MODI MUNDIPHARMA PVT. LTD.,NEW DELHI vs. PR. CIT - 4, NEW DELHI

The appeal in AY 2016-17, arises out of the order of the Pr. Commissioner of Income Tax-4, Delhi [hereinafter referred to as ‘ld. Pr. CIT’, in short] dated 04.03.2021 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 21.12.2018 by the Assessing Officer, ACIT, Circle-17(1), Delhi (hereinafter referred to as ‘ld. AO’).

The only effective issue to be decided in this appeal is as to whether the Leonard PCIT was justified in invoking Revisionary Jurisdiction under Section 263 of the Act in the facts and circumstances of the instant case.

We have heard the rival submissions and perused the materials available on record. The return of income for the assessment year 2016-17 was filed by the assessee company declaring total income of Rs. 15,89,56,320/-. The assessment was completed under Section 143(3) of the Act on 21-12-2018 determining total income of the assessee at Rs. 16,08,58,191/-. This assessment was sought to be revised by the Learned PCIT on the ground that the same is erroneous and prejudicial to the interest of the revenue. A show- cause notice under Section 263 of the Act stood issued to the assessee on 15-02- 2020. The Learned PCIT observed that assessee had claimed an expense of Rs. 4,49,01,950/- as legal and professional expenses. First of all, assessee is engaged in the pharmaceutical line of business. Accordingly, the Learned PCIT concluded that Rs. 4,49,01,950/- of legal and professional expenses is quite unusual in the pharmaceutical business. First of all, the Learned PCIT called for the details of the legal and professional charges. Upon perusal of the same, the Learned PCIT observed that there were big payments made by the assessee which were not examined by the Learned AO. The Learned PCIT concluded that the Learned AO had not examined these facts. Aggrieved, the assessee is in appeal before us.

The assessee had filed detailed submissions before the Learned AO vide letter dated 08-12-2018 giving the complete details of legal and professional charges and also explaining the purpose of making payments to them for the various services rendered by the concerned consultants. This reply is enclosed in Page 2 of 5 pages 40, 45 and 46 of the paper book. Hence it cannot be said that the Learned AO had not made any enquiries with regard to the allowability of legal and professional charges in the course of assessment proceedings. Since the Learned AO had made adequate enquiries with regard to the legal and professional charges, the Learned PCIT grossly erred in invoking his revisionary jurisdiction by stating that there was lack of enquiry on the part of Learned AO with regard to claim of legal and professional charges. Further the assessee had even furnished those details before the Learned PCIT. The Learned PCIT nowhere finds any fault in the details submitted by the assessee before him. He does not even say as to how the order of the Learned AO is erroneous on perusal of the details filed by the assessee. This is a case of invoking revisionary jurisdiction under section 263 of the Act only to make fishing and roving enquiries which is not permissible. Hence in our considered opinion, this is not a fit case for invoking revisionary jurisdiction under section 263 of the Act by the Learned PCIT and accordingly the revision order passed under section 263 of the Act is hereby quashed. The grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.