RADIANT TEXTILES PRIVATE LIMITED, SAMANA,PATIALA vs. THE PCIT, PATIALA, PATIALA

ITA 769/CHANDI/2026Status: DisposedITAT Chandigarh01 October 2026AY 2022-202316 pages
AI SummaryAllowed

What were the facts?

The assessee, M/s Radiant Textiles Private Limited, is challenging an order passed by the Principal Commissioner of Income Tax (Pr. CIT) invoking revisionary jurisdiction under Section 263 of the Income Tax Act for Assessment Year 2022-23. The Pr. CIT proposed to revise an assessment order dated March 16, 2024, passed by the Assessing Officer (AO) under Section 143(3) read with Section 144B, which had accepted the assessee's returned income of Rs. 35.70 Crores. The revision was initiated based on an audit objection concerning an insurance receivable of Rs. 10.10 Crores, reflected as 'other non-current assets' and subsequently written off as administrative expenses. The Pr. CIT opined that this write-off pertained to capital assets and constituted a capital loss, not deductible as revenue expenditure under Section 37(1). The assessee had provided explanations and documents during the original assessment, which the AO had accepted.

What did the Tribunal hold?

The Tribunal held that the Pr. CIT erred in invoking revisionary jurisdiction under Section 263. The Tribunal found that the assessment proceedings were conducted under complete scrutiny, with the AO issuing specific notices and calling for documentary evidence regarding the insurance claim write-off. The assessee furnished explanations and supporting documents, which the AO, after due examination, accepted. The Tribunal concluded that this was a case of inquiry followed by acceptance, not a complete lack of inquiry. The Pr. CIT essentially substituted his own view for that of the AO, which is not permissible under Section 263. The Tribunal also noted that the revision appeared to be triggered by an audit objection without independent demonstration of error by the Pr. CIT. Furthermore, the Tribunal found that there was ultimately no loss to the revenue. The reliance on CIT v. Paville Projects Pvt. Ltd. was distinguished, as in the present case, the AO had examined the issue, unlike situations where a claim is accepted without examination. The Tribunal also held that Explanation-2 to Section 263 was not attracted as the foundational fact of a complete absence of inquiry was not established. Consequently, the impugned revisionary order was quashed, and the original assessment order was restored. The Tribunal expressly left undecided the merits of whether the loss was capital or revenue in nature, focusing solely on the validity of the Section 263 invocation.

What were the issues?

1. Whether the Pr. CIT erred in invoking revisionary jurisdiction under Section 263 of the Income Tax Act, 1961, when the Assessing Officer (AO) had made a plausible assessment based on the material and explanations provided by the assessee? 2. Whether the write-off of insurance receivable, arising from damage to building and plant & machinery, constitutes a capital loss or a revenue loss deductible under Section 37(1)? Assessee's Contentions: The assessee argued that the AO had applied due application of mind, conducted necessary inquiries, and accepted the claim based on sufficient explanations and documents furnished during the regular assessment. The revision was unjustified and possibly triggered by audit objections without independent application of mind. The assessee also contended that Explanation-2 to Section 263 was not invoked in the show-cause notice, rendering the revision unsustainable. Revenue's Contentions: The revenue, through the Ld. CIT-DR, supported the Pr. CIT's order, contending that the revision was proposed with due application of mind and was sustainable in law. The revenue referred to the decision of the Hon'ble Apex Court in CIT v. Paville Projects Pvt. Ltd. (293 Taxman 38). The revenue argued that the AO did not critically examine whether the write-off was capital or revenue in nature, constituting a non-application of mind and making the assessment order erroneous and prejudicial to the interests of revenue. Explanation-2 to Section 263 was held applicable.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 144B,Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH

Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM & HON’BLE SHRI RAJESH DAMODARLAL SHARMA, JM

MANOJ KUMAR AGGARWAL (Accountant Member)

1.

By way of this appeal, the assessee assails invocation of revisionary juri iction u/s 263 by Ld. Pr. Commissioner of Income Tax, Patiala (Pr. CIT) for the Assessment Year (AY) 2022-23 vide impugned order dated 23-03-2026 proposing revision of an assessment as framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s. 144B of the Act

on 16-03-2024 accepting returned income

The order continues below.

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