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Facts
The assessee filed a return of Nil income for AY 2018-19. The assessment was completed accepting the Nil return. The PCIT initiated revision proceedings under Section 263, alleging that certain expenses totaling Rs. 16,68,02,397/- were not properly verified by the AO, making the assessment order erroneous and prejudicial to revenue.
Held
The tribunal noted that the assessee sought multiple adjournments for filing a paper book and did not appoint a representative. In the absence of necessary records and representation, the appeal was liable to be dismissed for non-prosecution.
Key Issues
Whether the PCIT erred in assuming jurisdiction under Section 263 and setting aside the assessment order without proper verification, and whether the assessee's failure to prosecute the appeal warrants dismissal.
Sections Cited
143(3), 144B, 263, 92CA, 142(1), 92CA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: DR. BRR KUMAR & Shri T.R. SENTHIL KUMAR
Assessee Represented: None Revenue Represented: Shri Sher Singh, CIT-DR Date of hearing : 30-07-2025 Date of pronouncement : 31-07-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the assessee as against the revision order dated 29-02-2024 passed by Ld. Principal Commissioner of Income Tax-1, Ahmedabad arising out of the assessment order passed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2018-19.
A.Y.2018-19 Page No 2 A Menarini India Pvt. Ltd. Vs. PCIT
Today is the 14th time of hearing of this appeal, None appeared on behalf of the assessee, no authorization is given to any Representative. Repeated adjournments were sought by the assessee with stereotypic letters seeking “Paper Book is under preparation”.
Brief facts of the case is that the assessee is a Private Limited Company filed its Return of Income for the Asst. Year 2018-19 on 29-11-2018 disclosing Nil Income. The return was taken for scrutiny assessment to verify the claim of allowable deductions, depreciation, share premium, refund claim and business loss. Based on the information given assessment was completed accepting the Nil return.
Perusal of the assessment order by Ld. PCIT, the assessee had debited following expenses in the profit and loss under Note 25. Particulars Amount Rs. Market Development Expenses 13,35,13,736 Advertisement & Publicity Expenses 47,06,024 Royalty Expenses 2,85,82,237 Total 16,68,02,397 4.1. The Assessing Officer finalized the assessment determining the total loss of Rs.22,21,87,239/- as against the returned loss of Rs.43,37,27,293/-. Thus the Assessing Officer has not verified the above expenses totaling Rs.16,68,02,397/- during assessment proceedings which is erroneous and prejudicial to the interest of Revenue. Therefore a show cause notice was issued to the assessee. The assessee replied to the show cause notice which was not found to be satisfactory. Therefore the Ld. PCIT directed the Assessing Officer to refer the matter to TPO to consider the issue of A.Y.2018-19 Page No 3 A Menarini India Pvt. Ltd. Vs. PCIT Market Development Expenses, Advertisement & Publicity Expenses and Royalty expenses for determination of ALP u/s 92CA of the Act which is erroneous and prejudicial to the interest of Revenue. Ld. PCIT further directed the A.O. to pass fresh assessment order in accordance with law after duly examining the facts of the case by giving the assessee a reasonable opportunity of hearing.
5. Aggrieved against the Revision order, assessee is in appeal before us raising the following Grounds of Appeal:
Your appellant being dissatisfied with the order passed by the learned Principal Commissioner of Income Tax, Ahmedabad-1, Ahmedabad presents this appeal against the same on the following amongst other grounds:
1. 1. The learned Principal Commissioner of Income Tax, Ahmedabad-1 has erred in law and on facts of the case in assuming jurisdiction u/s. 263 of the Income Tax Act and passing the order under that Section whereby by he has set aside the assessment order u/s. 143(3) r.w.s. 1448 dated 18/04/2021 passed by the Assessing Officer, National Faceless Assessment Centre, New Delhi by capriciously holding that the assessment order is erroneous and prejudicial to the interest of the revenue.
2. The learned Principal Commissioner of Income Tax, Ahmedabad-1 has erred in law and on facts of the case in passing the impugned order on the premises of assumption, presumption, surmises and conjectures that the expenses claimed by the appellant assessee totaling to Rs. 16,68,02,397/- on account of market development expenses of Rs. 13,35,13,736/-, advertisement and publicity expenses of Rs. 47,06,024/- and royalty expenses of Rs. 2,85,82,237/- were not verified by the AO and therefore the assessment order is erroneous to the interest of the revenue.
3. The learned Principal Commissioner of Income Tax, Ahmedabad-1 has erred in law and on facts of the case in making the observation to the effect that the above expenses were not A.Y.2018-19 Page No 4 A Menarini India Pvt. Ltd. Vs. PCIT verified by the AO in utter disregard to the fact that the return of income filed by the appellant assessee for the year under appeal was selected for scrutiny for verification of the following issues: Sr. No. Issues i. Claim of "Any other amount allowable as deduction" In Schedule BP. ii. Depreciation Claim ii. iii. Share Premium iv. Refund claim v. Business Loss. On the above issues, the AO had made necessary enquiries by issuing notice u/s. 142(1) in response to which the appellant had submitted requisite details which had been duly examined and verified by the AO before passing the assessment order u/s. 143(3) r.w.s. 1448. Further, in course of original assessment proceedings vide notice u/s. 142(1) dated 19/3/2021 the appellant was asked to furnish ledger account of all major expenses above Rs. 10,00,000/- and in due compliance, the appellant had furnished copies of the ledger accounts. The appellant had also submitted before the AO copies of the audited Profit & Loss Account, Balance Sheet, Tax Audit Report in Form No. 3CA & 3CD and also Form No. 3CEB. The learned Assessing Officer had passed the assessment order u/s. 143(3) r.w.s. 1448 after making due enquiries/investigation and verification of the accounts. Therefore, the learned Pr. CIT, Ahmedabad1-1 is in gross error in observing that 'the above expenses totaling to Rs.16,68,02,397/- were not verified by the AO'.
4. The learned Principal Commissioner of Income Tax, Ahmedabad-1 has erred in law and on facts of the case in passing the impugned order setting aside the original order u/s. 143(3) r.w.s. 1448 without recording any finding of fact in the order u/s. 263 to the effect that the expenditure referred to above, which had been genuinely incurred wholly and exclusively for the purpose and in the course of business of the appellant company, is inadmissible item of expenditure in the computation of total income.
The learned Principal Commissioner of Income Tax, Ahmedabad-1 has erred in law and on facts of the case in passing A.Y.2018-19 Page No 5 A Menarini India Pvt. Ltd. Vs. PCIT
the order u/s. 263 dated 29/02/2024 whereby the original assessment order u/s. 143(3) r.w.s. 1448 dated 18/04/2021 has been set aside by falsely observing that the assessee 'has not given any submission with regard to the expenditure totaling to Rs. 16,68,02,397/- on account of market development expenses of Rs. 13,35,13,736/-, advertisement and publicity expenses of Rs. 47,06,024/- and royalty expenses of Rs. 2,85,82,237/- in utter disregard to the fact that in the course of proceedings u/s. 263, the appellant had furnished complete details of the expenditure in question and also filed copy of the ledger account of the respective expenses, summary statement of the expenditure which containing detailed break-up of such expenditure and has also filed written submission in justification of expenditure in question. 6.1. The leamed Principal Commissioner of Income Tax, Ahmedabad-1 has erred in law and on facts of the case in falsely observing that the expenditure totaling to Rs. 16,68,02,397/- are either paid to or incurred on behalf of foreign associate enterprise in utter disregard to the fact that the expenditure on account of market development expenses and advertisement & publicity expenses has not been paid or incurred on behalf of foreign associate enterprise or any other associated. enterprise. The observation is based on assumption, presumption and surmises and is far removed from truth. Only royalty of Rs.2,85,82.237/- had been paid to an associated enterprise and such payment has been duly disclosed by the appellant company in the Audit Report in Form No. 3CEB. 6.2. The learned Principal Commissioner of Income Tax, Ahmedabad-1 has erred in law and on facts of the case in observing that the Assessing Officer ought to have made a reference to the Transfer Pricing Officer for determination of the Arm's Length Price with respect to the expenditure totaling to Rs.16,68,02,397/- In view of Instruction No. 3/2016 dated 10/03/2016 issued by the CBDT in utter disregard to the fact that in the show cause notice u/s. 263 dated 3/1/2024 there is not even a whisper with respect to the issue of reference to the Transfer Pricing Officer for determination of the Arm's Length Price with respect to the expenditure in question. 6.3. The learned Principal Commissioner of Income Tax, Ahmedabad-1 has erred in law and on facts of the case in setting aside the original assessment order u/s. 143(3) r.w.s. 1448 dated A.Y.2018-19 Page No 6 A Menarini India Pvt. Ltd. Vs. PCIT 18/4/2021 with a direction to the AO to refer the case of the assessee to the TPO for determination of the ALP u/s.92CA of the I.T. Act.
7. The learned Principal Commissioner of Income Tax, Ahmedabad-1 has erred in law and on facts of the case in passing the impugned order u/s. 263 on the basis of the objection raised by the revenue audit party in utter disregard to the settled position of law that recourse to provisions of Section 263 of Income Tax Act should not be taken on account of audit objection, in view of the following judicial pronouncements which were specifically brought to the notice of the Principal Commissioner of Income Tax:
(i) Sh. Jaswinder Singh Vs. CIT (ITA No.690/Chd/2010) (ii) M/s Refex Industries Ltd. vs. DCIT (ITA No.972/Mds/2014 (iii) CIT vs. Sohana Wollen Mills (2008) 296 ITR 238 (P&H) (iv) J. Thomas & Co. Pvt. Ltd. Vs. JCIT (OSD)
(v) Vinay Partap Thacker Vs. CIT (ITA No. 2939/Mum/2011. (vi) CIT vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom). It is therefore prayed that the impugned order u/s. 263 of the I.T. Act dated 29/02/2024 may please be cancelled.
The learned Principal Commissioner of Income Tax, Ahmedabad-1 has erred in law and on facts of the case in passing the impugned order u/s. 263 whereby the Assessment Order u/s.143(3) r.w.s. 144C(3) r.w.s. 1448 was set aside with a direction to make fresh reference u/s. 92CA to the TPO for determination of Arm's Length Price on the basis of the amendment introduced in Section 263 by Finance Act, 2022 with effect from 01/04/2022 which is not applicable to the A.Y. 2018-19.
The appellant prays that an interim relief restraining the Assessing Officer and also the Transfer Pricing Officer not to take any further action pursuant to the order u/s. 263 dated 29/02/2024 for A.Y. 2018-19 during the pendency of appeal before the Hon'ble ITAT may kindly be granted.
A.Y.2018-19 Page No 7 A Menarini India Pvt. Ltd. Vs. PCIT
Though detailed Grounds of Appeal raised by the assessee but no material records, documents, evidences are placed on record before us to adjudicate the grounds. The assessee itself seeking adjournment from time to time on the pretext to file Paper Book. However neither Paper Book is filed before this Tribunal nor appointed any Representative to represent its case. In the absence of any details, the appeal filed by the assessee is liable to be dismissed for non-prosecution.
In the result, the appeal filed by the Assessee is dismissed.
Order pronounced in the open court on 31-07-2025