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Facts
The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under Section 263 of the Income Tax Act for Assessment Year 2018-19, finding the assessment order erroneous and prejudicial. The PCIT identified two issues: non-disallowance of amounts for non-deduction of TDS under Section 40(a)(ia) on commission/brokerage and professional fees, and a lack of certification in the audit report regarding the acceptance of loans/deposits through banking channels, which the Assessing Officer (AO) had not verified.
Held
The Tribunal noted that the assessee had already explained to the PCIT that TDS was duly deducted, advance payments were correctly accounted for, and loans were received via banking channels (citing a clerical error in the audit report). It was also established that the AO had previously examined these issues during assessment. The Tribunal concluded that the PCIT passed the revision order mechanically, without considering the assessee's explanations or valid reasoning, thus the original assessment order was neither erroneous nor prejudicial to the revenue.
Key Issues
Whether the PCIT's revision order under Section 263 of the Income Tax Act was justified when the assessee had already provided comprehensive explanations to both the AO and PCIT regarding TDS deductions and the mode of acceptance of loans/deposits, and the AO had duly examined these matters.
Sections Cited
263, 40(a)(ia)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “ A” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Shri Narendra Prasad Sinha
Year : 2018-19 Arvind Lifestyle Brands Ltd. The PCIT, Ahmedabad-1 बनाम/ Formerly knowns as Ahmedabad – 380 015 v/s. Arvind Retail Ltd. Arvind Mills Premises Naroda Road Ahmedabad – 382 345 "थायी लेखा सं./PAN: AAACH 7252 A (अपीलाथ'/ Appellant) (!( यथ'/ Respondent) Assessee by : Shri Vartik Chokshi, AR Revenue by : Shri Alpesh Parmar, CIT-DR सुनवाई की तारीख/Date of Hearing : 15/09/2025 घोषणा की तारीख /Date of Pronouncement: 09/12/2025 आदेश/O R D E R
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the revision order passed by the Principal Commissioner of Income Tax, Ahmedabad-1 (hereinafter referred to as “PCIT”) dated 12/03/2024 u/s.263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year (AY) 2018-19.
At the outset, the Ld. Counsel for the assessee has invited our attention to the impugned order of the Ld. PCIT to show that the Ld. PCIT has Arvind Lifestyle Brands Ltd., Formerly known as Arvind Retail Ltd., vs. Pr.CIT Asst. Year : 2018-19 exercised his revision jurisdiction on two counts. Firstly, that the assessee had paid commission & brokerage amount of Rs.14,76,51,578/- and fees for professional or technical services of Rs.49,53,72,108/-. However, neither the AO nor the assessee has disallowed the said amount for non-deduction of TDS u/s.40(a)(ia) of the Act. Secondly, in the Audit Report , the Auditors had not certified that the loan/deposit had not been taken or accepted by cheque or bank draft or electronic clearing system through bank account and that the AO has not called for details of such loans or deposits during the assessment proceedings.
The Ld. Counsel further brought to our attention to the following Chart:
Remarks Sr.No. Expense Amt on which Amt Debited to TDS deducted P&L Account 1. Royalty 84,70,80,028 83,46,52,368 2. Prof Fees 49,53,72,108 15,80,07,108 3. Com & Brokerage 82,77,25,926 97,53,77,504 Total 217,01,78,062 196,80,36,980 PB Page Reference 45 40 3.1. The Ld. Counsel for the assessee relied upon the above Chart and submitted that the TDS was deducted on a higher amount, whereas, the amount actually debited to P&L account was less and, therefore, even otherwise, there was no loss to the Revenue, therefore, the assessment order was not prejudicial to the interests of the Revenue.
3.2. He has further demonstrated that the Ld. PCIT had issued show-cause to the assessee in this respect, whereupon, the assessee furnished the reply Arvind Lifestyle Brands Ltd., Formerly known as Arvind Retail Ltd., vs. Pr.CIT Asst. Year : 2018-19 and necessary details. The assessee explained before the PCIT that the TDS was duly deducted in respect of all the payments made by the assessee. Further that in the case of some advance payments made during the earlier year on which the TDS was duly deducted, the same was, however, claimed as expenditure during the year under consideration and similarly TDS was deducted on certain advance payments made during the year under consideration, which will be claimed as an expenditure when the transaction is matured in the subsequent year. It was also explained that the loans were taken by the assessee through banking channel and that there was a clerical mistake in the Audit Report as the Auditor in the relevant column had mentioned inadvertently as “NO” instead of “YES”. It was also explained that the said issue was duly examined by the AO during the course of assessment proceedings and it was duly explained to the AO that the loans were taken through banking channel. However, the Ld. PCIT has directed the AO to verify the same issue again.
A perusal of the impugned order of the Ld. PCIT reveals that the Ld. PCIT did not consider the aforesaid explanation given by the assessee and set aside the assessment order and further restored the matter to the file of the AO with a direction to verify the aforesaid issues again without giving any reasoning for the same. The assessee has duly demonstrated and explained that the TDS was duly deducted on the payments made and further that the loans were taken through banking channel. There remains nothing for further enquiry. The Ld. PCIT, in this case, has passed the revision order u/s.263 of the Act in a mechanical manner without application of mind. In view of the discussion made above, the impugned order of the AO was Arvind Lifestyle Brands Ltd., Formerly known as Arvind Retail Ltd., vs. Pr.CIT Asst. Year : 2018-19 neither erroneous nor prejudicial to the interests of Revenue. The impugned order of the Ld. PCIT passed u/s.263 of the Act is, therefore, not sustainable in the eyes of law and the same is hereby quashed.
In the result, the appeal of the assessee stands allowed.
Order pronounced in the Open Court on 09/12/2025. ( Narendra Prasad Sinha ) Judicial Member