AMBUJA CEMENTS LIMITED,MUMBAI vs. PCIT, MUMBAI-3, MUMBAI

Facts

The assessee's assessment order for A.Y. 2019-20 was revised by the PCIT under Section 263, citing that the AO failed to adequately inquire into two issues: a) the correct disallowance under Section 14A read with Rule 8D concerning exempt income and strategic investments, and b) alleged accommodation entries received by the assessee, information for which was available via the INSIGHT portal. The PCIT found a short disallowance of Rs. 116.30 cr. related to 14A and that the AO made no inquiry on the accommodation entries.

Held

The Tribunal upheld the PCIT's revision order, finding that the AO had indeed failed to make necessary inquiries and verifications on both matters, thus rendering the original assessment order erroneous and prejudicial to the revenue. It confirmed that merely accepting the assessee's expert report or overlooking vital information without independent application of mind constituted a lack of inquiry, justifying the invocation of Section 263, especially considering Explanation 2(a).

Key Issues

1. Whether the PCIT was justified in invoking Section 263 to revise the assessment order due to the AO's failure to adequately inquire into disallowance under Section 14A read with Rule 8D. 2. Whether the PCIT was justified in invoking Section 263 due to the AO's failure to investigate alleged accommodation entries received by the assessee.