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Before: SHRI SAKTIJIT DEY & SHRI PRABHASH SHANKAR
ORDER \nPER PRABHASH SHANKAR [A.Μ.] :-\nThe present appeal filed by the assessee emanates from the\nRevision order u/s 263 of the Income-tax Act, 1961 [hereinafter referred\nto as “Act"] dated 13.03.2025 passed by the Pr. Commissioner of\nIncome-tax, (Central), PCIT, Mumbai 20 [hereinafter referred to\n'PCIT'] pertaining to assessment order passed u/s.143(3) r.w.s.144B of\nthe Income-tax Act, 1961 [hereinafter referred to as “Act"] dated\n27.12.2022 for the Assessment Year [A.Y.] 2021-22.\nPage 2\nITA No. 1952/Mum/2025\nΑ.Υ. 2021-22\nKaushal Anil Shah\n2. The grounds of appeal are as under:-\nOrder passed u/s.263 of the Act is bad-in-law & liable to be\nquashed\n1. The Ld. Pr. CIT erred in passing revision order u/s.263 of the Act\nwithout appreciating that the assessment order passed by the Ld. AO\nu/s.143(3) r.w.s.144B of the Act dated 27.12.2022 was not erroneous in\nso far as prejudicial to the interest of the revenue and hence, the order\npassed under section 263 of the Act dated 13.03.2025 is bad-in-law and\nliable to be quashed.\n2. The Ld. Pr. CIT failed to appreciate that the AO has verified and\nexamined all the issues more particularly in respect of purchases made\nfrom various parties including from M/s. Nymphea Trademart P. Ltd.\n[NTPL' in short] and disallowed purchases made from NTPL due to\ncertain discrepancies and NOT due to reason of it being bogus and thus,\nsec.69C of the Act does not apply to the facts of the case and hence, notice\nissued u/s.263 of the Act and order passed thereof is bad in law and liable\nto be quashed.\n3. The Ld. Pr. CIT further failed to appreciate that the Appellant has filed\nappeal before National Faceless Appeal Centre (NFAC) CIT(A) against\nthe disallowance of purchases made from NTPL, which is pending and\nthus, the recourse to sec.263 of the Act is bad in law and the notice issued\nu/s.263 of the Act and the order passed u/s.263 of the Act is liable to be\nquashed\n3.\nWithout prejudice to the above:\n4. The Ld. Pr. CIT erred in cancelling the assessment order and directing\nthe AO the make fresh assessment order and not limiting the fresh\nassessment order in respect of issue for which notice u/s.263 is issued\nand hence, the order passed u/s.263 of the Act dated 13.03.2025 is bad in\nlaw and needs to be quashed.\nAccording to the revision order, the ld.PCIT observed that\nthe AO disallowed purchases from one Nymphea Trademart P.\nLtd.('NTPL') amounting to Rs 1.18 cr. on the basis of enquiry and\ninvestigation in respect of purchase due to discrepancies and failure to\nPage 3\nITA No. 1952/Mum/2025\nΑ.Υ. 2021-22\nKaushal Anil Shah\nfile confirmations. After certain verification made by the AO, he has\ngiven the finding in the assessment order that the purchase of Rs.\n1,18,14,750/-from NTPL was non-genuine and unexplained. However,\naccording to the ld.PCIT, he did not properly verify documentary\nevidence such as E-way bills, transportation details, and gate entry\nstamps etc. in respect of purchases made by the assessee particularly\nNTPL. Since the assessee could not explain the expenditure claimed on\naccount of such purchases, the AO ought to have invoked the correct\nprovision of Section 69C of the Act. It is noted that the correct provision\nin case of unexplained expenditure is 69C and in the case of such\nunexplained expenditure higher tax rates@60% with an additional\nsurcharge was leviable. Further, in the case of unexplained expenditure\nbrought to tax u/s 69C, penalty proceedings u/s 271AAC had to be\ninitiated. The AO did not initiate penalty proceedings under section\n271AAC, which is mandatory where additions are made on the grounds\nof unexplained expenditure under section 69C.He also noted that it is\nnot a condition in section 263 of the Act that these proceedings cannot\nbe initiated once the assessee files the appeal before the CIT(A) as power\nof revision under section 263 of the Act is independent of the appellate\nproceedings. Accordingly, he was satisfied that the order passed by the\nAO was erroneous in so far as it is prejudicial to the interests of the\nrevenue in terms of section 263 of the Act. Therefore, he directed the AO\nto properly verify the purchases made by the assessee particularly from\nM/s. Nymphaea Trademart Pvt. Ltd (NTPL). He was also directed to\ninvoke correct provisions in respect of unexplained purchases and\ninitiation of penalty under correct provisions of the Act. The assessment\norder was cancelled and set-aside to the AO for making fresh assessment\nin the light of above observations. He shall make necessary inquiry and\nverification and give the opportunity of being heard to the assessee\nbefore passing necessary order.\nPage 4\nITA No. 1952/Mum/2025\nΑ.Υ. 2021-22\nKaushal Anil Shah\n4. Before us, it is contented by the ld.AR that the impugned\nmatter is still pending before the first appellate authority. Therefore, the\nld.PCIT has wrongly assumed jurisdiction over the matter. Moreover,\nthe applicability of the provisions of section 69C or section 37(1) of the\nAct to the impugned transaction itself is debatable. It is submitted that\nthe assessee in response to the query in this regard had produced\nPurchase register, details thereof, GST details, ledger account of\ncreditors and monthwise purchase summary, sample invoice and\nconfirmation from the party. He has drawn our attention to relevant\nsupporting details as per various pages of the Paper book submitted\nbefore us. It is contented that the AO made all possible enquiries in the\nmatter. As such, no action 263 of the Act was warranted. He placed\nreliance on coordinate bench decisions in SSG Infratech in ITA\nNo,2278/Del/2024 and Shail Gas P.Ltd in ITA No.630/Del/630/2021.It\nis further stated that show cause notice u/s 263 of the Act dealt with\nsection 69C and initiation of penalty only but the ld.PCIT had travelled\nbeyond the said notice in directing the AO to make fresh assessment and\nverify all purchases.\nPage 5\nITA No. 1952/Mum/2025\nΑ.Υ. 2021-22\nKaushal Anil Shah\n4.1 It is further submitted that the matter being pending before\nCIT(A), the ld.PCIT could not have invoked jurisdiction u/s 263 when\nthe entire issue of purchase from NTPL was pending before CIT(A).\nReliance is placed on CIT vs Vam Resorts and Hotels P.Ltd 418\nITR 723(All), Smt. Renuka Philip 409 ITR 567(All) and also\nK.Anthalakshmi in ITA No.340/Chen/2022.\n4.2 The ld.DR has placed reliance on the impugned revision order.\n5. We have carefully examined the facts of the case. We find that\nas per the assessment order, pages-4 to 7 on paras 3.
3. to 3.3.5, the AO\nhas discussed all the relevant facets of the above purchase and the\ndetails submitted. It was observed by the AO that the said concern\ninitially did not comply with notice u/s 133(6) of the Act. However, it\nfiled ledger account showing transaction worth Rs 1.18 cr. shown as\noutstanding as no payments were made to it. Moreover, it did not file\nreturn for the relevant year. Finally, he rejected the genuineness of the\nsaid purchase transaction and added the amount of Rs 1.18 cr to the\nreturned income. Thus, we notice that a detailed enquiry is evident from\nthe assessment order which is quite contrary to the observations of the\nld.PCIT that adequate enquiry was not conducted by the AO. In this\ncase, during the assessment the AO issued query memos to the assessee,\ncalling upon it to justify the genuineness of the purchase. The assessee\nresponded to the same by giving necessary evidence. On perusal, the AO\nwas not satisfied and he drew an adverse conclusion w.r.t. the said\npurchase after making due enquiries and investigations. We find that\nthe impugned transaction has been duly examined and consequently the\nAO disallowed the same. Therefore, it cannot be concluded that he failed\nto make necessary enquiries in the matter.\nPage 6\n \nΑ.Υ. 2021-22\nKaushal Anil Shah\n5.1 We further note that the AO by already making the\ndisallowanceof the said purchase had caused greater prejudice to the\nassessee in the assessment. Moreover, the said assessment is challenged\nbefore the ld.CIT(A) and the same is pending. While this is so, we are\nafraid whether the same issue could be the subject matter of revision\nproceedings u/s 263 of the Act by seeking to look into the very same\nissue from different perspective. We find that the action of the ld PCIT is\nin complete disregard to the specific provisions of clause(c) of\nExplanation to section 263(1) of the Act, which places a clear embargo\non the ld.PCIT with respect to exercise of revisionary jurisdiction on\nassessments which have been subject matter of appeal. Reliance in this\nregard is placed on the decision of the Hon'ble Calcutta High Court in\nthe case of Oil India Ltd vs CIT reported in 138 ITR 836 (Cal)\nwherein, the hon'ble Court interpreting the scope of powers of the\nCommissioner u/s 263 of the Act held that where an appeal is preferred\nbefore the Appellate Assistant Commissioner (AAC) and a subject is\nparticularly raised, the Commissioner cannot revise such an order taking\ninto account an aspect not dealt by the AAC.\nPage 7\nITA No. 1952/Mum/2025\nΑ.Υ. 2021-22\nKaushal Anil Shah\n5.
Further, we are of the considered opinion that the ld.CIT(A)\nhaving conferred with the co-terminus powers with that of the AO has\ngot ample power to even enhance the assessment if circumstances so\nwarrant. Just because the ld.CIT(A) had not exercised his enhancement\npowers in the instant case, even if it is to be done, that would not confer\nautomatic revisionary power u/s 263 of the Act for the ld.PCIT. In this\nregard, the reliance placed by the ld AR on the observations of the\nHon'ble Supreme Court in the case of Jute Corporation Ltd in 187\nITR 688 and CIT v. Kanpur Coal Syndicate [1964] 53 ITR\n225(SC), the Court inter alia held that under section 31(3)(a) in\ndisposing of such an appeal the Appellate Assistant Commissioner\nmay, in the case of an order of assessment, confirm, reduce, enhance or\nannul the assessment; under clause (b) thereof he may set aside the\nassessment and direct the Income-tax Officer to make a fresh\nassessment. The Appellate Assistant Commissioner has, therefore,\nplenary powers in disposing of an appeal. The scope of his power is co-\nterminus with that of the Income-tax Officer. He can do what the\nIncome-tax Officer can do and also direct him to do what he has failed\nto do......."These observations\nare squarely applicable to the\ninterpretation of section 251(1)(a). Even otherwise, an appellate\nauthority while hearing appeal against the order of a subordinate\nauthority has all the powers which the original authority may have in\ndeciding the question before it subject to the restrictions or limitations,\nif any, prescribed by the statutory provisions. The appellate authority is\nvvvested with all the plenary powers which the subordinate authority may\nhave in the matter.\nPage 8\n \nΑ.Υ. 2021-22\nKaushal Anil Shah\n5.3 Accordingly, we hold that the issue of disallowance of purchase\nis already the subject matter of appellate proceedings before the\nld.CIT(A) and hence the same cannot be the subject matter of re-\nverification and re-adjudication from different perspective by the\nld.PCIT under revisionary jurisdiction u/s 263 of the Act. Hence, the\naction of the ld.PCIT in invoking revisionary jurisdiction u/s 263 of the\nAct deserves to be quashed on this count also.\n5.4 Moreover, an inquiry made by the AO, considered inadequate\nby the ld.PCIT, cannot make the order of the AO erroneous. It is his\nprerogative to make inquiry to the extent he feels proper. The ld.PCIT by\ninvoking revisionary powers under section 263 of the Act cannot impose\nhis own understanding of the extent of inquiry. There are plethora of\njudgments by various High Courts in this regard. The hon'ble Delhi\nHigh Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167\n(Del.), made a distinction between 'lack of inquiry' and 'inadequate\ninquiry'. The hon'ble court held that where the AO has made inquiry\nprior to the completion of assessment, the same cannot be set aside u/s\n263 of the Act on the ground of inadequate inquiry. It was observed that\none has to keep in mind the distinction between \"lack of inquiry\" and\n\"inadequate inquiry\". If there was any inquiry, even inadequate, that\nwould not by itself, give occasion to the Commissioner to pass orders\nunder section 263 of the Act, merely because he has different opinion in\nthe matter. It is only in cases of \"lack of inquiry\", that such a course of\naction would be open. The hon'ble Bombay High Court in case of\nGabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law\non this aspect in length in the following manner:\nPage 9\nITA No. 1952/Mum/2025\nΑ.Υ. 2021-22\nKaushal Anil Shah\n\"The consideration of the Commissioner as to whether an order is erroneous\nin so far as it is prejudicial to the interests of the Revenue, must be based on\nmaterials on the record of the proceedings called for by him. If there are no\nmaterials on record on the basis of which it can be said that the\nCommissioner acting in a reasonable manner could have come to such a\nconclusion, the very initiation of proceedings by him will be illegal and\nwithout jurisdiction. The Commissioner cannot initiate proceedings with a\nview to starting fishing and roving enquiries in matters or orders which are\nalready concluded. Such action will be against the well-accepted policy of\nlaw that there must be a point of finality in all legal proceedings, that stale\nissues should not be reactivated beyond a particular stage and that lapse of\ntime must induce repose in and set at rest judicial and quasi-judicial\ncontroversies as it must in other spheres of human activity.\"\n5.5 The hon'ble Supreme Court in the another case of Principal\nCommissioner of Income-tax-2, Meerut v. Canara Bank\nSecurities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the\nRevenue's SLP holding that 263 proceedings are invalid when AO had\nmade enquiries and taken a plausible view in law,\n5.6 Moreover, where two views are possible and the AO has taken\none view with which the PCIT does not agree, it cannot be treated as an\nerroneous order causing prejudice to the interests of the Revenue unless\nthe view taken by the AO is unsustainable in law, or the AO has\ncompletely omitted to make any enquiry altogether or the order\ndemonstrates non-application of mind.\nPage 10\nITA No. 1952/Mum/2025\nΑ.Υ. 2021-22\nKaushal Anil Shah\n5.7 In view of the aforesaid findings, on the facts and\ncircumstances of the case, we are of the considered opinion that in the\ninstant case, ld PCIT erred in invoking revisionary jurisdiction u/s\n263 of the Act on the ground of 'lack of enquiry' when adequate\nenquiries were already made by the ld.AO in the assessment\nproceedings. Moreover, he took one of the plausible views in disallowing\nthe impugned purchase rather than applying the provisions of section\n69C of the AO treating it to be unexplained expenditure. It goes without\nsaying that on the facts and the circumstances of the case, he did not\nconsider appropriate to initiate penalty proceedings. The ld.PCIT\ntherefore, cannot direct him to take a different course of action than\nthat adopted by the AO. Besides, The issue in hand is still pending for\nadjudication before the first appellate authority who himself is\nadequately empowered to take a different view of the matter. In view of\nthe above, we set aside the order of the Ld. PCIT quash the same\nallowing the grounds of appeal.\nPage 11\nITA No. 1952/Mum/2025\nΑ.Υ. 2021-22\nKaushal Anil Shah\n6. In the result, the appeal of the assessee is allowed.\nOrder pronounced in the open court on 04.08.2025.\nSd/-\nSAKTIJIT DEY\n(उपाध्यक्ष / VICE PRESIDENT)\nPlace: मुंबई/Mumbai\nदिनांक / Date 04.08.2025\nLubhna Shaikh / Steno\nSd/-\nPRABHASH SHANKAR\n(लेखाकार सदस्य/ACCOUNTANT MEMBER)\nआदेश की प्रतिलिपि अग्रेषित/