AMAZON SMART COMMERCE SOLUTIONS PRIVATE LIMITED,DELHI vs. PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-1, DELHI

PER S. RIFAUR RAHMAN, AM

The assessee has filed appeal against the order of the Learned Pr.
Commissioner of Income-Tax, Delhi-1 [“Ld. CIT(A)”, for short] dated 28.03.2025 for the Assessment Year 2021-22 and the assessment order was passed under secƟon 143(3) r.w.s. 263 of the Income-tax Act, 1961 (for short ‘the Act’).
2

notice issued under section 263 of the Act, the learned PCIT dealt with the following issues:
i. Related Party Transactions, the learned PCIT reproduced the submissions made by the assessee at pages 24 to 26 of the impugned order and observed that the Assessing Officer had not investigated the above transactions and even the names of the parties with whom these transactions were undertaken, were not brought on record. The AO had not investigated whether there were any transactions with foreign entities related to the assessee. He further observed that related party transactions are required to be examined in the light of transfer pricing provisions as well as section 40A(2) of the Act. However, the AO has not raised any query on these transactions from this point of view. Further, the assessee, in the audit report, has not even disclosed the names of the parties to whom such payments were made.
ii. Platform Selling Expenses, During the assessment proceedings, the AO asked the assessee to explain the details regarding platform selling expenses along with supporting documents. However, the assessee made no compliance. Again, vide Query No. 1 of the questionnaire dated 18.11.2022, the AO raised following query that he has observed that from the submissions dated 10.08.2022, the assessee has not submitted the details regarding platform selling fees claimed as expenses along with supporting documents. In response, the assessee submitted
5

that it makes certain payments to Amazon Seller Services Private Limited
(Amazon) for the purpose of using their e-commerce platform for the sale of goods. Such payments are termed as platform selling fees, which also include fees towards freight and shipping services that are rendered by Amazon.
Therefore, the said expenditures being incurred wholly and exclusively in connection with the assessee’s business of trading activities on the e-commerce platform. It was further submitted that the expenditures were incurred wholly and exclusively for the purpose of business and eligible to claimed under section 37
of the Act. The learned PCIT observed that, on perusal of the assessment order shows that the AO has accepted the submissions of the assessee without raising any query regarding the reasonableness of these expenses. The assessee has not provided the break-up of the amounts paid to Amazon, and no contract was placed on record to justify these huge payments. Further, no invoices were investigated by the AO to verify the genuineness of the claim. He observed that the assessee has only submitted that the expenses are incurred wholly and exclusively for the purpose of business, and the AO has accepted the submissions without going into the genuineness or reasonableness of the claim under section 40A(2) of the Act. He observed that the submissions of the assessee is very general in nature, and no evidence was produced to substantiate the claim before the AO.
6

iii. Provision for Doubtful Advances, with regard to the provision for doubtful advances, the learned PCIT observed that the AO asked the assessee to furnish details regarding the provision for doubtful advances and also raised a query directing the assessee to provide the details regarding provisions for doubtful advances and it was submitted before the Ld. AO that it was disallowed in the year of creation, when assessee was directed to provide the details in which year the provision was disallowed and also to provide computation of income. In response, the assessee has submitted that during AY 2020–21, the provision for doubtful advances and debts was disallowed while computing the total income.
In this regard, a copy of the computation of total income for AY 2020–21 was enclosed. During the year under consideration, upon reversal of the provisions, the same was claimed as an allowable expenditure. Ld. PCIT after perusal of the assessment order, observed that the Ld. AO has accepted the submissions of the assessee without making any further inquiries.
iv.
Aging Goods, he observed that the AO has raised Inquiry No. 4 of the quesƟonnaire dated 18.12.2021–22. In response, the assessee submiƩed that during Assessment Year 2020-2021, provisions for slow-moving inventory amounƟng to Rs.19.70 crores were disallowed while compuƟng the total income. In this regard, copy of the computation of total income for AY 2020-
2021 was submitted, and it was submitted that upon reversal of the said amount,
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it was claimed as an allowable expenditure. After considering the findings of the AO, the learned PCIT observed that the learned AO has not obtained the details of the goods or the reasons for treating it as ageing goods eligible for write-off.
He further observed that, besides bringing on record, even the basic details, the claim of more than ₹19 crores of write-off was allowed without any inquiry into the genuineness of the claim. Further, he observed that the inventories mentioned in the Balance Sheet were also not investigated by the Assessing
Officer with respect to their valuation of inventories. Further observed that the learned AO has not even asked for the details of expenses amounting to ₹304.30
crores relating to inventories. He further observed that the changes in liabilities arising from financing activities, as reported in the Auditors’ report, were completely overlooked by the learned AO. In this regard, he reproduced the observations of the auditor in the impugned order. Finally, he observed that on perusal of the assessment order shows that during the entire course of the assessment proceedings, absolutely no questions were asked by the learned AO on various issues. The learned AO has not verified the above said transactions.
Further, he observed that the claim of huge advertisement expenses was allowed without verification by the learned AO. After discussing the above various issues in the assessment order completed under Section 143(3) of the Act, the learned
PCIT invoked Explanation 2 to Section 263 of the Act and observed that the order
8

was passed without making inquiries or verifications which should have been made, and the order passed allowing relief without inquiry into the claim is considered to be erroneous order in so far as it is prejudicial to the interests of the Revenue. In this regard, the learned PCIT relied on various case laws, which are reproduced at pages 37 and 38 of the impugned order. Concerning the issue of no inquiry or inadequate inquiry conducted by the AO, he relied on the decision of the Hon’ble Supreme Court in the case of CIT v. Paville Projects (P.) Ltd. [2023]
149 taxmann.com 115 and also relied other case laws which are reproduced at pages 41 to 47 of the impugned order. After discussing the individual issues, as observed by him in the notice issued under Section 263 of the Act in detail in the impugned order. Accordingly, he concluded that the assessment order is erroneous and so far as it is prejudicial to the interests of the Revenue. Hence, he set aside the same and directed the Assessing Officer to pass a fresh assessment order de novo after making all necessary inquiries, as directed in his impugned order.
3. It is relevant to discuss at this stage the issue of impugned order passed in the name of erstwhile name of the assessee i.e. Cloudtail India Pvt. Ltd. by the Ld. PCIT vide order dated 28.03.2025. However, Ld. PCIT had passed corrigendum dated 29.03.2025 stating that the order passed in the name of erstwhile name of the assessee may be considered as passed in the name of 9

Amazon Smart Commerce Solutions Private Limited, the present name of the assessee.
4. Aggrieved with the above order, the assessee is in appeal before us raising following grounds:
“1. That on the facts and circumstances of the case and in law, the order dated 28.03.2025, passed by the Principal Commissioner of Income Tax,
Delhi-1 ['PCIT'], under section 263 of the Income Tax Act, 1961 ('the Act') in the name and PAN of non-existent entity (later sought to be corrected through corrigendum dated 29.03.2025), is without juri iction, illegal, bad in law and liable to be quashed.
2. That the PCIT erred in invoking revisionary juri iction under section 263 of the Act qua assessment completed by National Faceless
Assessment Centre ('NFAC') under section 143(3) read with sections
144C(3) and 144B of the Act, which is a complete code in itself.
3. That on the facts and circumstances of the case, the impugned order having been passed by the PCIT in undue haste without: (a) considering the submissions filed, and (b) first disposing off the legal objections by passing a separate speaking order and (c) providing reasonable opportunity of being heard, is illegal, bad in law and liable to be quashed/ set aside.

(iv) Revenue from contract with customers, basis of sales return and its valuation and the policy of discounts;
(v) Purchase of traded goods
12.1. Without prejudice, the PCIT erred in issuing vague/ open ended directions to the assessing officer to examine the 'items in the Balance
Sheet/Audit Report' [referred in ground no. 13 supra] and make addition(s)/disallowance(s) if the same found to have any bearing on computation of income of the appellant.
12.2 That the PCIT erred in setting aside the assessment order on aforesaid issues, without even appellant, thereby, not demonstrating how and why the final assessment order was erroneous and prejudicial to the interests of the Revenue, qua such issues.
Qua huge claim of advertisement expenses
13. That on the facts and circumstances of the case and in law, the exercise of revisionary juri iction by the PCIT under section 263 on the issue of advertisement expenses, is without juri iction and bad in law.
13.1. Without prejudice, the PCIT erred in issuing vague/ open ended directions to the assessing officer to examine the claim of advertisement expenses, its genuineness and applicability of withholding tax provisions thereon.
13.2. That the PCIT erred in setting aside the assessment order on aforesaid issue, without even recording any prima facie findings on merits despite detailed submission furnished by appellant, thereby, not demonstrating how and why the final assessment order was erroneous and prejudicial to the interests of the Revenue, qua such issue.
The appellant craves to leave, to add, to alter, to amend, to rescind, to modify or vary the above grounds of appeal before or at the time of hearing this appeal.”
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existent entity was held to be invalid:
-
Varnika RPG Trust v. PCIT: [2021] 133 taxmann.com 32 (Del. Trib.)
-
Adani Power Ltd. v. PCIT [ITA No. 453/Ahd/2023] (Ahd. Trib.)
-
Madhuban Dealers Pvt. Ltd. v. PCIT [ITA No. 273/Kol/2022] (Kol. Trib.)

Malabar Industrial Co. Ltd. v. CIT: 243 ITR 83 (SC)

CIT vs. Max India Limited: 268 ITR 128 (P&H) [affirmed in 295 ITR
282 (SC)]

CIT vs. Kwality Steel Suppliers Complex: 395 ITR 1 (SC)

the Revenue inasmuch as the AO passed the order after due application of mind, as elaborated hereunder:
Brief Background Facts
18. The appellant, Amazon Smart Commerce Solutions Private Limited is a private limited company incorporated in India. During the relevant previous year, the appellant was engaged in trading activities on online marketplace.
19. The appellant filed its return of income (ROI) on 13.03.2022 for relevant AY
2021-22 declaring a total income of INR 291,00,11,321. The ROI was selected for scrutiny assessment and vide order dated 15.12.2022, the returned income was accepted as such by the NaFAC

The appellant vide reply dated 23.11.2022 submitted a comprehensive response explaining the scope and terms of payments made under the head ‘platform selling fees’ (@pt 1 of reply in response to query no. 1).
[@ pages 392 to 399 of PB]

Further, the appellant submitted copy of invoices substantiating the platform selling fees (@pt 1 of reply in response to query no. 1)
[@ Annexure B of PB]

Further, in the aforesaid response, the appellant also furnished copy of relevant extract of ROI and audited financial statement filed for the relevant year, wherein the said expenses had been duly disclosed (@ pages 400 to 401 of PB)
3. Provision for doubtful advances
Vide notice dated
28.07.2022, the appellant was asked to furnish details of amounts claimed as deduction
The appellant vide reply dated 10.08.2022, provided details of expenses claimed under various heads in the relevant year including provision for doubtful advances (@pt 4 reply in 18

along with justification for each head (@pt 4
of notice)
[@ pages 384 to 387 of PB]

Vide notice dated
18.11.2022, the appellant was asked to furnish details regarding provision for doubtful advances (@pt 3
of notice)
[@ pages 388 to 391 of PB]

response to query no. 4)
[@ pages 402 to 405 of PB]

The appellant vide reply dated 23.11.2022, provided complete details of disallowances of doubtful advances and debts during
AY 2020-21 and the reversal of the same (@pt 3 of reply in response to query no. 3).
[@ pages 392 to 399 of PB]

Further, in the aforesaid response, the appellant also furnished copy of relevant extracts of ROI and computation filed for AY
2020-21, wherein the said expenses had been duly disallowed (@ pages 406 to 409 of PB)
4. Provision for slow and ageing goods
Vide notice dated
28.07.2022, the appellant was asked to provide details regarding provision made for slow and ageing goods
(@pt 4 of notice)
[@ pages 384 to 387 of PB]

Further vide notice dated
18.11.2022, the AO raised further queries regarding provision made for slow and ageing goods and required relevant documents to be furnished (@pt 4
of notice)
The appellant vide reply dated 10.08.2022, provided detailed submissions explaining the reversal of provision for slow and ageing goods (@pt 4 of reply in response to query no. 4)
[@ pages 402 to 405
of PB]

The appellant vide reply dated 23.11.2022 furnished reply to queries raised and also filed copy of relevant extract of ROI and computation filed for AY
2020-21, wherein the said expenses had been duly disallowed (@pt 4 of reply in response to query no. 4)
[@ pages 410 to 413
of PB]
19

[@ pages 388 to 391 of PB]
5. Various items in balance sheet and audit report:
(i)
Valuation of inventories and carrying amount of inventory pledged as security

(ii) Trade payables

(i) Changes in Liability arising from Financing activities

(ii) Revenue from contract with customers, sales return and the policy of discounts
(iii)
Purchase of Traded goods
Vide notice dated
28.06.2022, the appellant was asked to submit evidences relied in support of its ROI (@pt B of notice)
[@ pages 484 to 486 of PB]

The appellant vide reply dated 12.07.2022, furnished audited financialstatements and tax audit report, which had complete disclosures in respect of inventory, trade payables, revenue from customers and purchase of traded goods
(explained infra).
[@ page 487 of PB]
6. Huge claim of advertisement expenses
Vide notice dated
28.06.2022, the appellant was asked to submit any evidence to rely on in support of the return of income (@pt B of notice)
[@ pages 484 to 486 of PB]
The appellant vide reply dated 12.07.2022, furnished audited financial statements and tax audit report, which had complete disclosures in respect of advertisement expenses (explained infra).
[@ page 487 of PB]

“Considering the facts of the case and submissions of the assessee, total income of the assessee is computed as per order u/s 143(1)(a) of the Act…”

Business Services
Private Limited)
4
ASCSPL
Legal and Professional
Fees
97,295,509
5
ASCSPL
Reimbursement of expenses
386,895

-
‘Clause 23’ of Tax Audit Report – Particulars of payments made to persons specified under section 40A(2)(b) were disclosed (@ pages 62 to 63 of paper book)

-
Copy of computation of income and acknowledgement of income tax return (@
pages 1 to 3 of paper book)

Particulars of notice /reply
Summary of information sought/filed before the PCIT
Reply dated 28.12.2023

(@pages 101 to 133 of the paper book)
The appellant furnished a comprehensive reply regarding the related party transactions entered into during the relevant AY (@pt C.1 of reply attached at pages 113-117 of the paper book).
Notice dated 31.12.2023

(@pages 164 to 168 of paper book)
The PCIT vide the said notice directed the appellant to furnish information regarding certain related parties (@pt 2, 3, 6 of notice) as stated below:
“2. Please provide the copy of contract with Amazon Smart Commerce Solution Pvt Ltd
(ASCSPL) for administrative support services and legal and professional services. Please explain when you yourselves are running such huge business setup in India what specialized and unique administrative support services are provided by ASCSPL which you could not handle in house. Please explain whether
ASCSPL is a law firm and what legal and professional services were needed by you.
Please give details of each services provided and respective invoices raised.

(pt 2, 3, 5 of reply)

(@pages 169 to 196 of PB)
In response to the aforesaid notice, the appellant furnished a comprehensive reply explaining the nature of relationship and transactions entered into with ASCSPL and ASSPL (@pages 191-193 of paper book)
23

“3. Give details of Platform selling fees of Rs. 9,96,52,54,345/- claimed by you as expense. Give documentary evidences in support of the same and also furnish a detailed write up on allowability of the same.”
Notice dated 18.11.2022

[@ pt 1 of notice

Pages 388-391 of paper book]
The AO vide the said notice, reminded the appellant to provide the platform selling fees details:

“1. It is observed from your submissions dated 10/08/2022 ,that you have not submitted details regarding platform selling fees claimed as expenses along with supporting documents.”
Reply dated 23.11.2022

[@ pt 1 of reply
Pages 392-399 of paper book]
In response to the aforesaid query, the appellant provided a comprehensive response explaining the nature of platform selling fees and justified the deduction under section 37 of the Act
(Point 1 of the reply in response to query no. 1)
Vide the same reply, the appellant also submitted copies of invoices with respect to platform selling fees paid to ASSPL attached as Annexure B to the paper book.

not examined by the AO in terms of section 40A(2) of the Act, it is emphatically submitted that ASSPL does not qualify as a related party to the assessee in terms of provision of section 40A(2) of the Act, which is also evident from the fact that the said transaction has not be reported in Clause 23 of the Tax Audit Report. Thus, the question of AO not determining the reasonableness of the claim in terms of section 40A(2) of the Act does not arise at all.
48. In so far as tax withholding on platform fess, it is submitted that tax was duly deducted at source on the aforesaid payments at appropriate rates, which was also clarified to the PCIT vide reply dated 10.01.2024 (@ page 192 of the paperbook). Further, the fact that there has been no violation on account of tax witholding is also evident from the fact that no adverse qualification has been reported in the tax audit report (refer pgs 59 to 60 of the PB).
49. That apart, during the revisionary proceedings before the PCIT, the appellant, vide reply dated 28.12.2023, duly submitted that detailed inquiry was made by the AO qua allowability of the said expense claimed under the head platform selling fees (@pt C.2 of reply at page 120 of the paper book).
50. Further, vide the aforesaid reply dated 28.12.2023, the appellant furnished copy of agreement with ASSPL for platform selling fees attached at pages 134 to 156 of the paper book. Vide the said reply, it was also pointed out to the PCIT that provisions of section 40A(2) of the Act had not application.
51. It is submitted that despite the appellant furnishing detailed explanations and supporting documents during the course of revisionary proceedings, the PCIT failed to consider or even refer to these submissions in the impugned order. The PCIT, without dealing with any of the detailed factual submissions or rendering any finding thereon, proceeded to mechanically hold that the AO had failed to conduct adequate enquiries.
52. It may thus be appreciated that the PCIT has proceeded on completely incorrect facts in respect of the aforesaid issues without any application of mind and on this count alone, the revisionary order calls for being quashed.
Re (iii): Provision for doubtful advances
53. The PCIT, has in para(s) 7-7.3 @ pages 29-30 of the impugned order, observed that during the course of assessment proceedings, the AO failed to make enquiries regarding provision made for doubtful advances.
54. Thereafter, the PCIT has admitted @ pg 29-30 of the order that the said issue was examined during the course of the original assessment and that specific query was raised in this regard by the AO vide query no. 3 of notice dated 18.11.2022 which was duly responded by the appellant vide reply dated 23.11.2022. 55. Despite the aforesaid categoric observation, the PCIT has in para 14 at page 48 of the impugned order, proceeded to allege that the AO failed to make inquiries to ascertain the genuineness of the claim made by the appellant in so far as the list of parties, basis of write off and steps taken to recover such advances was not enquired upon.
56. In this regard, it is submitted, that the appellant had, in the preceding AY 2020-21, suo- moto disallowed provision for doubtful advances and debts to the extent of INR 52,287,589, while computing total income for the said year. In the relevant assessment year under consideration i.e., AY 2021-22, part of the said provision to the extent of INR 33,216,933
was reversed, which was consequently claimed as reduction from the total income.
26

[@pt 4 of notice

Pages 384-387 of PB]
The AO vide the said notice, directed the appellant to provide the following details:
“Furnish details of Any other amount allowable as deduction claimed you of Rs.86,06,09,795/-. Furnish justification for allowability of each head along with documentary evidences.”
Reply dated 10.08.2022

[@ pt 4 of reply

Pages 402-405 of PB]
The appellant vide the said reply submitted details of deductions claimed under the head ‘any other amount allowable as deduction’ amounting to INR
86,06,09,795. Notice dated 18.11.2022

[@ pt 3 of notice

Pages 388-391 of PB]
The AO vide the said notice, directed the appellant to provide the following details:
“Provide the details regarding provisions for doubtful advances of Rs 3,32,16,933/-. You have stated in submissions that it was disallowed in the year of creation, provide the details in which year the provision was disallowed and provide Computation of Income of that year.
Reply dated 23.11.2022

[@ pt 3 of reply

Pages 392-399 of PB]
In response to the aforesaid query, the appellant provided a comprehensive response explaining the reversal of provision for doubtful advances and justified the deduction as below:
“The Assessee wishes to submit that during AY
2020-21, provision for doubtful advances and debts amounting to INR 52,287,589
was disallowed while computing total income for the said AY. In this regard, copy of computation of total income for AY 2020-21 is enclosed as Annexure 5. Further, in the ROI filed for AY 2020-21, the said disallowance has been clubbed under Sl. No. 14 of 27

Schedule BP, the relevant extract of the Form ITR-
6 (highlighted in yellow) is enclosed as Annexure
6. Accordingly, during the year under consideration, upon reversal of the provision to the extent of INR
33,216,933, the same has been claimed as an allowable expenditure.”

The relevant extract of ITR-6 and computation of income for AY 2020-21 has been attached at pages
406 to 409 of the paper book.

the claim made by the appellant in so far as details of goods and the reason for treating it as aging goods eligible for write off was not enquired upon.
67. In this regard, it is submitted, that the appellant had, in the preceding AY 2020-21, created provision for slow and ageing goods amounting to INR 197,004,607, which was suo-moto disallowed while computing total income for the said year. In the relevant assessment year under consideration i.e., AY 2021-22, the said provision was reversed, which was consequently claimed as reduction from the total income.
68. It is submitted that during the course of original assessment proceedings, the appellant had furnished a copy of the computation of total income and return of income filed for AY 2020-21, evidencing the disallowance in the year of creation. Copies of the same were duly filed before the AO vide submission dated 23.11.2022 (@ pages 392-399
and 410-413 of paper book).
69. Accordingly, it is submitted that the claim of deduction of reversal of the provision of slow and ageing goods during the relevant year is both reasonable and justifiable. There is no factual basis to characterise the same as non-genuine.
70. It is respectfully submitted that the allegation that the AO has not properly enquired the claim is entirely misplaced and factually incorrect as detailed investigation/
inquiry in respect of this issue was made by the AO during the assessment proceedings.
Details of relevant queries raised by the AO vide notices/ questionnaire and information/
replies filed by the appellant in response thereto from time to time is tabulated hereunder:
Particulars of notice/
reply
Summary of information sought/ filed before the AO
Notice dated 28.07.2022

[@pt 4 of notice

Pgs 384-387 of PB]
The AO vide the said notice, directed the appellant to provide the following details:
“Furnish details of Any other amount allowable as deduction claimed you of Rs.86,06,09,795/-. Furnish justification for allowability of each head along with documentary evidences.”
Reply dated 10.08.2022

[@ pt 4 of reply

Pgs 402-405 of PB]
The appellant vide the said reply submitted details of deductions claimed under the head ‘any other amount allowable as deduction’ amounting to INR 86,06,09,795. Notice dated 18.11.2022

[@ pt 4 of notice

Pgs 388-391 of PB]
The AO vide the said notice, directed the appellant to provide the following details:
“Provide the details regarding provisions for reversal of provision for slow and ageing goods of Rs 19,70,04,607/-.You have stated in submissions that it was disallowed in the year of creation, provide the details in which year the provision was disallowed and provide Compuation of Income of that year.”
Reply dated 23.11.2022

In response to the aforesaid query, the appellant provided a comprehensive
29

[@ pt 4 of reply

Pgs 392-399 of PB]
response explaining the reversal of provision for doubtful advances and justified the deduction (Point 4 of the reply in response to query no.3) as below:
“The Assessee wishes to submit that during
AY 2020-21, provision for slow moving inventory amounting to INR 197,004,607
was disallowed while computing total income for the said AY. In this regard, copy of computation of total income for AY 2020-
21 is enclosed as Annexure 7. Further, in the ROI filed for AY 2020-21, the said disallowance has been clubbed under Sl. No.
15 of Schedule BP, the relevant extract of the Form ITR-6 (highlighted in yellow) is enclosed as Annexure 8. Accordingly, during the year under consideration, upon reversal of the said amount of INR 197,004,607, it has been claimed as an allowable expenditure.”

The relevant extract of ITR-6
and computation of income for AY 2020-21 are attached at pages 410-413 of the Paper book.

the paper book). The same was reiterated vide reply dated 20.02.2024 (@Sl. No. 2 of reply at pages 199-202 of the paper book).

Re (a): Valuation of inventories and carrying amount of inventory pledged as security

-
Removal Shipment Damage: Inventories that are damaged by Amazon partnered carriers during its shipment from a fulfillment center [“FC”] to a seller.
-
Customer/Carrier Damage: Inventories that are damaged by the postal carrier in route to the customer or the FC to a seller.
-
Lost in Transit: Sometimes, inventories are lost in the Amazon network while on its way for delivering to the customer, or on its way to return to FC as Customer Return/Reject items
82. On damage of goods, certain amounts are reimbursed to the appellant by ASSPL and the balance is written off in the books of accounts as loss on inventory.
83. In the relevant assessment year an amount of INR 304.30 crores was recorded as loss of damaged inventories and provision for inventories created on scientific / past trends, which is approximately 2% of total purchase (tabulated below) made during the relevant year.
Particulars
Amount
(INR)
Reference
Value of inventories as on 31 March 2021
2,796.03
[A]
Revenue from operations
16,623.81
[B]
Purchases made during the year
14,626.25
[C]
Value of inventories expensed through statement of profit and loss (write-off/
provision for inventories created on scientific basis/
past trends)
304.30
[D]
% of inventory write- off to sales
1.83%
[E]
=
[D]/[B]
% of inventory write- offs to purchases
2.08%
[E]
=
[D]/[C]
84. From the aforesaid table, it can be reasonably inferred that considering the business size of the appellant, the aforesaid inventories written off during the captioned AY is very minimal and are incidental to earning revenue. Thus, it may be noted that the said wear and tear is incurred in the normal course of business and is allowable business expenditure under section 37 of the Act.

account of increase in purchase of inventories for carrying on the business operations of the Company. It is reiterated that the appellant is engaged in the business of trading activities and sale of products through e-commerce platform. Due to the nature of the business model, the goods that are proposed to be sold are maintained at Amazon warehouse. Accordingly, higher procurement of goods as reflected in the increased inventory, naturally results in a corresponding rise in trade payables.

and amortization debited to profit and loss account’ of Schedule BP.

108 In view of the aforesaid, it is submitted that the appellant has disallowed the expenditure towards lease liabilities [i.e., depreciation and interest expenses] debited to the statement of profit and loss and has only claimed the actual payments made towards lease liabilities.

109 It is further the respectful submission of the appellant that all expenses incurred were duly vouched i.e., duly checked, verified and audited by the statutory auditors, while conducting audit of books of account for the relevant previous year. No adverse remarks have been pointed by the auditors in the audit report issued for the relevant previous year with respect to expenses claimed by the appellant. Each and every expense incurred by the appellant is supported by proper bills/ vouchers.

110 It is submitted that despite the appellant furnishing detailed explanations and supporting documents during the course of revisionary proceedings, the PCIT failed to consider or even refer to these submissions in the impugned order. The PCIT, without dealing with any of the detailed factual submissions or rendering any finding thereon, proceeded to mechanically hold that the AO had failed to conduct adequate enquiries.

111 It may thus be appreciated that the PCIT has proceeded on completely incorrect facts in respect of the aforesaid issues without any application of mind, and on this count alone, the revisionary order calls for being quashed.

Re (d): Revenue from contract with customers, basis of sales return and its valuation and the policy of discounts

113 In this regard, it is at the outset submitted that revenue from sale of traded goods is net of sales returns (i.e., right to return goods) and discounts as reflected in Note 16 of the Financial Statements.
114 It is reiterated that the appellant is engaged in the business of trading activities and sale of products through e-commerce platform. Due to the nature of its business model, items such as sales returns, valuation of returns, discount policies, right-to-return provisions, and scrap sales) are an inherent and unavoidable part of the business.

115 In this regard, it is submitted that sales returns refer to the products that are returned by the customers within a specific time-period provided by the appellant. It also includes provision for sales returns based on a scientific method/ past trend.
37

116 In an e-commerce environment, customers frequently return products for various reasons, and the platform follows structured return and refund mechanisms as per industry-standard as it is necessary to maintain customer trust. Further, discounts are provided by the appellant to its customers, which are general business expenditures in order to attract customers and promote sales. As a result, sales returns, return-related provisions, and various promotional discounts form an integral part of the appellant’s business operations.

117 . Furthermore, during the course of day-to-day operations, certain goods are identified as non-saleable in the e-commerce platform. Such non-saleable goods are considered as scrap sales of goods. Upon sale of such goods, the entire amount is offered to tax as revenue from sale of scrap.

119
. That apart, during the section 263 revisionary proceedings, specific query was raised by the PCIT regarding the aforesaid issue and vide reply dated 28.12.2023, the appellant furnished a comprehensive response in relation to the details of basis of sales return, valuation and policy of discounts (@ pt C.5 (d) of the reply at pages 128 to 131 of the paper book).

120 The aforesaid submission was reiterated vide reply dated 10.01.2024 (@Sl. No. 8 of the reply at page 193 of the paper book).

121 It is further the respectful submission of the appellant that all the expenses incurred were duly vouched i.e., duly checked, verified and audited by the statutory auditors, while conducting audit of books of account for the relevant previous year. No adverse remarks have been pointed by the auditors in the audit report issued for the relevant previous year with respect to expenses claimed by the appellant. Each and every expense incurred by the appellant is supported by proper bills/ vouchers.

122 It is further submitted that at page 34 of the impugned order, the PCIT has remarked that “discounts have not been verified from the point of view of withholding tax.”

123 In this regard, it is submitted that in the absence of principal and agent relationship between the appellant and its customers, withholding tax is not applicable on such discounts, as the same is not in the nature of commission. The aforesaid fact was duly explained to the PCIT vide reply dated 28.12.2023 (@ pt C.5 (d) of the reply at page 130
38

of the paper book). It may also be clarified here that provisions of section 194R of the Act, which was introduced vide Finance Act, 2022 w.e.f. 01.07.2022 was not at all applicable to the assessment year under consideration i.e., AY 2021-22. 124 It is submitted that despite the appellant furnishing detailed explanations and supporting documents during the course of revisionary proceedings, the PCIT failed to consider or even refer to these submissions in the impugned order. The PCIT, without dealing with any of the detailed factual submissions or rendering any finding thereon, proceeded to mechanically hold that the AO had failed to conduct adequate enquiries.

125 It may thus be appreciated that the PCIT has proceeded on completely incorrect facts in respect of the aforesaid issues without any application of mind and on this count alone, the revisionary order calls for being quashed.

Re (e): Purchase of traded goods
126 The PCIT has, at para 10.1(C) of the impugned order, vaguely alleged that the AO has not made any enquiries in respect of purchase of traded goods with reference to sales and stock in trade.

127 It is submitted that during the relevant assessment year, the appellant recorded purchase of traded goods amounting to INR14,626.25 crores in its statement of profit and loss, which was duly disclosed in “Note 18 to the Audited Financial Statements – Purchase of traded goods” (filed before AO vide reply dated 12.07.2022 @ page 487 of the paperbook).

128 It is respectfully submitted that the increase in purchases must be viewed in conjunction with the corresponding increase in revenue. As evident from the financial statements, the appellant’s revenue from operations during the relevant AY has grown approximately
1.5 times that of the preceding AY, whereas the purchase of traded goods have increased by approximately 1.4 times. The same is tabulated hereunder:

129
Particulars
Revenue from operations
Purchase of traded goods
Reference
AY 2021-
22
16,624
14,626
[A]
AY 2020-
21
11,412
10,505
[B]
Ratio
1.46 times
1.39 times
[C] =
[A]/[B]

130 It is evident from the above table that the rise in purchases is a direct and proportionate consequence of the expansion in the scale of operations and the increase in the volume of 39

goods sold by the appellant. Since the appellant is engaged in the business of trading and selling products through e-commerce platform, the volume of purchases naturally moves in line with the scale of sales made during the year.

131 During revisionary proceedings, specific query was raised by PCIT regarding the aforesaid issue and vide reply dated 28.12.2023, the appellant furnished a comprehensive response providing details of purchase of traded goods (@ pt C.5 (e) of the reply at pages 131 to 132 of PB).

132 It is submitted that despite the appellant furnishing detailed explanations and supporting documents during the course of revisionary proceedings, the PCIT failed to consider or even refer to these submissions in the impugned order. The PCIT, without dealing with any of the detailed factual submissions or rendering any finding thereon, proceeded to mechanically hold that the AO had failed to conduct adequate enquiries.

133 It is further the respectful submission of the appellant that all expenses incurred were duly vouched i.e., duly checked, verified and audited by the statutory auditors, while conducting audit of books of account for the relevant previous year. No adverse remarks have been pointed by the auditors in the audit report issued for the relevant previous year with respect to expenses claimed by the appellant. Each and every expense incurred by the appellant is supported by proper bills/ vouchers.

134 It may thus be appreciated that the PCIT has proceeded on completely incorrect facts in respect of the aforesaid issues without any application of mind, and on this count alone, the revisionary order calls for being quashed.

Re(vi): Huge claim of advertisement expenses
135 The PCIT, has in para(s) 11 at page(s) 35, observed that during the course of the assessment proceedings, the AO failed to make enquiries regarding the claim of advertisement expense amounting to INR 67.45 crores.

136 In this regard, it is submitted that the appellant operates in the e-commerce trading space, where visibility on digital platforms, customer acquisition, and promotion of product listings are critical for driving sales. It is a common industry practice that an e-commerce business must consistently invest in online advertisements, sponsored listings, digital campaigns, platform-based promotions and other similar endeavours to ensure that the products reach the intended customers.

137 In view of the aforesaid, it is submitted that such an expenditure is an essential and inseparable part of the appellant’s business model and is directly linked to generating revenue on the platform. Therefore, the advertisement expenses have been incurred wholly and exclusively for the purpose of business, which is deductible under section 37 of the Act.
40

138 In this regard, it is submitted that vide “Note 23 to the Audited Financial Statements –
Other Expenses”, full and complete disclosure in respect of the aforesaid expenditure was made in the audited financials of the appellant (furnished before the AO vide reply dated
12.07.2022 (@ page 487 of the PB).

139 That apart, during revisionary proceedings, specific query was raised by the PCIT regarding the aforesaid issue vide notice dated 12.12.2023 and vide reply dated
28.12.2023, the appellant furnished a comprehensive response in relation to the expenses incurred on advertisements (@ pt C.5 (f) of the reply at pages 132 to 133 of the PB).

140 Further, the appellant furnished copies of invoices in relation to advertisement expenses running into 9,657 pages, attached as Annexure A of the PB.

141 In so far as applicability of TDS provisions on advertisement expenses, it is submitted that the same was never confronted to the appellant during the course of revisionary proceedings. Even otherwise, due taxes had been deducted on the aforesaid payments, which is evident from the fact that no adverse qualification has been reported in the tax audit report (refer pgs 59 to 60 of the PB)

142 It is submitted that despite the appellant furnishing detailed explanations and supporting documents during the course of revisionary proceedings, the PCIT failed to consider or even refer to these submissions in the impugned order. The PCIT, without dealing with any of the detailed factual submissions or rendering any finding thereon, proceeded to mechanically hold that the AO had failed to conduct adequate enquiries.

143 It may thus be appreciated that the PCIT has proceeded on completely incorrect facts in respect of the aforesaid issues without any application of mind, and on this count alone, the revisionary order calls for being quashed.

144 It may thus be appreciated that the PCIT has proceeded on completely incorrect facts in respect of the aforesaid issues (i) to (vi) without any application of mind and on this count alone, the revisionary order calls for being quashed.

145 To summarize, in view of the above, it is submitted that the AO rightly accepted returned loss at INR 2,91,00,11,321 and thus, the assessment order was neither erroneous nor prejudicial to the interest of revenue for the following reasons:
(a) complete disclosures were made by the appellant and were a matter of record;
(b) pointed queries were raised by the AO on the impugned issues, which were duly responded by the appellant and all documents/ information sought by the AO
41

were filed during the course of assessment proceedings;
(c) the appellant was allowed the expenses only after conducting proper inquiries, scrutiny and examination of the documents submitted;
(d) the appellant, in any case, rightly claimed deduction of the expenses; therefore, the same has caused no prejudice to the interest of the revenue.

146 In the aforesaid circumstances, it is respectfully submitted that the AO order was neither erroneous nor prejudicial to the interests of the Revenue so as to warrant exercise of juri iction under section 263 of the Act. In that view of the matter, the impugned order dated 28.03.2025 needs to be quashed on the ground of being devoid of juri iction and bad in law.

Re: (b) View taken by assessing officer is a plausible view in law
147 On perusal of the above, it is submitted that apart from the fact that there was no error whatsoever, in the AO order, the view adopted therein, for all the aforesaid issues dealt in extenso supra was, in any case, a plausible view and thereby no interference is called for in terms of section 263 of the Act. The view taken by the assessing officer cannot, by any stretch of argument, be regarded as unsustainable in law, so as to be regarded as “erroneous” warranting exercise of revisionary juri iction.

148 It is trite law that if the view taken by the assessing officer is a plausible view in law, the assessment order passed cannot be regarded as “erroneous”, much less prejudicial to the interests of the Revenue. It has been consistently held by the Courts that if the assessing officer has adopted one of the courses permissible in law which has resulted in loss of revenue, or where two views are possible and the assessing officer has taken one view with which the Commissioner does not agree, the exercise of revisionary power under section 263 of the Act would not be within juri iction.

149 It is further settled law that if the assessing officer has adopted one of the courses permissible in law which has resulted in alleged loss of revenue, or where two views are possible and the assessing officer has taken one view with which the Commissioner does not agree, the exercise of revisionary power under section 263 of the Act would be without juri iction [refer, Malabar Industrial (supra), Max India (supra), CIT vs. Kwality Steel
Suppliers Complex (supra)].

150 Reliance, in this regard is further placed on the following decisions, wherein although no enquiry was conducted by the AO on the issue raised by the CIT, however, considering sufficient details/information/disclosures were available on record to form an opinion on the matter, even then, it was held that there was no error in the assessment order and, accordingly, the juri iction assumed under section 263 was quashed:
- CIT v. DLF Ltd.: 350 ITR 555 (Del.)
- CIT v. International Travel House Ltd.: 344 ITR 554 (Del.)
- Gulmohar Finance Ltd.: 170 Taxman 483 (Del.)
42

- CIT v. Leisurewear Exports: 341 ITR 166 (Del.)
- CIT v. Hero Auto Ltd.: 343 ITR 342 (Del.)
- CIT v. Escorts Ltd.: 338 ITR 435 (Del.)

151 For the aforesaid reason, too, it is respectfully submitted that the revisionary proceedings initiated under section 263 of the Act is wholly without juri iction since the view taken by the assessing officer is, in any case, a plausible view in law, which cannot be regarded as erroneous, much less prejudicial to the interests of the Revenue.

Re (c): Lack of enquiry vs. Inadequate Enquiry
152 It is well settled law that if the concerned officers, acting in accordance with law makes an assessment, the same could not be regarded as erroneous, simply because according to PCIT more enquiries should have been conducted by such officer or the order should have been written more elaborately. In other words, juri iction under section 263 of the Act cannot be invoked for making further enquiries or to go into the process of assessment again and again, merely on the basis that more enquiries ought to have been conducted to find something.

153 There is, it is respectfully submitted, a distinction between “lack of enquiry” and “inadequate enquiry”. While in the former case, the assessment order may be regarded as “erroneous”, but that would not be so in the latter case where enquiry had actually been conducted by the concerned officer, even though the PCIT may not agree with the nature and manner of conducting enquires.

154 As a necessary corollary, when on a particular issue, the AO conducted certain enquiries during the course of proceedings, such order cannot, it is submitted, be regarded as erroneous so as to exercise revisionary juri iction under section 263 of the Act.

155 In simple words, where an issue has been examined by the AO, the PCIT cannot set aside the assessment merely because according to the PCIT enquiries should have been conducted in a particular manner and/ or further enquiries ought to have been conducted by the AO. PCIT cannot substitute his opinion in place of that of the AO as to the manner and the form in which the enquiries should have been conducted during the course of assessment.
-
PCIT v. NYA International: [2025] 173 taxmann.com 102 (Guj.) – Revenue’s
SLP dismissed in [2025] 173 taxmann.com 103 (SC)
-
PCIT v. Clix Finance India (P.) Ltd.: [2025] 473 ITR 650 (Delhi)
-
CIT vs. Sunbeam Auto Ltd: 332 ITR 167 (Del)

-
CIT v. International Travel House: 344 ITR 554 (Del)
-
CIT vs. Vikas Polymers: 341 ITR 537 (Del)
-
Gulmohar Finances Limited: 170 Taxman 483 (Del.)
-
Fab India Overseas vs. CIT: 244 CTR 380 (Del.)
-
CIT vs. Vodafone Essar: 212 Taxman 184 (Del.)
43

-
CIT vs. DLF Ltd.: 350 ITR 555 (Del)
-
CIT v. Ratlam Coal Ash Co: 171 ITR 141 (MP)
-
CIT vs. Ganpat Ram Bishonoi: 152 Taxman 242 (Raj.)
-
CIT vs. Mehrotra Brothers: 270 ITR 157 (MP)
-
CIT vs. Associated Food Profits (P) Ltd.: 280 ITR 377 (MP)
-
CIT vs. Development Credit Bank Ltd: 323 ITR 206 (Bom.)
-
Bharti Airtel Ltd. v. PCIT: [2025] 171 taxmann.com 754 (Delhi – Trib.)

156 It is respectfully submitted that, in the aforesaid circumstances, the AO order dated
15.12.2022 was not ‘erroneous’ or ‘prejudicial to the interests of the Revenue’
warranting exercise of revisionary juri iction under section 263 of the Act.

Re (d): CIT to record prima facie finding on merits before setting aside the assessment
157 The Courts have held that the CIT while exercising revisionary powers under section 263
of the Act and setting aside the assessment order , is required to record prima-facie finding on the merits of the matter after conducting necessary enquiry(ies) and is not empowered to blanketly set aside the assessment order on the ground that sufficient enquiries were not conducted by the assessing officer; the order of the AO cannot be set aside for making deep inquiry only on the presumption and assumption that something new may come out.:
 PCIT v. V-Con integrated Solutions (P.) Ltd.: 173 taxmann.com 773 (P&H) - SLP dismissed by Supreme Court in 173 taxmann.com 774 (SC)
 PCIT vs. Prabhu Poly Pipes Ltd.: 481 ITR 503 (Cal) - SLP dismissed by Supreme
Court in 481 ITR 506 (SC)
 ITO v. DG Housing Projects Ltd.:343 ITR 329 (Del.)
 DIT v. Jyoti Foundation: 357 ITR 388 (Del.)
 CIT v. Leisure Wear Exports Limited: ITA No.1165/2007 (Del)
 CIT v. Delhi Airport Metro Express (P) Ltd.: ITA No. 705/2017 (dated 5.9.2017)
 CIT v. Modicare Ltd.: 759/2016 (dated 20.9.2017)
 CIT v. Prithvi Raj And Co.: 199 ITR 424 (Del)
 CIT v. O. P. Seth: 201 ITR 635 (Del)
 CIT, Mysore v. T. Narayana Pai : 98 ITR 422 (Kar)
 J.P.Srivastava And Sons (Kanpur) Ltd. v. CIT, UP: 111 ITR 326 (All)
 S.B.Sankar v. State of Kerala and Another: 171 ITR 689 (All)
 CIT v. Kanda Rice Mills: 178 ITR 446 (P&H)
 CIT, Patiala v. Chawla Trunk House: 139 ITR 182 (P&H)

158 In the facts of the present case, the Pr. CIT, in respect of all the issues, have merely held that further enquiry and examination is required, without even recording as to how the assessment order sought to be revised is erroneous on such issues; no error whatsoever has been pointed out regarding the said claims made by the appellant and allowed by the assessing officer after due examination. The exercise of revisionary powers under section 263 of the Act on such grounds is clearly impermissible in law.

Re (e): Explanation 2 to section 263 relied upon by PCIT
159 In the impugned order passed under section 263 of the Act, the PCIT has harped upon 44

Explanation 2 to section 263 of the Act to hold that non-conduct of proper enquiry by the AO renders the order erroneous and prejudicial to the interest of the Revenue.

160 In this regard, it is submitted that the aforesaid Explanation cannot, in our respectful submission, be read to provide unfettered powers to the PCIT to set aside an assessment order, on a paltry ground of insufficient enquiry being conducted by the AO, at his whims and fancies.

161 Even after insertion of the aforesaid Explanation, the PCIT, is, in our respectful submission, required to point out failure on the part of the AO in not conducting relevant enquiries which were not only critical for decision on an issue but also an enquiry which “should have been done” and has not been done, before branding the AO order to be erroneous and prejudicial to the interest of the Revenue.

162 To reiterate, for the sake of emphasis, the law mandates the PCIT to show that certain enquiry “should have been done” and has not been done, before invoking Explanation
2 to section 263 of the Act.

163 Any or every alleged failure on the part of the AO in conducting an enquiry would not, in our respectful submission, validate assumption of juri iction by the PCIT under section 263 of the Act, in accordance with the consistent view of the Courts referred supra, unless the PCIT can demonstrate that the enquiries or verification conducted by the AO was not in accordance with the enquiries or verification that would have been carried out by a prudent officer.

164 Reliance is placed on the following decisions, wherein it has been held that Explanation 2
to section 263 of the Act does not authorize or give unfettered powers to CIT to revisit each and every order:
 PCIT vs. Shreeji Prints Pvt. Ltd.: TA No. 828 of 2019 (Guj) [Revenue’s SLP dismissed in [2021] 130 taxmann.com 294 (SC)]
 PCIT vs. Harikrishan S Virmani: ITA No. 164 of 2019 (Guj)
 Bagrrys India Ltd., v. Pr.CIT: ITA No.3785 of 3018 (Del)
 M/s Arun Kumar Garg HUF vs. Pr.CIT (ITA No. 3391/Del/2018 (Del)
 Pr. CIT vs. Indian Farmers & Fertilizers Co-operative Ltd.: ITA No. 597/2017 (Del)
 Amira Enterprises Ltd vs PCIT in ITA No 3206/Del/2017 dated 29/11/2017 (Del)
 Narayan Tatu Rane v. ITO: [2016] 70 taxmann.com 227 (Mum)
 Shree Bhagawati Enterprises vs. PCIT: ITA No. 525 of 2016 (Mum)
 Torrent Pharmaceuticals Ltd vs. DCIT: ITA No.164 of 2018 (Ahd.)
 Shri Narasimha Reddy Peechu v. ITO: ITA No. 932 of 2017

165 In the light of the aforesaid settled legal position, it is the respectful submission of the appellant that the impugned order under section 263 of the Act is without juri iction and bad in law, since the pre-requisite twin conditions for invoking juri iction under the said section have not been fulfilled qua the order of the AO.
45

Re (f): Assessment completed by NaFAC cannot be subjected to revisionary proceedings
166 It is of utmost important to note that in the present case the assessment order dated
15.12.2022 was passed by the NaFAC under section 143(3) r.w.s. 144B of the Act and not by the Juri ictional Assessing Officer (JAO). It is submitted that the order so passed by the NaFAC cannot be subjected to revisionary proceedings under section 263 of the Act for the reasons stated hereunder:

167 It is respectfully submitted that procedure of faceless assessment under the Faceless
Assessment Scheme notified as per section 144B is a complete code in itself. The said section and the faceless assessment scheme, it is submitted, contains a robust mechanism for completion of assessment inasmuch as the assessment is subjected to various inbuilt checks and balances to the complete exclusion of the JAO.

168 It is submitted that the Scheme lays down a comprehensive procedure for faceless assessment, which functions under the overall superintendence and control of the Principal
Chief Commissioner or the Principal Director General, as specified by the Central Board of Direct Taxes (CBDT). Further, NaFAC comprises of assessment units, verification units, technical units and review units, who functions as part of the faceless assessment centre to facilitate and conduct faceless assessment in a seamless manner.

169 As per the scheme of faceless assessment, before an assessment order is finalized, a draft assessment order is prepared, which is subject to various inbuilt checks and balances, including but not limited to the assessment being subjected to review by the review unit and its examination by the NaFAC in accordance with the risk management strategy specified by the Board. Subject to such checks and balance incorporated as integral part of faceless assessment, the final assessment order is passed.

170 On perusal of the aforesaid, it will thus kindly be appreciated that an assessment order passed by the NaFAC is, before its finalization, not only examined extensively by the assessment unit but is also subjected to internal review and has to pass through the risk management strategy.

171 Having regard to the aforesaid comprehensive procedure of assessment, it is submitted that there is hardly any scope left for an assessment order to have been passed in a manner prejudicial to the interests to the Revenue. This is precisely the reason, the Legislature, it is submitted, has not conferred any revisionary power under section 263 for revision of an assessment order passed by the NaFAC.

172 In such circumstances, it is respectfully submitted that the assessment order passed by the NaFAC cannot, on mere apprehension/ suspicion, be regarded as having been passed without undertaking adequate inquiries/ examination, more particularly on the issue for which the assessment was picked-up for scrutiny so as to be regarded as erroneous and/ or prejudicial to the interests of the revenue. An order passed by the NaFAC cannot therefore, in the ordinary course, and/ or routinely be regarded as erroneous and be subjected to revisionary proceedings under section 263 of the Act.
46

173 In fact, it is pertinent to note that section 263 nowhere refers to an assessment order passed by the NaFAC under section 144B of the Faceless Assessment Scheme to be subjected to revisionary juri iction. It only confers revisionary juri iction to revise any order passed by the ‘Assessing Officer’ or the ‘Transfer Pricing Officer’.

174 Thus, it is submitted that the PCIT has erred in invoking revisionary juri iction under section 263 of the Act qua assessment completed by NaFAC under section 143(3) r.w.s.
144B of the Act, which is a complete code in itself.

Re (g): Other Juri ictional Issues
175 Independent of the above, it is further submitted that the impugned revisionary order is illegal, bad in law and liable to be quashed/ set aside inasmuch as the same has been passed by the PCIT in undue haste and without:
a) affording a reasonable opportunity of being heard; b) considering the submissions filed (explained issue wise supra); and c) first disposing off the legal objections by passing a separate speaking order [refer NIIT Ltd vs. UOI WP(C) No.4722/2008 and 172-177/2009 (Del)]

176 In view of the above, it is submitted that the impugned revisionary order having been passed in blatant violation of statutory mandate and in violation of principles of natural justice, is without juri iction, illegal, bad in law, void ab initio and liable to be quashed.”

have devolve, and upon whom the liability in the event it is adjudicated would fall. He further objected to the submissions of the learned AR that the order under Section 263 of the was passed in the name of a non-existing entity as void ab initio. In this regard, he made further submissions relying on the decision of Mahagun Realtors Private Limited, specifically referring to paragraphs 28 and 30
of the order. Further, with regard to the corrigendum passed by the learned PCIT, he submitted that the corrigendum was passed suo motu and therefore the same is proper, as it merely rectifies the above defect in passing the order in the name of a non-existing entity. He further relied on the decision of the Hon’ble Supreme
Court, wherein the Hon’ble Delhi High Court held that human errors and mistakes cannot and should not nullify proceedings which are otherwise valid, particularly when no prejudice has been caused. This is the affect and the mandate of Section 292B of the Act. Further, he submitted that there is no prejudice has been caused to the assessee. With regard to the validity of the rectification, the learned DR relied on the decision of the ITAT Chennai Bench in the case of Rajkumari Gulecha, and brought to our notice following verdict of the Bench:
“1. Validity of Rectification: If the corrigendum was issued immediately
(e.g., the next day) to correct a palpable mistake or an "Inadvertent punching error," it is considered a valid exercise of administrative/quasi- judicial rectification.
48

the Act in the name of non-existent entity, in our view, which is issued properly as per law in the existing entity name at that point in time.
11. With regard to order passed u/s 263 of the Act, we observed that Ld PCIT had in fact issued in the name of non-existent entity even though it is brought to the notice of amalgamation vide letter dated 20.02.2024. Before we get into the validity of the above order, we observed that Ld PCIT had passed a corrigendum and rectified the above mistake vide order dated 29.03.2025, which is next date of passing the impugned order. Whether the corrigendum passed against the revisionary order is valid or not is the issue raised before us. We observed that Ld
AR vehemently argued that an order or notice passed in the name of a non- existent entity is void from the outset void ab initio and this fundamental juri ictional defect cannot be cured by a subsequent corrigendum. As discussed above, we noticed that the notice issued by the Ld PCIT on 12.12.2023 is proper since the erstwhile entity was in existence at the time of issue of notice. With regard to the revisionary order, the amalgamation scheme was sanctioned only on 15.01.2024 with effect from 01.04.2022, the present order being the first order passed subsequent to the approval of the scheme. No doubt the Ld PCIT initially made a mistake by passing the order in the name of the non-existent entity; however, he observed that there is fatal error in passing the impugned order, he rectified the same by passing the corrigendum on the next date itself. Therefore,
51

in our considered view the corrigendum passed is proper. Further, we observed that the decision relied by the assessee are, on the decision of Vijay Television
(P) Ltd (supra), the decision rendered by the Hon’ble Madras High Court on the issue of final assessment order u/s 143(3) of the Act instead of passing a draft assessment order u/s 144C of the Act, there being violation of procedure prescribed under the Act, impugned order was to be set aside and in such a case, even corrigendum issued modifying the final order could not be cured. Whereas in the given case, there is no violation of any procedure prescribed in the Act. It is mere non-consideration of the submissions of the assessee, which could have been fatal to the proceedings, however it was rectified by passing corrigendum, it is only a inadvertent mistake. With regard to decision of Oracle India (P) Ltd
(supra) case, we observed that issue involved was draft assessment order was not passed in accordance with procedure laid down in the section 144C of the Act instead passed final assessment order though within limitation period, then such an order cannot be cured after limitation has expired. This case is also distinguishable to the fact in the present case. Even in the Noth Shore
Technologies (P) Ltd (supra) case also the issue was similar to the facts in the Oracle India Case. Hence, the case laws relied by the assessee are distinguishable to the facts in the present case. Finally, in our considered view, the order passed u/s 263 with the erstwhile name is bad in law however, the Ld PCIT had realized
52

the above mistake and passed the corrigendum on the next date itself and there is no involvement of any procedural mistake or contravention to any of the provisions of the existing Act, we do not see any reason to treat the order passed u/s 263 as bad in law. Therefore, the corrigendum passed to rectify the proper name of the assessee in the order passed with the erstwhile name is proper.
Therefore, we are inclined to dismiss the relevant grounds raised by the assessee relating to the order passed in the name of non-existing entity as well as on the issue of corrigendum.
12. The next issue raised by the assessee that whether the revisionary order passed u/s 263 has not passed the test of pre-requisite twin conditions that it is erroneous and prejudicial to the interest of the revenue. They relied on the decisions in the case of Malabar Industrial, Max India and Kwality Steel (supra) wherein it was held that twin conditions had to be fulfilled. We noticed that subsequent to the amendment and clarification on the definition to the term
‘erroneous’ was brought in the section itself in the form of explanation, it is enough to prove that the AO had passed the order without making inquiries or verification which should have been made. In the given case, we observed that the assessing officer had asked several information by issue of questionnaires and assessee also submitted the same time to time. However, the assessment was completed without making any enquiries which he should have made, we
53

observed from the detailed observations and detailed submissions made by the assessee during the revisionary proceedings. It clearly shows that the AO had not applied his mind during the assessment proceedings and merely accepted the various documents submitted by the assessee either not understood the nature of the business of the assessee or by negligence. Therefore, after considering the detailed findings and submissions of the assessee, in our view the order passed by the AO without making enquiries which he should have is erroneous.
13. The next issue is whether the order passed is prejudicial to the interest of revenue, we observed that in the issue of provision for doubtful advances and provision for slow and ageing goods, it was submitted before the AO that the assessee had claimed provision for doubtful advances in the AY 2020-21 and the same was reversed, in support it had submitted ROI and computation for AY
2020-21 substantiate that the said expenses had been duly disallowed. The assessee had created the provision and reversed it suo motto and disallowed the same in the computation in the previous assessment year, is the above expenditure automatically eligible to claim in the present year, in our view, it is not justified to claim the same without bringing on record relevant details and rationale to do so. This issue was never confronted to the assessee. Similarly, the issue of Provision for slow and ageing goods, this issue also the assessee had made the submissions similar to the provision created for doubtful advances. In our view,
54

the explanation offered and acceptance by the AO without proper verification on the eligibility to claim the same without proper enquiry is prejudicial to the interest of the revenue.
14. With regard to the related party transactions, no doubt the assessee had submitted the audit report and finance disclosures to substantiate the same, but we noticed that the transactions are disclosed in the gross manner, whether the related parties include the entities of Amazon, which had global presence, whether the transactions made with Amazon within the reasonableness. In our view, the details provided in the financial statement are not commensurate with the full disclosure as observed by Ld PCIT in the impugned order. No doubt there is no requirement when there is no international transaction with related parties, however, when the disclosures are made by following the IndAS-24, it was disclosed as per the category, however, AO is not precluded to ask and investigate the same. It was also submitted that IndAS does not necessitate the disclosure of the name of the related parties, however, tax authorities can ask for and make verification, the assessee is duty bound to submit the same. Even during the revisionary proceedings, nothing was submitted. No doubt in the AO cannot invoke the transfer pricing provision in the absence of international transactions, however, the AO can verify the reasonableness of the related party transaction by invoking the provisions of section 40A(2) of the Act. In the submissions made
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before us, it was submitted that the related party transactions are disclosed under clause 23 of the tax audit report, mere submission without proper enquiry by the AO, particularly the assessee had disclosed the transactions party wise, nature and payment details, it is the duty of the AO to verify whether they are reasonable and within the range of the industry. Therefore, even in one of the above transactions are not properly verified as the AO supposed to have verified, which is erroneous as well as prejudicial to the interest of the revenue. In our considered view, there exist twin conditions of failure in the order passed u/s 143(3) of the Act. Therefore, we are inclined to reject the plea of the assessee and the case law relied by the assessee are distinguishable to the fact in the present case particularly after the insertion of the definition of erroneous in so far as it is prejudicial to the interest of revenue in the Act itself.
15. Further, Ld. AR made elaborate submissions that the AO had made specific enquiries and the assessee had responded, similarly the assessee had submitted the various information during the revisionary proceedings. After considering the detailed submissions, no doubt all the details were submitted before the AO and AO had miserably failed to enquire which he should have. The data involved in the present case is huge and it is not possible to verify at this stage, therefore the same was set aside to the AO to complete the assessment de novo.
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CBDT. Further they are comprised of assessment units, verification units, technical units and review units, who functions as part of the faceless assessment
Center in a seamless manner. Further it was submitted that the comprehensive procedure of assessment, there is hardly any scope left in the assessment order to have been passed in a manner which is prejudicial to the interests of the revenue.
Therefore, there is no scope to initiate proceedings u/s 263 of the Act. After considering the above submissions, we are inclined to reproduce section 144B of the Act below:
“144B. (1) Notwithstanding anything to the contrary contained in any other provision of this Act, the assessment, reassessment or recomputation under sub-section (3) of section 143 or under section 144 or under section 147, as the case may be, with respect to the cases referred to in sub-section (2), shall be made in a faceless manner as per the following procedure, namely:—
xxx
(i) the National Faceless Assessment Centre shall assign the case selected for the purposes of faceless assessment under this section to a specific assessment unit through an automated allocation system; xxx
(ii) the National Faceless Assessment Centre shall intimate the assessee that assessment in his case shall be completed in accordance with the procedure laid down under this section;
(iii) a notice shall be served on the assessee, through the National Faceless
Assessment Centre, under sub-section (2) of section 143 or under sub- section (1) of section 142 and the assessee may file his response to such 58

notice within the date specified therein, to the National Faceless Assessment
Centre which shall forward the same to the assessment unit;
(iv) where a case is assigned to the assessment unit, under clause (i), it may make a request through the National Faceless Assessment Centre for—
(a) obtaining such further information, documents or evidence from the assessee or any other person, as it may specify;
(b) conducting of enquiry or verification by verification unit;
(c) seeking technical assistance in respect of determination of arm's length price, valuation of property, withdrawal of registration, approval, exemption or any other technical matter by referring to the technical unit;
(v) where a request under sub-clause (a) of clause (iv) has been initiated by the assessment unit, the National Faceless Assessment Centre shall serve appropriate notice or requisition on the assessee or any other person for obtaining the information, documents or evidence requisitioned by the assessment unit and the assessee or any other person, as the case may be, shall file his response to such notice within the time specified therein or such time as may be extended on the basis of an application in this regard, to the National Faceless Assessment Centre which shall forward the reply to the assessment unit;
(vi) where a request,—
(a) for conducting of enquiry or verification by the verification unit has been made by the assessment unit under sub-clause (b) of clause
(iv), the request shall be assigned by the National Faceless
Assessment Centre to a verification unit through an automated allocation system; or (b) for reference to the technical unit has been made by the assessment unit under sub-clause (c) of clause (iv), the request shall be assigned
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by the National Faceless Assessment Centre to a technical unit through an automated allocation system;
(vii) the National Faceless Assessment Centre shall send the report received from the verification unit or the technical unit, as the case may be, based on the request referred to in clause (vi) to the concerned assessment unit;
(viii) where the assessee fails to comply with the notice served under clause (v) or notice issued under sub-section (1) of section 142 or the terms of notice issued under sub-section (2) of section 143, the National Faceless Assessment Centre shall intimate such failure to the assessment unit;
(ix) the assessment unit shall serve upon such assessee, as referred to in clause (viii), a notice, through the National Faceless Assessment
Centre, under section 144, giving him an opportunity to show- cause on a date and time as specified in such notice as to why the assessment in his case should not be completed to the best of its judgment;
(x) the assessee shall, within the time specified in the notice referred to in clause (ix) or such time as may be extended on the basis of an application in this regard, file his response to the National Faceless
Assessment Centre which shall forward the same to the assessment unit;
(xi) where the assessee fails to file response to the notice served under clause (ix) within the time specified therein or within the extended time, if any, the National Faceless Assessment Centre shall intimate such failure to the assessment unit;
(xii) the assessment unit shall, after taking into account all the relevant material available on the record, prepare, in writing,—
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(a) an income or loss determination proposal, where no variation prejudicial to assessee is proposed and send a copy of such income or loss determination proposal to the National Faceless
Assessment Centre; or (b) in any other case, a show cause notice stating the variations prejudicial to the interest of assessee proposed to be made to the income of the assessee and calling upon him to submit as to why the proposed variation should not be made and serve such show cause notice, on the assessee, through the National Faceless
Assessment Centre;
(xiii) the assessee shall file his reply to the show cause notice served under sub- clause (b) of clause (xii) on a date and time as specified therein or such time as may be extended on the basis of an application made in this regard, to the National Faceless Assessment Centre, which shall forward the reply to the assessment unit;
(xiv) where the assessee fails to file response to the notice served under sub- clause (b) of clause (xii) within the time specified therein or within the extended time, if any, the National Faceless Assessment Centre shall intimate such failure to the assessment unit;
(xv) the assessment unit shall, after considering the response received under clause (xiii) or after receipt of intimation under clause (xiv), as the case may be, and taking into account all relevant material available on record, prepare an income or loss determination proposal and send the same to the National Faceless Assessment Centre;
(xvi) upon receipt of the income or loss determination proposal, as referred to in sub-clause (a) of clause (xii) or clause (xv), as the case may be, the National
Faceless Assessment Centre may, on the basis of guidelines issued by the Board,—
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(a) convey to the assessment unit to prepare draft order in accordance with the income or loss determination proposal, which shall thereafter prepare a draft order; or (b) assign the income or loss determination proposal to a review unit through an automated allocation system, for conducting review of such proposal;
(xvii) the review unit shall conduct review of the income or loss determination proposal assigned to it by the National Faceless Assessment Centre, under sub-clause (b) of clause (xvi), whereupon it shall prepare a review report and send the same to the National Faceless Assessment Centre;
(xviii) the National Faceless Assessment Centre shall, upon receiving the review report under clause (xvii), forward the same to the assessment unit which had proposed the income or loss determination proposal;
(xix) the assessment unit shall, after considering such review report, accept or reject some or all of the modifications proposed therein and after recording reasons in case of rejection of such modifications, prepare a draft order;
(xx) the assessment unit shall send such draft order prepared under sub-clause
(a) of clause (xvi) or under clause (xix) to the National Faceless Assessment
Centre;
(xxi) in case of an eligible assessee, where there is a proposal to make any variation which is prejudicial to the interest of such assessee, as mentioned in sub-section (1) under section 144C, the National Faceless Assessment
Centre shall serve the draft order referred to in clause (xx) on the assessee;
(xxii) in any case other than that referred to in clause (xxi), the National Faceless
Assessment Centre shall convey to the assessment unit to pass the final assessment order in accordance with such draft order, which shall thereafter pass the final assessment order and initiate penalty proceedings, if any, and send it to the National Faceless Assessment Centre;
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(xxiii) upon receiving the final assessment order as per clause (xxii), the National
Faceless Assessment Centre shall serve a copy of such order and notice for initiating penalty proceedings, if any, on the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment;
(xxiv) where a draft order is served on the assessee as referred to in clause (xxi), such assessee shall,—
(a) file his acceptance of the variations proposed in such draft order to the National Faceless Assessment Centre; or (b) file his objections, if any, to such variations, with—
(I) the Dispute Resolution Panel, and (II) the National Faceless Assessment Centre, within the period specified in sub-section (2) of section 144C;
(xxv) the National Faceless Assessment Centre shall,—
(a) upon receipt of acceptance from the eligible assessee; or (b) if no objections are received from the eligible assessee, within the period specified in sub-section (2) of section 144C, intimate the assessment unit to complete the assessment on the basis of the draft order;
(xxvi) the assessment unit shall, upon receipt of intimation under clause (xxv), pass the assessment order, in accordance with the relevant draft order, within the time allowed under sub-section (4) of section 144C and initiate penalty proceedings, if any, and send the order to the National Faceless
Assessment Centre;
(xxvii) where the eligible assessee files objections with the Dispute Resolution
Panel, under sub-clause (b) of clause (xxiv), the National Faceless
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Assessment Centre shall send such intimation along with a copy of objections filed to the assessment unit;
(xxviii) the National Faceless Assessment Centre shall, in a case referred to in clause (xxvii), upon receipt of the directions issued by the Dispute
Resolution Panel under sub-section (5) of section 144C, forward such directions to the assessment unit;
(xxix) the assessment unit shall, in conformity with the directions issued by the Dispute Resolution Panel under sub-section (5) of section 144C, complete the assessment within the time allowed in sub-section (13) of section 144C and initiate penalty proceedings, if any, and send a copy of the assessment order to the National Faceless Assessment Centre;
(xxx) the National Faceless Assessment Centre shall, upon receipt of the assessment order referred to in clause (xxvi) or clause (xxix), as the case may be, serve a copy of such order and notice for initiating penalty proceedings, if any, on the assessee, along with the demand notice, specifying the sum payable by, or the amount of refund due to, the assessee on the basis of such assessment;
(xxxi) the National Faceless Assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing
Officer having juri iction over the said case for such action as may be required under the provisions of this Act;
(xxxii) if at any stage of the proceedings before it, the assessment unit having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of accounts, multiplicity of transactions in the accounts or specialised nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary to do so, it may, upon recording its reasons in writing, refer the case to the National Faceless Assessment Centre stating that the provisions of sub-section (2A) of section 142 may be invoked and such 64

case shall be dealt with in accordance with the provisions of sub-section (7).
19. We observed from the above section, as per the clause wise provisions, the faceless assessment process are:
a. The NFAC assigns the case selected under this section to a specific assessment unit (AU) through an automated allocation system. The NFAC to intimate the assessee that the assessment shall be completed under this section. Accordingly, the notices shall be issued to the assessee and the assessee to file their response.
b. Where a case is assigned to the AU, the AU can make a request through
NFAC for obtaining further information etc., for conducting enquiries by verification unit (VU) and seeking technical assistance by referring to technical unit (TU).
c. Where a request for conducting enquiry or verification by the verification unit, it will be assigned by the NFAC to a verification unit through an automated allocation system, similarly for reference to the technical unit, the request shall be assigned by the NFAC to a technical unit through automated allocation system.
d. NFAC shall send the report received from the VU or TU to the concerned
AU. In case of failure on the part of the assessee to respond the various
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notices issued, the same shall be intimated to the AU to complete the assessment under the law.
e. The AU shall, after taking into account all the relevant material on the record to prepare in writing a proposal, where no variation prejudicial to the assessee and send the above proposal to the NFAC or in other cases, a show cause notice stating the variations prejudicial to the interest of the assessee and calling upon the assessee to submit s to why the proposed variation should not be made to the NFAC. NFAC will collect the response from the assessee and forward the same to the AU. When the assessee fails to respond, the same will also be intimate such failure to the AU.
f. After considering the response from the assessee and taking into account all the relevant material available on record, AU will prepare an income or loss determination proposal and send the same to NFAC.
g. NFAC upon receipt of the above proposal may either convey to the AU to prepare a draft order or assign the same to the review unit (RU) through an automated allocation system, for conducting review of such proposal.
h. RU will conduct review the above proposal forwarded by the NFAC, RU will prepare the report and send the same to the NFAC. The NFAC will forward the review report to the AU.
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i. The AU shall, after considering such review report, accept or reject some or all of the modifications proposed therein and after recording the reasons in case of rejection prepare a draft order. The AU shall send the draft order to NFAC.
j. The procedure for eligible assessee is slightly different to the normal assessment proceedings. With regard to eligible assessee, the draft assessment order will be sent to them and upon receipt of response from such assessee, final assessment order will be prepared on the direction of NFAC by the AU. With regard to other assessee, draft assessment order is served on the assessee and upon receipt of acceptance of the variations proposed in such draft order, NFAC will direct the AU to pass final assessment order. The above said final assessment order shall be served on the assessee.
20. From the above, we observed that the NFAC is the intermediary between the AU and the other service providers to complete the assessment proceedings.
The NFAC is being controlled by the PCCIT as an administrator or controller.
Their duty is to smooth functioning of the assessment proceedings, and they do not have any control over the assessment proceedings perse individually. It is important and relevant to notice that the AU has absolute control over the assessment, it takes relevant assistance from the NFAC and even after assigning
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the proposal to the RU, still the AU has absolute control over the assessment, it has got power to accept the suggestions of review unit partially or reject whole suggestions of the RU. In our view, AU is the faceless or invisible JAO to complete the assessment of the relevant assessee. Therefore, as per the provisions of section 144B, the assessment is being completed as per the old procedure except the NFAC has equipped AU, is made more robust to assist the AU and the final say is with the AU only. Even though there are several criteria to evaluate the proceedings in fixed time line, still no other authorities are interfering into the assessment proceeding carried on by the AU. Therefore, assessment completed by the AU, which is the faceless JAO in the faceless regime, the order passed by the NFAC is always subjected to the revisionary juri iction u/s 263 of the Act.
Therefore, PCIT has juri iction over the cases passed by the NFAC or the JAO irrespective of the fact that the relevant assessment was completed physical mode or faceless mode. Hence, the ground raised by the assessee is accordingly rejected.
21. The other juri ictional issues raised by the assessee like, no reasonable opportunity of being heard was not afforded, not considered the submissions filed and first disposing off the legal objections by passing a separate speaking order.
In our view, these are already addressed by the Ld PCIT in the speaking order, he has power to dispose off the objections raised before him either in a separate
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speaking order or in the revisionary order itself. Therefore, we do not inclined to interfere with that.
22. In the result, grounds raised by the assessee are dismissed.
23. In the result, appeal filed by the assessee is dismissed.
Order pronounced in the open court on this 18th March, 2026. (VIMAL KUMAR)
ACCOUNTANT MEMBER

Dated: 18 .03.2026
Binita, Sr. PS