INFINITY CARS PRIVATE LIMITED,MUMBAI vs. PCIT03 CENTRAL MUMBAI, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “C” BENCH,
MUMBAI
BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER
&
SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER
Infinity
Cars
Private
Limited, 12/A, 1st Floor,
Lotus Cinema Bldg., Worli
S.O. Mumbai - 400 018,
Maharashtra v/s.
बनाम
Principal
Commissioner of Income
Tax–
03
Central,
Mumbai, Room No. 441, 4 th
Floor, Kautilya Bhavan, C-41 to C-43, G-Block, Bandra Kurla
Complex, Bandra (East),Mumbai
- 400051, Maharashtra
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AABCI5671H
Appellant/अपीलार्थी
..
Respondent/प्रतिवादी

Appellant by :
Shri Bhupendra Shah,AR
Respondent by :
Mr.R.A. Dhyani, (CIT-DR)

Date of Hearing
02.07.2025
Date of Pronouncement
21.07.2025

आदेश / O R D E R

PER PRABHASH SHANKAR [A.M.] :-

The present appeal filed by the assessee emanates from the Revision order passed u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 31.03.2025 by the Pr. Commissioner of Income-tax, PCIT(Central), Mumbai – 3 [hereinafter referred to as “PCIT(A)”] pertaining to assessment order passed u/s. 153C of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 30.03.2023
for the Assessment Year [A.Y.] 2019-20. P a g e | 2
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Infinity Cars Private Limited

Infinity Cars Private Limited the revenue, on the issue of depreciation on Goodwill of Rs.2,96,25,164/- which had to be disallowed in view of the decision taken in the assessment order for A.Y. 2017-18.In response, the assessee submitted that in view of judicial pronouncements of the Hon’ble Apex
Court in the cases of Abhisar Builwell Pvt. Ltd., Continental
Warehousing Corporation (Nhava Sheva) Ltd. (64 Taxmann.com 34),
Kabul Chawla etc. no addition could be made in respect of assessments which have became final if no incriminating material is found during search or during 153A proceedings. The assessee also contented that where there was nothing on record to suggest that any material was unearthed during search or proceedings u/s 153A, the PCIT could not invoke juri iction u/s 263 of the Act. The assessee has also submitted that if addition u/s 153C could not be made, revisionary juri iction u/s 263 of the Act does not lie. It was also contented that to assume juri iction twin conditions i.e. assessment order being erroneous as well as prejudicial to the interest of revenue or to be fulfilled; that an order cannot be said to be erroneous if A.O. has adopted one of possible views, that necessary details were called for by the A.O. which were duly furnished by the assessee and the inference was drawn thereon and returned income accepted would not permit the him to exercise powers under section 263 of the Act merely because there is no discussion on P a g e | 4
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Infinity Cars Private Limited the said issue in the assessment order. The assessee has further contented that proceeding is not meant for fishing and roving enquiries nor are revisional powers to be exercised to hold another round of investigation.
4. The ld.PCIT observed that notice u/s 153C was issued after receipt of information along with satisfaction from the A.O. that there was an incriminating material pertaining to the information of the assessee, after following due procedure as laid down by law. The assessment proceedings were concluded by an order dated 30.03.2023
and if at all the assessee had any grievance against the invoking of provisions u/s 153C, the assessee ought to have challenged that order.
Unless the order u/s 153C dated 30.03.2023 is nullified, powers u/s 263
of the Act could be invoked subject to fulfilment of above stated twin conditions. In the instant case, a detailed finding had been given in the assessment order for A.Y. 2017-18 that the assessee was not entitled to depreciation on Goodwill. The said issue had not been examined at all in the assessment proceedings pertaining to the year under consideration.
Section 263 of the Act requires fulfilment of twin conditions namely error in an order and the consequent prejudice to the interest of revenue. In the instant case, both these conditions are fulfilled in as much as that the non seeking of details regarding allowability of the P a g e | 5
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Infinity Cars Private Limited claim of depreciation on Goodwill, more so where the issue has been discussed in great details and disallowed in the assessment order for A.Y. 2017-18. Reliance was placed on the decision of Hon’ble Gauhati
High Court rendered in the case of CIT vs Jawahar Bhattacharjee [2012]
341 ITR 434 (Gauhati),CIT Vs. Bhagwan Das [2005] 272 ITR 367,
Pratap Footwear Vs ACIT [2003] SOT 638 etc. It is stated that in the present case, assessment order passed u/s 153 of the Act is an order passed by the A.O. and therefore, the aforesaid issues, which had not been considered by him in the said reassessment order, could be brought to life in exercise of powers under Section 263 of the Act.
Reliance was placed in this regard the decision of New Jagat Textile
Mills (P.) Ltd. Vs CIT [2006] 282 ITR 399.As regard the other objections raised by the assessee namely that powers cannot be used where (i) A.O.
has taken one of the possible views or (ii) where an issue has been examined and accepted by the A.O. but no discussion is made in the assessment order or (iii)proceedings under this section is not meant for making fishing and roving enquiries or to order a second round of investigation it is stated that in the assessment proceedings, the issue of depreciation on Goodwill claimed by the assessee of Rs.2,96,25,164/- had been accepted without any question being asked or without any examination. Hence, it was clear that the A.O. has neither formed an P a g e | 6
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Infinity Cars Private Limited opinion or view on the issue nor has he examined leave alone accepting the claim of depreciation on Goodwill. As regards, the objection on the grounds of making fishing and roving enquiries or to order a second round of investigation, it is already brought out herein above that in respect of A.Y. 2017-18, the issue has been discussed in greater details in the assessment order passed u/s 143(3) of the Act and it was only logical that the A.O. ought to have examined this issue, which as evident from the records he has not. Therefore, by exercise of powers vested u/s 263
of the Act, neither is any fishing or roving enquiries intended nor is a second round of investigation directed since the issue of claim of depreciation on Goodwill has already been decided in the assessment order for A.Y. 2017-18 as being not allowable expenditure. The objections raised by the assessee were rejected and the assessment order was set aside.
5. Before us, the ld.CIT(DR) has supported the revision order while the ld.AR has reiterated the contentions made before the ld.PCIT in revision proceedings. It is further contented that the disallowance f
Goodwill could not be made in the assessment order passed u/s 153C of the Act as the search action did not bring out any incriminating material which is not disputed. Therefore, the AO did not commit any error in terms of section 263 of the Act. He took one of the plausible views which P a g e | 7
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Infinity Cars Private Limited could not be reviewed by the ld.PCIT. He relied upon landmark judgements of hon’ble Supreme Court in Abhishar Bulidwell etc.

Infinity Cars Private Limited deliberated in several coordinate benches of ITAT, a few of which are narrated in the succeeding paras.

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Infinity Cars Private Limited assessment/reassessment orders already passed in the assessment years covered under Section 153A stand abated and the Assessing officer is obliged to pass fresh assessment/reassessment orders and determine the total income afresh for those assessment years. In the present case, according to Mr. Jaiswal, the assessment order passed under Section 153A read with Section 143(3) of the Income- Tax Act is erroneous and prejudicial to the interests of the revenue because, firstly, the AO had only determined undisclosed income and had not determined the total income which the mandate of Section 153A of the Income- tax Act. Secondly, the total computed after giving effect to the order of Commissioner of Income-tax(A) being loss which less than 30% of the book profit, the AO ought to have computed book profit as per Section 115JA of the Income-tax Act. Thirdly, the deduction allowed under Section 80HHC of the Act in the original assessment was erroneous and since the original assessment order stood abated on initiation of proceedings under Section 153A of the Act, the AO ought to have correctly computed deduction under Section 80HHC in the assessment order passed under Section 153A read with Section 143(3) of the Income-tax Act. Accordingly, Mr. Jaiswal submitted that in the facts of the present case, the Commissioner of Income Tax was justified in invoking juri iction under Section 263 and the ITAT committed an error in setting aside the order passed by the C.I.T.
8. We find it difficult to accept the above contention raised on behalf of the revenue.
The object of inserting Sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIVB of the Income-tax Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 (see 260 ITR (St) 191 at 219) was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as ' undisclosed income' or whether a particular income could be said to be relatable to the material found during the course of search, etc., which led to prolonged litigation. To overcome that difficulty, the legislature by Finance Act 2003, decided to discard Chapter XIVB provisions and introduce Sections 153A, 153B and 153C in the IT Act.
9. What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to Section 153A provides for abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under Section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived.
10. Thus on a plain reading of section 153A of the Income-tax Act, it becomes clear that on initiation of proceedings under Section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting

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Infinity Cars Private Limited search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessments/reassessments already finalised for those assessment years covered under Section 153A of the Act. By a circular No.8 of 2003 dated 18-9-
2003 (See 263 ITR (St) 61 at107) the CBDT has clarified that on initiation of proceedings under Section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalized assessment/reassessment shall not abate. It is only because, the finalized assessments/reassessments do not abate, the appeal, revision or rectification pending against finalized assessments/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of under Section 153A, the assessments/reassessments finalised for the assessment years covered under Section 153A of the Income-tax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1).
11. In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for the assessment year 1998-99 was finalized on 29-12-2000 and search was conductedthereafter on 3-12-2003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affect the assessment finalized on 29-12-2000. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the AO while passing the independent assessment order under Section 153A read with Section 143(3) of the I.T Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings.
13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80HHC was erroneous. In such a case, the AO while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalized on 29.12.2000 relating to Section 80HHC deduction and consequently the C.I.T could not have invoked juri iction under Section 263 of the Act.
14. Moreover, since the AO had made addition on account of undisclosed income at Rs. 89,19,477/- in the assessment order passed under Section 153A, there was no question of computing book profits under Section 115JA of the I.T Act. When the addition of undisclosed income was deleted by CIT(A) without any direction to compute the book profits, the AO was bound to modify the assessment order passed under Section 153A read with s. 143(3) of the Act as directed by CIT(A). Therefore, in the facts of the present case, no fault could be found with the AO in giving effect to the order of CIT(A). Consequently, the CIT could not invoke juri iction under Section P a g e | 11
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Infinity Cars Private Limited

263 of the income-tax Act on the ground that the assessment under Section 153A read with Section 143(3) was erroneous or prejudicial to the interests of revenue.
15. In the result, the decision of the Tribunal in quashing the order of C.I.T passed under Section 263 of the I.T Act cannot be faulted. Accordingly, we see no merit in the present appeal and the same is hereby dismissed with no order as to costs."
We also find that the impugned issue is also supported by the decision of the Hon'ble Bombay High Court in the case of CIT vs Continental Warehousing
Corporation (Nhava Sheva) Ltd and All Cargo Global Logistics
Ltd reported in (2015) 374 ITR 645 (Bom) vide order dated 21.4.2015, wherein the facts before the Court and decision rendered thereon are as below
:-
"Under section 153A of the Income-tax Act, 1961, which enables carrying out of search or exercise of power of requisition, assessment in furtherance thereof is contemplated. There is a mandate to issue notices under section 153(1)(a) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, the crucial words "search" and "requisition" appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. True it is that the assessment which has to be made in pursuance of the notice is in relation to the six years. An order will have to be made in that regard. While making the order, the income or the return of income filed for all these assessment years is to be taken into account. A reference will have to be made to the income disclosed therein. However, the scope of enquiry though not confined essentially revolves around the search or the requisition under section 132A , as the case may be. The provision deals with those cases where assessment or reassessment, if any, relating to the assessment years falling within the period of six assessment years referred to in sub-section (1) of section 153A were pending. If they were pending on the date of the initiation of the search under section 132 or making of requisition under section 132A , as the case may be, they abate. It is only pending proceedings that would abate and not where there are orders made of assessment or reassessment and which are in force on the date of initiation of the search or making of the requisition.
The assessee was engaged in the operation of a container freight station. It claimed deduction under section BO-IA(4) producing a certificate dated July 13, 2006, from the Jawaharlal Nehru Port Trust Nhava Sheva declaring that the assessee was considered an extended arm of port-related services. The education was disallowed on the ground that the certificate was withdrawn on October 5, 2007. The Commissioner (Appeals) confirmed the view of the Assessing Officer. The Tribunal held in favour of the assessee.
A search was carried out on its premises and a notice under section 153A was issued to the assessee. The assessee declared a total income of Rs.5,54,63,220 while claiming the deduction under section 80-IA(4) of Rs.1,25, 77,637. The Assessing
Officer held that the assessee was not entitled to the deduction under section 80-IA.

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The Commissioner (Appeals) upheld the order of the Assessing Officer. The Special
Bench of the Tribunal held that by the clear language of section 153A together with its provisos, pending assessments abated and that the Assessing Officer was required to make one assessment for each of the six years on the basis of the search and any other material existing or brought on record by the Assessing Officer, that in other cases assessments would be made on the basis of the books of account and other documents found during the search and not produced during assessment and also on any other undisclosed income or property found during the search. On the issue of deduction under section BO-IA(4) the Tribunal held that the container freight station was an inland port and its income was entitled to deduction under section 80-IA(4) .
On appeals:
Held, dismissing the appeals, (i) that the notice under section 153A was founded on search. If there was no incriminating material found during the search then the Tribunal was right in holding that the power under section 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material. If that was not found then in relation to the second phase of three years, there was no warrant for making an order within the meaning of this provision."
In view of the aforesaid findings and judicial precedent relied upon, we hold that the addition towards deemed dividend u/s 2(22)(e) of the Act in the assessments framed u/s 153C of the Act for the Asst Years 2007-08 to 2010-11
without any incriminating materials found during the course of search with respect to those assessment years, is not warranted and held as not in accordance with law.
5.6. We hold that the Learned CIT had just entertained a belief that order passed by the Learned AO u/s 153 C of the Act is erroneous , which otherwise does not emanate from the provisions of the Act. Hence in this scenario, invoking juri iction under section 263 proceedings is not permissible.
5.7. Since we have decided the impugned issue of addition towards deemed dividend in favour of the assessee on facts as well as on law, we don't find it necessary to address the same issue on the ground of limitation of invoking juri iction u/s 263 of the Act. Hence we refrain to give our findings in this regard on the issue of limitation.
5.8. In view of the aforesaid findings, we quash the order passed u/s 263 of the Act by the Learned CIT and allow the grounds and additional grounds raised by the assessee for all the asst years.
6. In the result, the appeals of the assessee are allowed.”

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Infinity Cars Private Limited while accepting the withdrawal of claim of depreciation amounting to Rs.
60,14,71,456/- by M/s Wellknown Polyester Ltd. in its return of income filed in response to notice issued under Sec.153A of the IT Act. Be that as it may, in our considered view the observation of the A.O that no addition under Sec. 68 and/or Sec. 2(24)(iv) of the IT Act was liable to be made in respect of the bogus share application money received by the assessee from the shell companies could not have been dislodged by the Pr. CIT in exercise of his revisional juri iction under Sec. 263 of the IT Act. We have further perused the order passed by the Tribunal in the case of other group entity viz. M/s Wellknown Technologies Pvt. ltd. Vs. Pr. CIT (Central)-4
[ITA No. 2912- 2915/Mum/2018; dated 03.12.2018] for A.Ys. 2009-10 to 2013-14, and find that the order passed by the CIT under Sec.263 on similar lines in the case of the said group entity had been vacated by the Tribunal. Apart therefrom, we also find substantial force in the contention of the ld. A.R that as during the course of the search and seizure proceedings conducted on M/s Wellknown Polyester Ltd. and its directors no incriminating material pertaining to receipt of bogus share capital (along with premium) was found, therefore, in the backdrop of the judgment of Hon'ble High Court of Bombay in the case of CIT Vs. Continential Warehousing Corporation (2015) 374 ITR
645 (Bom) no addition on the said aspect could have been made by the A.O while framing the assessment under Sec.153C r.w.s. 143(3) of the IT Act.
11. We thus in terms of our aforesaid observations are of the considered view that the order passed by the A.O under Sec. 143(3) r.w.s. 263, dated
01.04.2015 cannot be held to be erroneous. As a result thereof, the very exercise of the revisional juri iction by the Pr. CIT culminating into an order under Sec.263, dated 21.03.2018 cannot be sustained and is liable to be vacated.
12. We thus set aside the order passed by the Pr. CIT under Sec.263 of the IT Act and restore the order passed by the A.O under Sec. 143(3) r.w.s
153C of the IT Act, dated 01.04.2015. 13. The appeal of the assessee is allowed.”
6.3 In a recent decision in the case of Alliance Broadcasting
Pvt.vs PCIT (Central), Chennai on 18 June, 2025 in ITA
No.2278/Chny/2024, on similar issue it was held as below:

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“9. The second reason is that the search operation u/s.132 of the Act was conducted in the case of VV Group Concerns on 25.10.2018. Pursuant to it, proceedings u/s.153C of the Act have been initiated against the assessee on 11.03.2021 and directed assessee to file RoI including that for AY 2017-18. In this regard, it is noted that the assessee had filed RoI for AY
2017-18 u/s.139(1) of the Act on 07.11.2017
and the intimation u/s.143(1) of the Act was issued dated 02.06.2018 and the time- limit to issue notice u/s.143(2) of the Act got expired on 30.09.2018; and taking note of the crucial facts in this case i.e. the search commenced on 25.10.2018 and consequent notice u/s.153C of the Act was issued to the assessee on 11.03.2021, it can be safely presumed that assessment for AY
2017-18 was not pending before the AO on the date of search. Therefore, assessment for AY 2017-18 has to be held to be unabated assessment for the purpose of assessment u/s.153C r.w.s.153A of the Act; and as per the settled position of law in respect of unabated assessment, only on the basis of incriminating materials qua assessee qua for AY 2017-18, any addition can be made. [refer to the decision of the Hon'ble Supreme
Court in CIT v. Sinhgad Technical Education Society 250 Taxman
225].It is undisputed fact that there was no incriminating material for making any disallowance under PF/ESI found during search.
Therefore, the AO can't be blamed for not making any disallowance on this count. Therefore, on the aforesaid reasons stated supra we find that action of the AO not to take any adverse view against the assessee was a plausible view and can't be termed as erroneous and prejudicial to the interest of the Revenue. Therefore, assessee succeeds on the legal issue raised before us.
10. In the light of the aforesaid discussion, we find that the Ld.PCIT erred in invoking his juri iction u/s.263 of the Act, therefore, the impugned order u/s.263 of the Act stands quashed.”

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Infinity Cars Private Limited

Place: म ुंबई/Mumbai
ददनाुंक /Date 21.07.2025
Lubhna Shaikh / Steno

आदेश की प्रयियलयि अग्रेयिि/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.