RANJEET BALESHWAR SINGH,MUMBAI vs. DCIT CIRCLE 27(3), MUMBAI

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ITA 7821/MUM/2025Status: DisposedITAT Mumbai13 August 2026AY 2022-2310 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the PCIT erred in invoking revisional jurisdiction under Section 263. The AO had examined the issue and adopted a plausible view, and the assessment order could not be revised merely because the PCIT had a different opinion. Furthermore, the assessee was not properly confronted with the invocation of Explanation 2 to Section 263.

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 3,56,21,397/- on account of alleged bogus purchases. The Principal Commissioner of Income Tax (PCIT) invoked revisional powers under Section 263, holding the AO's order erroneous as it should have been treated as unexplained expenditure under Section 69C and taxed under Section 115BBE.

What were the issues?

Whether the PCIT was justified in invoking Section 263 when the AO had already examined the issue and taken a plausible view, and whether the assessee was properly given an opportunity to be heard regarding the invocation of Explanation 2 to Section 263.

Which sections of the Income-tax Act were involved?

Section 263,Section 69C,Section 115BBE,Section 133(6),Section 143(3),Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI ANIKESH BANERJEE

For Respondent: Shri Sandeep Lakra (CIT DR)

Heard together (2 matters)

ITA 7821/MUM/2026
ITA 7821/MUM/2025

Read from the judgment's own cause title. This page is filed under one of them.

PER SHRI ANIKESH BANERJEE, JUDICIAL MEMBER: The instant appeal of the assessee filed against the order of the Ld. Principal Commissioner of Income Tax, Mumbai - 27 [for brevity “Ld. PCIT”], order passed under Section 263 of the Income Tax Act, 1961 (for brevity ‘the Act’) for Assessment Year 2022-23, date of order 24.11.2025. The impugned

ITA 7821/MUM/2026 RANJEET BALESHWAR SINGH order emanated from the order of the Assessment Unit, Income Tax Department (for brevity ‘Ld. AO’), order passed under Section 143(3) r.w.s 144B of the Act, date of order 22.03.2024.

2.

The brief facts of the case are that the assessee filed its return of income under section 139(1) of the Act, declaring a total income of Rs.3,04,84,530/-. The assessee’s case was selected for scrutiny under CASS for verification of business purchases made during F.Y. 2021-22. It was observed that the assessee had made substantial purchases from certain suppliers who had either filed non-business returns of income or disclosed substantially lower turnover in their returns of income as compared to the turnover reflected in their GSTR-1 returns. During the course of assessment proceedings, the Ld. AO issued a notice under section 133(6) of the Act to M/s. MSC Agency India Pvt. Ltd. (“MSC”). In response thereto, MSC furnished a confirmation of account in respect of the transactions with the assessee. Upon verification of the said confirmation, the Ld. AO observed that three bills aggregating to Rs.2,01,37,086/- were not reflected in the ledger account furnished by MSC. Further, the opening balance of Rs.1,54,84,311/- appearing in the books of account of the assessee was also not reflected in the account furnished by MSC. Considering these discrepancies, the Ld. AO made an addition aggregating to Rs.3,56,21,397/- on account of alleged bogus purchases under the head “Profits and Gains of Business or Profession”. Subsequently, the Ld. PCIT, in exercise of revisional jurisdiction under section 263 of the Act, issued a show-cause notice proposing to treat the impugned assessment order as erroneous insofar as it was prejudicial to the interests of the Revenue. The Ld. PCIT observed that the Ld. AO had treated the entire amount, comprising the alleged bogus purchases as well as the difference in 2

ITA 7821/MUM/2026 RANJEET BALESHWAR SINGH the opening balance, as business income. According to the Ld. PCIT, the aforesaid addition was required to be considered under section 69C read with section 115BBE of the Act. Accordingly, invoking the provisions of section 263 of the Act, the Ld. PCIT held the assessment order to be erroneous insofar as it was prejudicial to the interests of the revenue and set aside the same. Being aggrieved by the revisional order, the assessee has preferred the present appeal before us.

3.

The Ld. AR argued and contended that the Ld. PCIT erred in assuming revisional jurisdiction under section 263 of the Act and in treating the impugned assessment order as erroneous insofar as it was prejudicial to the interests of the Revenue. The Ld. AR submitted that the Ld. AO had already added the entire amount representing the alleged purchases as well as the difference in the opening balance to the total income of the assessee. Therefore, according to the Ld. AR, the conditions necessary for invoking jurisdiction under section 263 of the Act were not satisfied. The Ld. AR also filed written submissions in support of his arguments. The relevant portion of the assessee’s written submissions, appearing at pages 3 to 6, is reproduced below: “B. SUBMISSIONS :- 1. Tax@ 60% can be levied u/s. 115BBE only when the total income of the Assessee includes any income u/s. 68, 69, 69A, 69B, 69C & 69D of I. T. Act, 1961. 2. As can be seen from the assessment order dated 22.3.2024, the addition of Rs. 3,56,21,397 was made on account of bogus purchases under the head 'Profit and gains of business or profession'. 3. The amount of Rs. 2,01,35,086 was on account of 3 purchase bills booked by the Appellant but not reflected in the books of the Seller and amount of Rs. 1,54,84,311

ITA 7821/MUM/2026 RANJEET BALESHWAR SINGH was on account of difference in the opening balance of the Appellant and the Purchaser and added u/s. 41(1) of I. T. Act, 1961 as ceased liability. 4. S. 41(1)(a) clearly states that amount in respect of remission or cessation shall be deemed to be profits and gains of business or profession and hence, taxable u/s. 28 of I. T.Act, 1961. 5. As for bogus purchases, being related to business of the assessee, only profit margin in respect thereof (restricted to 12.5%) is disallowed and added to the income under the head Profit and gains of business or profession'. This has been so held in - (a) PCIT Vs. Mohammed Hazi Adam & Co. - ITA No. 1004 of 2016 decided on 11.2.2019. (b) PCIT Vs. Paramshakti Distributors Pvt. Ltd. - ITA No. 413 of 2017 decided on 15.7.2019. c) PCIT Vs. S. V. Jiwani-2022) 449 ITR 583 (Bom) (d) PCIT Vs. Batliboi Environmental Engineering Ltd. - 2022] 446 ITR 238 (Bom) (e) Kimaya Impex Pvt. Ltd. Vs. ITO 2022] 193 ITD 710 (Mum-Tri) 6. From the above, it can be concluded that the addition of Rs. 3,56,21,397 was rightly made by the AO under the head "Profit and gains of business or profession' and not under S. 69C. 7. And addition of Rs. 3,56,21,397 having been made u/s. 28 as 'Profit and gains of business or profession', question of applying S. 115BBE does not arise at all as held in - (a) Abdul Hamid vs. ITO-2020]183 ITD 711 (ITAT-Guwahati) (b) Bajaj Sons Ltd. vs DCITITA No. 1127/CHD/2019 dated 24.5.2021 (ITAT- Chandigarh) [P.7-121 (c) Hari Narain Gattani vs. DCIT-2021] 186 ITD 434 (ITAT -Jaipur) (d) ACIT Vs. Sudesh Kumar Gupta 2020] 184 ITD 651(ITAT -Jaipur) e) ACIT Vs. Rahil Agencies ITA No. 4413/MUM/2014 dated 23.11.2016 (ITAT - MUM) [P. 13-22] 8. And hence, the appeal filed by the Appellant deserves to be allowed in toto by setting aside the order dated 24.11.2025 passed u/s. 263 of I. T. Act, 1961 by the PCIT by holding that S. 115BBE could not have been invoked at all in respect of addition of Rs. 3,56,21,397 made under the head 'Profit and gains of business or profession'.”

ITA 7821/MUM/2026 RANJEET BALESHWAR SINGH

4.

The Ld. AR further contended that the Ld. AO had already made the addition of the bogus purchase. But the Ld. CIT(A) had exercised the revisional jurisdiction and made the assessment order as erroneous and unjustified. When the Ld. AO has taken a plausible view could not be considered as erroneous or prejudicial to the interest of the revenue as the Ld. PCIT has taken another view. The Ld. AR respectfully relied on the order of Hon'ble Supreme Court in the case of PCIT V. Shreeji Prints Pvt. Ltd. reported in (2021) 282 Taxman 464 (SC). The identical issue was duly considered by the Hon’ble Bombay High Court in the case of CIT(E) V. Impact Foundation (India) reported in (2026) 489 ITR 20 (Bom). The relevant observation of the Hon'ble Court in para no. 13 is reproduced as below:

“13. 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 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 if the show-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 assessee was not confronted with the aforesaid Explanation, hence, such an order, without confronting the respondent-assessee with the invocation of Explanation 2 to 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 issue.”

5.

The Ld. DR argued and contended that the Ld. AO had made the entire additions under the head “Profits and Gains from business or profession”. The same issue was duly considered in different benches and High Court and accordingly the addition was reduced to 12.5% of the bogus purchase. So, for protection of revenue the Ld. PCIT had exercised it jurisdiction and treated the impugned assessment order as erroneous and prejudicial to the interest of the 5

ITA 7821/MUM/2026 RANJEET BALESHWAR SINGH revenue. The Ld. DR stands in favour of the orders of Ld. PCIT. The Ld. DR invited our attention in impugned revisional order. The relevant paragraphs of the said order are reproduced as below:

“9.2.2 Thus, from the above, it is crystal clear that the assessee is himself accepting the 3 purchase bills of Rs.2,01,24,724/- along with opening balance of Rs.1,54,84,311/-as bogus and requesting the Ld. CIT(A) for restricting the same to 12.5% of the total bogus purchases based on judicial pronouncements.

9.3 Therefore, it is quite obvious that the assessment order passed by Assessing Officer suffered from serious errors and resulted in prejudice to revenue; hence, assumption of jurisdiction u/s 263 of the Act in the case under consideration is justified.

10.

As discussed in detail at foregoing paras 6 to 9, despite establishing the expenditure in respect of purchases/services as bogus and treating the same as unexplained expenditure, the Assessing Officer had not taxed the said bogus expenditure as per the provisions of section 69C r.w.s 115BBE of the Act. Therefore, assessee's contention that bogus purchases do not fall under section 69C is not tenable.

11 It is an established law that an assessment passed by the Assessing Officer is expected to be made after making necessary inquiries and verifications to find out the correct course of action, including the correct assessable income of the assessee, and not take the facts placed by the assessee on their face value. In the present case, Assessing Officer failed to properly examine the issues discussed above and passed the order without proper consideration of law and due application of mind. Consequently, the assessment order passed by him is erroneous and prejudicial to the interests of revenue. The case of assessee is also clearly covered under clause (a) of Explanation 2 of section 263(1) of IT Act, 1961. For the sake of clarity, the same is reproduced herein below:

ITA 7821/MUM/2026 RANJEET BALESHWAR SINGH "263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

Explanation 1-.........................

Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,-

(a) the order is passed without making inquiries or verification which should have been made;

12.

Accordingly, after careful examination of the facts placed on record and the legal position discussed as above, the contentions raised by the assessee through submissions filed during the course of revision proceedings, are hereby disposed as devoid of any merit and unacceptable for the following reasons:

1.

In the case under consideration, it is abundantly clear that the Assessing Officer had failed to properly inquire / verify / examine the issue which has rendered the assessment order erroneous in so far as it is prejudicial to the interests of the revenue. The Assessing Officer, despite his categorical finding that the assessee had booked bogus expenditure of Rs.3,56,21,397/- on account of purchase / services, failed to make such addition u/s 69C of the Act.

2 The Assessing Officer has also failed to invoke the provisions of section 115BBE of the Act and levied tax @30% whereas tax should have been levied

ITA 7821/MUM/2026 RANJEET BALESHWAR SINGH as per provisions of clause (i) of sub section (1) to section 115BBE of the I.T Act @60% instead of 30%.

3.

In result, the Assessing Officer failed to tax the bogus expenditure of Rs.3,56,21,397/-on account of purchase / services by applying the provisions of section 69C r.w.s 115BBE of the Act which resulted in under assessment.”

6.

We have heard the rival submissions and perused the material available on record. The limited issue before us is whether the Ld. PCIT was justified in invoking the revisional jurisdiction under section 263 of the Act on the ground that the Ld. AO, while making the addition of Rs.3,56,21,397/- under the head “Profits and Gains of Business or Profession”, ought to have treated the same as unexplained expenditure under section 69C and consequently applied the provisions of section 115BBE of the Act. It is undisputed that the Ld. AO had examined the purchases during the assessment proceedings, issued notice under section 133(6) to MSC and, after noticing discrepancies in the confirmation furnished by the said party, made an addition of Rs.3,56,21,397/-. Thus, this is not a case where the issue had escaped the attention of the Ld. AO or where no inquiry whatsoever had been conducted.

7.

The principal objection of the Ld. PCIT is not that the Ld. AO failed to bring the disputed amount to tax, but that the addition ought to have been made under section 69C r.w.s. 115BBE instead of being assessed under the head “Profits and Gains of Business or Profession”. The revisional order itself records that the Ld. AO had made the addition but had failed to invoke sections 69C r.w.s. 115BBE. The Ld. PCIT, therefore, sought to substitute the statutory provision and the consequential rate of tax applied by the Ld. AO.

ITA 7821/MUM/2026 RANJEET BALESHWAR SINGH

8.

In this regard, we respectfully follow the ratio laid down in Shreeji Prints Pvt. Ltd. (supra), as relied upon by the assessee, on the scope of revisional jurisdiction under section 263 of the Act. Where the Ld. AO has examined the issue and adopted a plausible view, the assessment order cannot be subjected to revision merely because the Ld. PCIT entertains a different view on the manner in which the income is required to be assessed. The revisional jurisdiction cannot be invoked merely for substitution of the view of the Ld. AO by another possible view.

9.

We further find that the assessee has relied upon the judgment of the Hon’ble Bombay High Court in Impact Foundation (India) (supra). The Hon’ble Jurisdictional High Court has held, inter alia, that where Explanation 2 to section 263 is sought to be invoked, the assessee is required to be confronted with such invocation in the show-cause notice, and invocation thereof without such opportunity is not sustainable in law. In the present case, the revisional order specifically invokes clause (a) of Explanation 2 to section 263(1) on the ground of alleged failure on the part of the Ld. AO to make proper inquiry or verification. The ratio of the aforesaid judgment, therefore, squarely applies to the extent that Explanation 2 was not put to the assessee in the show-cause notice.

10.

Considering the facts in their entirety and respectfully following the ratio laid down in Shreeji Prints Pvt. Ltd. (supra) and Impact Foundation (India) (supra), we find that the essential conditions for assumption of revisional jurisdiction under section 263 of the Act are not satisfied in the present case. Accordingly, the impugned revisional order passed by the Ld.

ITA 7821/MUM/2026 RANJEET BALESHWAR SINGH PCIT under section 263 of the Act is set aside and the grounds raised by the assessee are allowed. 11. In the result, the appeal of the assessee bearing ITA No.7821/Mum/2025 is allowed.

Order pronounced in the open court on 13th day of August 2026 Sd/- Sd/-

(OM PRAKASH KANT) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 13/08/2026 Soumili, PS

Copy of the Order forwarded to: अपीलाथ�/The Appellant , 1. �ितवादी/ The Respondent. 2. आयकरआयु� CIT 3. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, 4. Mumbai गाड�फाइल/Guard file. 5.

BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI

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