrates that the valuation of work therefore, clearly demonstrates that the valuation of work progress and the method of revenue recognition were matters which progress and the method of revenue recognition were matters which progress and the method of revenue recognition were matters which had specifically engaged the attention of the Assessing Officer had specifically engaged the attention of the Assessing Officer had specifically engaged the attention of the Assessing Officer during the assessment proceedings. during the assessment proceedings. In these circumst In these circumstances, the allegation that WIP was accepted without enquiry is plainly not allegation that WIP was accepted without enquiry is plainly not allegation that WIP was accepted without enquiry is plainly not supported by the assessment record. supported by the assessment record.

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6.12.2 The The aforesaid aforesaid issue issue-wise wise examination examination assumes assumes significance because the learned PCIT has exercised jurisdiction significance because the learned PCIT has exercised jurisdiction significance because the learned PCIT has exercised jurisdiction under section 263 principall under section 263 principally on the footing that the Assessing y on the footing that the Assessing Officer had not made enquiry not made enquiry into the matters identified in the into the matters identified in the notice. The record, however, establishes the following: The record, however, establishes the following: The record, however, establishes the following:

Issue Assessment enquiry demonstrated on record Assessment enquiry demonstrated on record Assessment enquiry demonstrated on record Revenue from Query No.11 dated 04.09.2023; party-wise details of 118 parties; Query No.11 dated wise details of 118 parties; operations subsequent detailed questionnaire on revenue recognition subsequent detailed questionnaire on revenue recognition subsequent detailed questionnaire on revenue recognition Project management Query and supporting details furnished in response to Query and supporting details furnished in response to Query and supporting details furnished in response to consultancy subsequent questionnaire subsequent questionnaire Cost of construction Query Query No.12 dated 04.09.2023; supporting material No.12 dated 0 4.09.2023; supporting material on on municipal charges/cost of construction municipal charges/cost of construction Finance cost Query No.14(iv); subsequent specific query regarding interest Query No.14(iv); subsequent specific query regarding interest Query No.14(iv); subsequent specific query regarding interest Query No.12; supporting details relating to legal expenses, rent, Query No.12; supporting details relating to legal expenses, rent, Query No.12; supporting details relating to legal expenses, rent, Other expenses brokerage and write-offs brokerage and write MSME trade Query No.9 and corresponding supporting material Query No.9 and corresponding supporting material Query No.9 and corresponding supporting material payables Specific explanations regarding payment/disallowance of TDS, Specific explanations regarding payment/disallowance of TDS, Specific explanations regarding payment/disallowance of TDS, Statutory liabilities professional tax, property tax and GST professional tax, property tax and GST Unpaid gratuity/leave encashment disallowed Unpaid gratuity/leave encashment disallowed in computation Unpaid gratuity/leave encashment disallowed Employee benefits and disclosed in tax audit report and disclosed in tax audit report Related-party Query No.7; shareholding pattern under Query No.19(iv) Query No.7; shareholding pattern under Query No.19(iv) Query No.7; shareholding pattern under Query No.19(iv) transactions Query No.18(iii); detailed questionnaire regarding revenue Query No.18(iii); detailed questionnaire regarding revenue Query No.18(iii); detailed questionnaire regarding revenue WIP recognition, WIP and stock recognition, WIP and stock

6.12.3 The record thus does not present a case of an Assessing The record thus does not present a case of an Assessing The record thus does not present a case of an Assessing Officer who remained passive in the face of matters requiring Officer who remained passive in the face of matters requiring Officer who remained passive in the face of matters requiring

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examination. On the contrary, the assessment proceedings show examination. On the contrary, the assessment proceedings show examination. On the contrary, the assessment proceedings show repeated and specific requisitions for information, followed by repeated and specific requisitions for information, followed by repeated and specific requisitions for information, followed by submissions from the assessee. from the assessee.

The distinction between lack of enquiry and and inadequate 6.13 The distinction between enquiry cannot be lost sight of. cannot be lost sight of. In CIT v. Gabriel India Ltd. CIT v. Gabriel India Ltd., (1993) 203 ITR 108 (Bom.) (1993) 203 ITR 108 (Bom.), the Hon'ble Bombay High Court held , the Hon'ble Bombay High Court held that the Commissioner cannot invoke section 263 merely because that the Commissioner cannot invoke section 263 that the Commissioner cannot invoke section 263 he has a different view of the matter unless the order sought to be he has a different view of the matter unless the order sought to be he has a different view of the matter unless the order sought to be revised is shown to be erroneous. Likewise, in CIT v. Nirav Modi CIT v. Nirav Modi, revised is shown to be erroneous. (2017) 390 ITR 292 (Bom.) (2017) 390 ITR 292 (Bom.), the Hon'ble Bombay High Court , the Hon'ble Bombay High Court recognised that the power under section 263 is ord recognised that the power under section 263 is ordinarily attracted inarily attracted in a case of no enquiry, and that where the Assessing Officer has in a case of no enquiry, and that where the Assessing Officer has in a case of no enquiry, and that where the Assessing Officer has made an enquiry and adopted a view on the material produced made an enquiry and adopted a view on the material produced made an enquiry and adopted a view on the material produced before him, the Commissioner cannot substitute his own view before him, the Commissioner cannot substitute his own view before him, the Commissioner cannot substitute his own view merely because he would have conducted the enquiry differently. merely because he would have conducted the enquiry d merely because he would have conducted the enquiry d The recent decision of the jurisdictional High Court in CIT The recent decision of the jurisdictional High Court in The recent decision of the jurisdictional High Court in (Exemptions) v. Impact Foundation (India) (Exemptions) v. Impact Foundation (India) is particularly apposite. There, the Court observed that where the AO had apposite. There, the Court observed that where the AO had apposite. There, the Court observed that where the AO had conducted enquiries and considered the material furnished by the conducted enquiries and considered the material furnished by the conducted enquiries and considered the material furnished by the assessee, the Commissioner could not initiate a de novo or fishing essee, the Commissioner could not initiate a de novo or fishing essee, the Commissioner could not initiate a de novo or fishing enquiry merely because he considered that further verification enquiry merely because he considered that further verification enquiry merely because he considered that further verification ought to have been made. The Court emphasised that the ought to have been made. The Court emphasised that the ought to have been made. The Court emphasised that the Commissioner must establish that the view taken by the AO was Commissioner must establish that the view taken by the AO was Commissioner must establish that the view taken by the AO was erroneous and unsustainable. d unsustainable. The principle is also consistent with The principle is also consistent with

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Con Integrated Solutions Pvt. Ltd., (2025) 476 ITR PCIT v. V-Con Integrated Solutions Pvt. Ltd. (2025) 476 ITR 526 (SC), where the Revenue's challenge was dismissed by the , where the Revenue's challenge was dismissed by the , where the Revenue's challenge was dismissed by the Hon'ble Supreme Court after the High Court had found that the Hon'ble Supreme Court after the High Court had found that the Hon'ble Supreme Court after the High Court had found that the Assessing Officer had raised comprehensive queries and the r had raised comprehensive queries and the r had raised comprehensive queries and the assessee had furnished the requisite material. assessee had furnished the requisite material.

6.13.1 We are conscious that a mere issuance of a questionnaire We are conscious that a mere issuance of a questionnaire We are conscious that a mere issuance of a questionnaire cannot, in every case, immunise an assessment from revision under cannot, in every case, immunise an assessment from revision under cannot, in every case, immunise an assessment from revision under section 263. If the enquiry is whol section 263. If the enquiry is wholly illusory, superficial or ly illusory, superficial or disconnected from the issue, the Commissioner may still have disconnected from the issue, the Commissioner may still have disconnected from the issue, the Commissioner may still have jurisdiction, subject to the statutory requirements. But that is not jurisdiction, subject to the statutory requirements. But that is not jurisdiction, subject to the statutory requirements. But that is not the factual situation before us. the factual situation before us. Here, the questions raised by the Here, the questions raised by the Assessing Officer correspond su Assessing Officer correspond substantially to the very issues bstantially to the very issues subsequently characterised by the learned PCIT as having escaped subsequently characterised by the learned PCIT as having escaped subsequently characterised by the learned PCIT as having escaped enquiry.

6.14 There is another fundamental difficulty in sustaining the There is another fundamental difficulty in sustaining the There is another fundamental difficulty in sustaining the impugned order. The learned PCIT has repeatedly stated that the The learned PCIT has repeatedly stated that the The learned PCIT has repeatedly stated that the Assessing Officer did no Assessing Officer did not ask further questions or conduct further t ask further questions or conduct further verification. However, after the assessee placed before him the verification. However, after the assessee placed before him the verification. However, after the assessee placed before him the relevant notices, queries and replies, the learned PCIT did not relevant notices, queries and replies, the learned PCIT did not relevant notices, queries and replies, the learned PCIT did not undertake any independent examination of those materials and undertake any independent examination of those materials and undertake any independent examination of those materials and demonstrate that the ans demonstrate that the answers furnished by the assessee were wers furnished by the assessee were factually factually factually incorrect, incorrect, incorrect, that that that any any any particular particular particular expenditure expenditure expenditure was was was inadmissible, that any particular receipt had escaped assessment, inadmissible, that any particular receipt had escaped assessment, inadmissible, that any particular receipt had escaped assessment, or that any particular transaction attracted a statutory provision or that any particular transaction attracted a statutory provision or that any particular transaction attracted a statutory provision

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which the Assessing Officer ha which the Assessing Officer had wrongly failed to apply. d wrongly failed to apply. Instead, the learned PCIT proceeded on the general proposition that “lack of learned PCIT proceeded on the general proposition that “lack of learned PCIT proceeded on the general proposition that “lack of enquiry” makes the assessment order erroneous and directed the enquiry” makes the assessment order erroneous and directed the enquiry” makes the assessment order erroneous and directed the Assessing Officer to conduct further enquiries and pass a fresh Assessing Officer to conduct further enquiries and pass a fresh Assessing Officer to conduct further enquiries and pass a fresh assessment order. assessment order. That approach cannot substitute for the pproach cannot substitute for the statutory requirement of demonstrating the error in the order statutory requirement of demonstrating the error in the order statutory requirement of demonstrating the error in the order sought to be revised. sought to be revised. The Commissioner exercises a revisional The Commissioner exercises a revisional jurisdiction; he is not merely an administrative authority directing jurisdiction; he is not merely an administrative authority directing jurisdiction; he is not merely an administrative authority directing the Assessing Officer to unde the Assessing Officer to undertake a fresh investigation because the rtake a fresh investigation because the Commissioner would have preferred a more elaborate assessment. Commissioner would have preferred a more elaborate assessment. Commissioner would have preferred a more elaborate assessment.

6.15 The learned PCIT has ultimately set aside the assessment The learned PCIT has ultimately set aside the assessment The learned PCIT has ultimately set aside the assessment order and directed the Assessing Officer to pass a fresh assessment order and directed the Assessing Officer to pass a fresh assessment order and directed the Assessing Officer to pass a fresh assessment order after conducting order after conducting due enquiries and after providing the due enquiries and after providing the assessee an opportunity of being heard. Such a direction can validly assessee an opportunity of being heard. Such a direction can validly assessee an opportunity of being heard. Such a direction can validly follow only where the jurisdictional requirements of section 263 are follow only where the jurisdictional requirements of section 263 are follow only where the jurisdictional requirements of section 263 are first established. The power under section 263 cannot be exercised first established. The power under section 263 cannot be exercised first established. The power under section 263 cannot be exercised merely to remit a concluded assessment for a fresh fishing or roving it a concluded assessment for a fresh fishing or roving it a concluded assessment for a fresh fishing or roving The principle stated by the Hon'ble Delhi High Court in enquiry. The principle stated by the Hon'ble Delhi High Court The principle stated by the Hon'ble Delhi High Court ITO v. D.G. Housing Projects Ltd. ITO v. D.G. Housing Projects Ltd., (2012) 343 ITR 329 (Delhi) (2012) 343 ITR 329 (Delhi), is relevant in this context: where the Commissioner seeks to revise an relevant in this context: where the Commissioner seeks to revise an relevant in this context: where the Commissioner seeks to revise an order on the ground that the Assessing Officer has taken a wrong order on the ground that the Assessing Officer has taken a wrong order on the ground that the Assessing Officer has taken a wrong view on merits, the Commissioner must himself arrive at the view on merits, the Commissioner must himself arrive at the view on merits, the Commissioner must himself arrive at the requisite finding that the assessment order is erroneous and requisite finding that the assessment order is erroneous a requisite finding that the assessment order is erroneous a prejudicial to the interests of the Revenue; he cannot simply remit prejudicial to the interests of the Revenue; he cannot simply remit prejudicial to the interests of the Revenue; he cannot simply remit

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the matter to the Assessing Officer to determine whether the order the matter to the Assessing Officer to determine whether the order the matter to the Assessing Officer to determine whether the order is erroneous. The same principle has subsequently been applied in is erroneous. The same principle has subsequently been applied in is erroneous. The same principle has subsequently been applied in several decisions concerning section 263.In the present case, the several decisions concerning section 263.In the pres several decisions concerning section 263.In the pres learned PCIT has not recorded a definite finding, issue-wise, learned PCIT has not recorded a definite finding, issue learned PCIT has not recorded a definite finding, issue demonstrating how the assessment order is erroneous after demonstrating how the assessment order is erroneous after demonstrating how the assessment order is erroneous after considering the material furnished by the assessee. Instead, the considering the material furnished by the assessee. Instead, the considering the material furnished by the assessee. Instead, the matter has been remitted to the Assessing Officer for further matter has been remitted to the Assessing Officer for fur matter has been remitted to the Assessing Officer for fur enquiry. Such an exercise cannot be sustained when, as Such an exercise cannot be sustained when, as Such an exercise cannot be sustained when, as demonstrated above, the assessment record itself establishes that demonstrated above, the assessment record itself establishes that demonstrated above, the assessment record itself establishes that enquiry had already been undertaken. enquiry had already been undertaken.

6.16 On a cumulative consideration of the assessment record, we On a cumulative consideration of the assessment record, we On a cumulative consideration of the assessment record, we find that the principal premi find that the principal premise on which the learned PCIT assumed se on which the learned PCIT assumed jurisdiction under section 263 jurisdiction under section 263—that the Assessing Officer had that the Assessing Officer had failed to enquire into the matters specified in the show-cause failed to enquire into the matters specified in the show failed to enquire into the matters specified in the show notice—is not borne out by the record. is not borne out by the record. The Assessing Officer had The Assessing Officer had issued notices under section issued notices under section 142(1), raised specific queries 142(1), raised specific queries concerning revenue, revenue recognition, cost of construction, concerning revenue, revenue recognition, cost of construction, concerning revenue, revenue recognition, cost of construction, finance finance finance cost, cost, cost, expenditure, expenditure, expenditure, trade trade trade payables, payables, payables, related-party related related transactions, shareholding pattern and work transactions, shareholding pattern and work-in-progress, and the progress, and the assessee had furnished replies and supp assessee had furnished replies and supporting material in response orting material in response thereto. It is also significant that the assessment order was not an thereto. It is also significant that the assessment order was not an thereto. It is also significant that the assessment order was not an order order order accepting accepting accepting the the the return return return mechanically. mechanically. mechanically. Substantial Substantial Substantial additions/disallowances were made by the Assessing Officer, additions/disallowances were made by the Assessing Officer, additions/disallowances were made by the Assessing Officer, including a disallowance of interest exceeding including a disallowance of interest exceeding Rs.191 crores and Rs.191 crores and

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treatment of CAM charges amounting to Rs.15.48 crores differently treatment of CAM charges amounting to Rs.15.48 crores differently treatment of CAM charges amounting to Rs.15.48 crores differently from the assessee's returned position. The learned PCIT has not from the assessee's returned position. The learned PCIT has not from the assessee's returned position. The learned PCIT has not demonstrated, after considering the material placed before him, demonstrated, after considering the material placed before him, demonstrated, after considering the material placed before him, that any specific conclusion reached by the that any specific conclusion reached by the Assessing Officer is Assessing Officer is erroneous in law or on facts. Nor has he established the precise erroneous in law or on facts. Nor has he established the precise erroneous in law or on facts. Nor has he established the precise prejudice caused to the Revenue arising from such demonstrable prejudice caused to the Revenue arising from such demonstrable prejudice caused to the Revenue arising from such demonstrable error. The jurisdiction under section 263 cannot be exercised The jurisdiction under section 263 cannot be exercised The jurisdiction under section 263 cannot be exercised merely because the revisional authority cons merely because the revisional authority considers that the iders that the Assessing Officer ought to have made further enquiries. There must Assessing Officer ought to have made further enquiries. There must Assessing Officer ought to have made further enquiries. There must first be a sustainable finding that the order sought to be revised is first be a sustainable finding that the order sought to be revised is first be a sustainable finding that the order sought to be revised is erroneous and that such error is prejudicial to the interests of the erroneous and that such error is prejudicial to the interests of the erroneous and that such error is prejudicial to the interests of the Revenue. The twin requirements laid Revenue. The twin requirements laid down by the Hon'ble Supreme down by the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. Malabar Industrial Co. Ltd. are therefore not satisfied in are therefore not satisfied in the facts of the present case. the facts of the present case. The present case is consequently not The present case is consequently not one of absence of enquiry absence of enquiry, but one where the assessment record , but one where the assessment record demonstrates that enquiries demonstrates that enquiries were made and material was called for were made and material was called for and furnished. The learned PCIT, instead of demonstrating an error and furnished. The learned PCIT, instead of demonstrating an error and furnished. The learned PCIT, instead of demonstrating an error in the view adopted by the Assessing Officer, has directed a fresh in the view adopted by the Assessing Officer, has directed a fresh in the view adopted by the Assessing Officer, has directed a fresh examination of matters already subjected to enquiry. Such an examination of matters already subjected to enquiry. Such an examination of matters already subjected to enquiry. Such an exercise falls outside exercise falls outside the permissible scope of revisional jurisdiction the permissible scope of revisional jurisdiction under section 263.

6.17 In view of the foregoing discussion, we hold that the In view of the foregoing discussion, we hold that the In view of the foregoing discussion, we hold that the assessment order dated 31.03.2024 cannot be regarded as assessment order dated 31.03.2024 cannot be regarded as assessment order dated 31.03.2024 cannot be regarded as erroneous insofar as it is prejudicial to the interests of the Revenue erroneous insofar as it is prejudicial to the interests of the Revenue erroneous insofar as it is prejudicial to the interests of the Revenue

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on the grounds stated by the learned PCIT in the impugned order n the grounds stated by the learned PCIT in the impugned order n the grounds stated by the learned PCIT in the impugned order under section 263 of the Act. under section 263 of the Act. Accordingly, the order dated Accordingly, the order dated 28.03.2026 passed by the learned PCIT under section 263 is set 28.03.2026 passed by the learned PCIT under section 263 is 28.03.2026 passed by the learned PCIT under section 263 is aside. The grounds raised by the assessee are The grounds raised by the assessee are allowed allowed.

Order pronounced in the open Court on ounced in the open Court on 17/ /08/2026.

Sd/- Sd/- (PAWAN SINGH PAWAN SINGH) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 17/08/2026 M. Ranganath Vittal , Sr. P.S. M. Ranganath Vittal , Sr. P.S.

Copy of the Order forwarded to forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai