KAUSHAL ANIL SHAH,MUMBAI vs. PR. CIT-20, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL“E” BENCH,
MUMBAI
BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT
&
SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER
Shri Kaushal Anil Shah,
106, D Square, 1st Floor,
Opp.
CNMS
School,
Dadabhai
Rd.,
Ville
Parle(W), Mumbai–400056,
Maharashtra v/s.
बनाम
Pr.CIT-20, Assistant Commissioner of Income Tax, Circle–24(1), Room
No.
418,
4th
Floor,
Piramal
Chamber, Lal Baug, Parel, Mumbai
– 400012, Maharashtra
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AADPS6780J
Appellant/अपीलार्थी
..
Respondent/प्रतिवादी

Appellant by :
Shri Reepal G. Trashawala,AR
Respondent by :
Shri Ritesh Misra,(CIT-DR)

Date of Hearing
16.07.2025
Date of Pronouncement
04.08.2025

आदेश / O R D E R

PER PRABHASH SHANKAR [A.M.] :-

The present appeal filed by the assessee emanates from the Revision order u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 13.03.2025 passed by the Pr. Commissioner of Income-tax, (Central), PCIT, Mumbai - 20 [hereinafter referred to ‘PCIT’] pertaining to assessment order passed u/s. 143(3) r.w.s. 144B of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated
27.12.2022 for the Assessment Year [A.Y.] 2021-22. P a g e | 2
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Kaushal Anil Shah

Without prejudice to the above:

Kaushal Anil Shah file confirmations. After certain verification made by the AO, he has given the finding in the assessment order that the purchase of Rs.
1,18,14,750/-from NTPL was non-genuine and unexplained. However, according to the ld.PCIT, he did not properly verify documentary evidence such as E-way bills, transportation details, and gate entry stamps etc. in respect of purchases made by the assessee particularly
NTPL. Since the assessee could not explain the expenditure claimed on account of such purchases, the AO ought to have invoked the correct provision of Section 69C of the Act. It is noted that the correct provision in case of unexplained expenditure is 69C and in the case of such unexplained expenditure higher tax rates@60% with an additional surcharge was leviable. Further, in the case of unexplained expenditure brought to tax u/s 69C, penalty proceedings u/s 271AAC had to be initiated. The AO did not initiate penalty proceedings under section 271AAC, which is mandatory where additions are made on the grounds of unexplained expenditure under section 69C.He also noted that it is not a condition in section 263 of the Act that these proceedings cannot be initiated once the assessee files the appeal before the CIT(A) as power of revision under section 263 of the Act is independent of the appellate proceedings. Accordingly, he was satisfied that the order passed by the AO was erroneous in so far as it is prejudicial to the interests of the P a g e | 4
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Kaushal Anil Shah revenue in terms of section 263 of the Act. Therefore, he directed the AO to properly verify the purchases made by the assessee particularly from M/s. Nymphaea Trademart Pvt. Ltd (NTPL). He was also directed to invoke correct provisions in respect of unexplained purchases and initiation of penalty under correct provisions of the Act. The assessment order was cancelled and set-aside to the AO for making fresh assessment in the light of above observations. He shall make necessary inquiry and verification and give the opportunity of being heard to the assessee before passing necessary order.
4. Before us, it is contented by the ld.AR that the impugned matter is still pending before the first appellate authority. Therefore, the ld.PCIT has wrongly assumed juri iction over the matter. Moreover, the applicability of the provisions of section 69C or section 37(1) of the Act to the impugned transaction itself is debatable. It is submitted that the assessee in response to the query in this regard had produced
Purchase register, details thereof, GST details, ledger account of creditors and monthwise purchase summary, sample invoice and confirmation from the party. He has drawn our attention to relevant supporting details as per various pages of the Paper book submitted before us. It is contented that the AO made all possible enquiries in the P a g e | 5
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Kaushal Anil Shah matter. As such, no action 263 of the Act was warranted. He placed reliance on coordinate bench decisions in SSG Infratech in ITA
No,2278/Del/2024 and Shail Gas P.Ltd in ITA No.630/Del/630/2021.It is further stated that show cause notice u/s 263 of the Act dealt with section 69C and initiation of penalty only but the ld.PCIT had travelled beyond the said notice in directing the AO to make fresh assessment and verify all purchases.

Kaushal Anil Shah outstanding as no payments were made to it. Moreover, it did not file return for the relevant year. Finally, he rejected the genuineness of the said purchase transaction and added the amount of Rs 1.18 cr to the returned income. Thus, we notice that a detailed enquiry is evident from the assessment order which is quite contrary to the observations of the ld.PCIT that adequate enquiry was not conducted by the AO. In this case, during the assessment the AO issued query memos to the assessee, calling upon it to justify the genuineness of the purchase. The assessee responded to the same by giving necessary evidence. On perusal, the AO was not satisfied and he drew an adverse conclusion w.r.t. the said purchase after making due enquiries and investigations. We find that the impugned transaction has been duly examined and consequently the AO disallowed the same. Therefore, it cannot be concluded that he failed to make necessary enquiries in the matter.
5.1 We further note that the AO by already making the disallowanceof the said purchase had caused greater prejudice to the assessee in the assessment. Moreover, the said assessment is challenged before the ld.CIT(A) and the same is pending. While this is so, we are afraid whether the same issue could be the subject matter of revision proceedings u/s 263 of the Act by seeking to look into the very same issue from different perspective. We find that the action of the ld PCIT is P a g e | 7
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Kaushal Anil Shah in complete disregard to the specific provisions of clause(c) of Explanation to section 263(1) of the Act, which places a clear embargo on the ld.PCIT with respect to exercise of revisionary juri iction on assessments which have been subject matter of appeal. Reliance in this regard is placed on the decision of the Hon'ble Calcutta High Court in the case of Oil India Ltd vs CIT reported in 138 ITR 836 (Cal) wherein, the hon’ble Court interpreting the scope of powers of the Commissioner u/s 263 of the Act held that where an appeal is preferred before the Appellate Assistant Commissioner (AAC) and a subject is particularly raised, the Commissioner cannot revise such an order taking into account an aspect not dealt by the AAC.
5.2. Further, we are of the considered opinion that the ld.CIT(A) having conferred with the co-terminus powers with that of the AO has got ample power to even enhance the assessment if circumstances so warrant. Just because the ld.CIT(A) had not exercised his enhancement powers in the instant case, even if it is to be done, that would not confer automatic revisionary power u/s 263 of the Act for the ld.PCIT. In this regard, the reliance placed by the ld AR on the observations of the Hon'ble Supreme Court in the case of Jute Corporation Ltd in 187
ITR 688 and CIT v. Kanpur Coal Syndicate [1964] 53 ITR

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Kaushal Anil Shah

225(SC), the Court inter alia held that under section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income-tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co- terminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do.......”These observations are squarely applicable to the interpretation of section 251(1)(a). Even otherwise, an appellate authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. The appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter.
5.3 Accordingly, we hold that the issue of disallowance of purchase is already the subject matter of appellate proceedings before the ld.CIT(A) and hence the same cannot be the subject matter of re-

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Kaushal Anil Shah verification and re-adjudication from different perspective by the ld.PCIT under revisionary juri iction u/s 263 of the Act. Hence, the action of the ld.PCIT in invoking revisionary juri iction u/s 263 of the Act deserves to be quashed on this count also.
5.4 Moreover, an inquiry made by the AO, considered inadequate by the ld.PCIT, cannot make the order of the AO erroneous. It is his prerogative to make inquiry to the extent he feels proper. The ld.PCIT by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There are plethora of judgments by various High Courts in this regard. The hon’ble Delhi
(Del.), made a distinction between ‘lack of inquiry’ and ‘inadequate inquiry’. The hon'ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. It was observed that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of P a g e | 10
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Kaushal Anil Shah action would be open. The hon'ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner:
"The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without juri iction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity.”
5.5 The hon’ble Supreme Court in the another case of Principal
Commissioner of Income-tax-2, Meerut v. Canara Bank
Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Revenue's SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law,
5.6 Moreover, where two views are possible and the AO has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order causing prejudice to the interests of the Revenue unless

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Kaushal Anil Shah the view taken by the AO is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind.
5.7 In view of the aforesaid findings, on the facts and circumstances of the case, we are of the considered opinion that in the instant case, ld PCIT erred in invoking revisionary juri iction u/s 263 of the Act on the ground of 'lack of enquiry' when adequate enquiries were already made by the ld.AO in the assessment proceedings. Moreover, he took one of the plausible views in disallowing the impugned purchase rather than applying the provisions of section 69C of the AO treating it to be unexplained expenditure. It goes without saying that on the facts and the circumstances of the case, he did not consider appropriate to initiate penalty proceedings. The ld.PCIT therefore, cannot direct him to take a different course of action than that adopted by the AO. Besides, The issue in hand is still pending for adjudication before the first appellate authority who himself is adequately empowered to take a different view of the matter. In view of the above, we set aside the order of the Ld. PCIT quash the same allowing the grounds of appeal.

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Kaushal Anil Shah

Place: म ुंबई/Mumbai
ददनाुंक /Date 04.08.2025
Lubhna Shaikh / Steno

आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयुक्त / CIT
4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT,
Mumbai
5. गार्ड फाईल / Guard file.

सत्यावपि प्रवि ////
आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt.