Loading judgment…
Facts
The assessee's appeals are against revisionary orders passed by the Ld. PCIT under Section 263 of the Income Tax Act, 1961. The assessee's challenge primarily concerns the Ld. PCIT's jurisdiction in setting aside assessment orders passed under Section 143(3) read with Section 153A. The core issue is whether the Assessing Officer's failure to conduct proper inquiries rendered the assessment erroneous and prejudicial.
Held
The Tribunal held that the Assessing Officer's failure to examine the applicability of Section 79 of the Act concerning the carry forward and set off of business losses, despite a significant change in shareholding, constituted a lack of inquiry. This made the assessment order erroneous and prejudicial to the interest of the revenue, thus justifying the Ld. PCIT's action under Section 263.
Key Issues
Whether the Assessing Officer's assessment order was erroneous and prejudicial to the revenue due to a lack of proper inquiry regarding the disallowance of carry forward business losses under Section 79, despite significant changes in shareholding. Whether the revisionary action under Section 263 was valid.
Sections Cited
Section 263, Section 143(3), Section 153A, Section 132(1), Section 79, Section 142(1), Section 40A(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI OM PRAKASH KANT
ORDER PER BENCH
These appeals by the assessee are directed against separate revisionary orders passed by the Learned Principal Commissioner of Income Tax (hereinafter ‘Ld. PCIT’) under Section 263 of the Income Tax Act, 1961 (hereinafter ‘the Act’) for AY 2017-18 to 2021-22. The challenge primarily assails the jurisdiction of the Ld. PCIT in setting aside the assessment order(s) passed under Section 143(3) read with Section 153A, contending that the same was neither
Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025 erroneous nor prejudicial to the interests of the Revenue. In all erroneous nor prejudicial to the interests of the Revenue. erroneous nor prejudicial to the interests of the Revenue. these appeal identical issues these appeal identical issues are involved and therefore, same were erefore, same were heard together and disposed off by way of this consolidated order heard together and disposed off by way of this consolidated order heard together and disposed off by way of this consolidated order for the sake of convenience and avoid repetition of facts. for the sake of convenience and avoid repetition of facts. for the sake of convenience and avoid repetition of facts.
Firstly, we take up the appeal of the assessee for assessment Firstly, we take up the appeal of the assessee for assessment Firstly, we take up the appeal of the assessee for assessment year 2017-18. The grounds raised
by the 18. The grounds raised by the assessee are reproduced assessee are reproduced as under:
On the facts and in the circumstances of the case and in law, the 1. On the facts and in the circumstances of the case and in law, the 1. On the facts and in the circumstances of the case and in law, the Ld. Pr. Commissioner of Income Tax (PCIT) erred in initiating Ld. Pr. Commissioner of Income Tax (PCIT) erred in initiating Ld. Pr. Commissioner of Income Tax (PCIT) erred in initiating revision proceedings u/s. 263 of the Income Tax Act, 1961 vide revision proceedings u/s. 263 of the Income Tax Act, 1961 vide revision proceedings u/s. 263 of the Income Tax Act, 1961 vide show-cause notice dated 21 cause notice dated 21-02-2025 and thereby passing an order 2025 and thereby passing an order u/s. 263 of the Income Tax Act, 1961 therefore erred in seeking u/s. 263 of the Income Tax Act, 1961 therefore erred in seeking u/s. 263 of the Income Tax Act, 1961 therefore erred in seeking revision of the assessment order by setting aside Assessment order revision of the assessment order by setting aside Assessment order revision of the assessment order by setting aside Assessment order passed under section 143(3) rws 153A, which was neither passed under section 143(3) rws 153A, which was neither passed under section 143(3) rws 153A, which was neither erroneous nor prejudicial to the erroneous nor prejudicial to the interest of revenue.
The Ld. PCIT erred in invoking the revisionary power under 2. The Ld. PCIT erred in invoking the revisionary power under 2. The Ld. PCIT erred in invoking the revisionary power under section 263 of the Income Tax Act, 1961 without appreciating the section 263 of the Income Tax Act, 1961 without appreciating the section 263 of the Income Tax Act, 1961 without appreciating the fact that the Ld. Assessing officer (AO) completed the assessment fact that the Ld. Assessing officer (AO) completed the assessment fact that the Ld. Assessing officer (AO) completed the assessment under section 143(3) rws 153A of the under section 143(3) rws 153A of the Income Tax Act, 1961 after Income Tax Act, 1961 after proper application of mind by accepting the claim of the appellant, proper application of mind by accepting the claim of the appellant, proper application of mind by accepting the claim of the appellant, which was in accordance with the provisions of law. which was in accordance with the provisions of law.
Briefly stated, facts of the case are that a search and seizure Briefly stated, facts of the case are that a search and seizure Briefly stated, facts of the case are that a search and seizure action u/s 132(1) of the Act was conducted action u/s 132(1) of the Act was conducted on 08.02.2021 in the on 08.02.2021 in the cases of ‘JMJ group’ of entities ’ of entities including the assessee. the assessee. Pursuant to search action, a notice u/s 153A of the Act was issued on otice u/s 153A of the Act was issued on otice u/s 153A of the Act was issued on 07.10.2021 which was duly served upon the assessee. In response, 07.10.2021 which was duly served upon the assessee. In response, 07.10.2021 which was duly served upon the assessee. In response, the assessee filed its return of income fo the assessee filed its return of income for the year under r the year under consideration on 31.10.2017 declaring total income of Rs. Nil. The consideration on 31.10.2017 declaring total income of Rs. Nil consideration on 31.10.2017 declaring total income of Rs. Nil
Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025 assessment was completed u/s 143(3) r.w.s. 153A of the Act on assessment was completed u/s 143(3) r.w.s. 153A of the Act on assessment was completed u/s 143(3) r.w.s. 153A of the Act on 01.04.2022 determining total income at Rs.5,99,74,390/-. 01.04.2022 determining total income at Rs.5,99,74,390/ 01.04.2022 determining total income at Rs.5,99,74,390/ 3.1 Subsequently, the Ld. PCIT called for the recor Subsequently, the Ld. PCIT called for the recor Subsequently, the Ld. PCIT called for the record and after examination, he observed observed that in the year under consideration in the year under consideration, there was a change in share holding there was a change in share holding of the assessee company by of the assessee company by more than 50% and therefore, the Assessing Officer was required to more than 50% and therefore, the Assessing Officer was required to more than 50% and therefore, the Assessing Officer was required to disallow the claim of the assessee of carry forward disallow the claim of the assessee of carry forward and set off of loss and set off of loss of the earlier years invoking provisions of section invoking provisions of section 79 79 of the Act. The Ld. PCIT accordingly issued notice u/s 263 of the Act to the Ld. PCIT accordingly issued notice u/s 263 of the Act to the Ld. PCIT accordingly issued notice u/s 263 of the Act to the assessee.
3.2 The assessee in response submitted that the case of the The assessee in response submitted that the case of the The assessee in response submitted that the case of the assessee was not hit by section not hit by section 79 of the Act as the change of the 79 of the Act as the change of the share holding was among the relative share holding was among the relatives, which was transferred by which was transferred by way of gift. The assessee also submitted that the year under way of gift. The assessee also submitted that the year under way of gift. The assessee also submitted that the year under consideration was unabated assessment year and therefore, no consideration was unabated assessment year and therefore, no consideration was unabated assessment year and therefore, no addition could have been made other addition could have been made otherwise then any incriminating wise then any incriminating material unearthed during the search. The Ld. PCIT though material unearthed during the search. The Ld. PCIT though material unearthed during the search. The Ld. PCIT though considered the submission considered the submissions of the assessee, however, was of the however, was of the view that disallowance mandated u/s 79 of the Act was attracted in view that disallowance mandated u/s 79 of the Act was attracted in view that disallowance mandated u/s 79 of the Act was attracted in the case of the assessee. The relevant finding of the Ld. PCIT is the case of the assessee. The relevant finding of the Ld. PCIT is the case of the assessee. The relevant finding of the Ld. PCIT is reproduced as under: reproduced as under:
10.3 In all, it appears that the disallowance facts of this case since 10.3 In all, it appears that the disallowance facts of this case since 10.3 In all, it appears that the disallowance facts of this case since mandate of Section 79 of the Act is attracted on the facts of this Section 79 of the Act is attracted on the facts of this Section 79 of the Act is attracted on the facts of this case since.
Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025 a) The assessee is a company in which the Public are not a) The assessee is a company in which the Public are not a) The assessee is a company in which the Public are not substantially interested. substantially interested. b) The combined shareholding of Ms. Vidya Joshi and Shri Jagdish b) The combined shareholding of Ms. Vidya Joshi and Shri Jagdish b) The combined shareholding of Ms. Vidya Joshi and Shri Jagdish Prasad Joshi which exceeded the stipula Prasad Joshi which exceeded the stipulated 51% reduced to an ted 51% reduced to an insignificant figure of 1.26% in FY 2016 insignificant figure of 1.26% in FY 2016-17. c) The precise definition of "internal" transfers of shares and the c) The precise definition of "internal" transfers of shares and the c) The precise definition of "internal" transfers of shares and the consequent changes in shareholdings amongst the 3 family consequent changes in shareholdings amongst the 3 family consequent changes in shareholdings amongst the 3 family members above and the acceptability of the argument that this is members above and the acceptability of the argument that this is members above and the acceptability of the argument that this is not adversely impacted by Section 79 of the Act needs to be not adversely impacted by Section 79 of the Act needs to be not adversely impacted by Section 79 of the Act needs to be examined. d) The non-mention of how the shares of Ms. Vidya Joshi were mention of how the shares of Ms. Vidya Joshi were mention of how the shares of Ms. Vidya Joshi were transferred to Shri Sachin Joshi in the assessee's submissions transferred to Shri Sachin Joshi in the assessee's submissions transferred to Shri Sachin Joshi in the assessee's submissions needs to be explained by assessee. needs to be explained by assessee. e) Whether the gifting of e) Whether the gifting of 70000 shares by Shri Jagdish Prasad 70000 shares by Shri Jagdish Prasad Joshi to Shri Sachin Joshi would attract any taxability under the Joshi to Shri Sachin Joshi would attract any taxability under the Joshi to Shri Sachin Joshi would attract any taxability under the income tax Act needs to be examined. income tax Act needs to be examined. f) How the percentage shareholding of 0% of Shri Sachin Joshi in f) How the percentage shareholding of 0% of Shri Sachin Joshi in f) How the percentage shareholding of 0% of Shri Sachin Joshi in the company in the AY 2016 the company in the AY 2016-17 increased to 88.06% in 17 increased to 88.06% in AY 2017- 18 needs to be explained, since only one gift by Shri Jagdish 18 needs to be explained, since only one gift by Shri Jagdish 18 needs to be explained, since only one gift by Shri Jagdish Prasad Joshi to his son has been stated. Prasad Joshi to his son has been stated. 10.4 Therefore, the assessee's submissions made above on the Therefore, the assessee's submissions made above on the Therefore, the assessee's submissions made above on the merits of the matter are not satisfactory in that they are incomplete merits of the matter are not satisfactory in that they are incomplete merits of the matter are not satisfactory in that they are incomplete and provide o and provide only partial information and are also internally nly partial information and are also internally inconsistent. inconsistent. inconsistent. Further, Further, Further, they they they challenge challenge challenge the the the conventional conventional conventional interpretations per the stated text of the provisions of Section 79 of interpretations per the stated text of the provisions of Section 79 of interpretations per the stated text of the provisions of Section 79 of the Act. A relook into the applicable facts. and syllogistic the Act. A relook into the applicable facts. and syllogistic the Act. A relook into the applicable facts. and syllogistic foundations and legal foundations and legal provisions of this case is clearly indicated provisions of this case is clearly indicated on the facts that have been provided and are available on record on the facts that have been provided and are available on record on the facts that have been provided and are available on record following the submission of the assessee to the questions raised. following the submission of the assessee to the questions raised. following the submission of the assessee to the questions raised.” 3.3 The Ld. PCIT also rejected the contention of the assessee qua The Ld. PCIT also rejected the contention of the assessee qua The Ld. PCIT also rejected the contention of the assessee qua the issue of no incriminating material in relation to assessment no incriminating material in relation to assessment no incriminating material in relation to assessment year. The relevant finding of the Ld. PCIT is reproduced as under: year. The relevant finding of the Ld. PCIT is reproduced as under: year. The relevant finding of the Ld. PCIT is reproduced as under:
“10.5 The assessee's argument that no addition can be made in 10.5 The assessee's argument that no addition can be made in 10.5 The assessee's argument that no addition can be made in respect of a particular issue in an order of assessment passed u/s respect of a particular issue in an order of assessment passed u/s respect of a particular issue in an order of assessment passed u/s 153A of the Act, if there was the absence of any incriminating the Act, if there was the absence of any incriminating the Act, if there was the absence of any incriminating material during the search on such issue. He has cited various material during the search on such issue. He has cited various material during the search on such issue. He has cited various ratios of the Hon'ble Courts in support. On this matter it is held ratios of the Hon'ble Courts in support. On this matter it is held ratios of the Hon'ble Courts in support. On this matter it is held
Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025 that it is not prima facie visibly and completely clear from the that it is not prima facie visibly and completely clear from the that it is not prima facie visibly and completely clear from the materials available on record as to whether the impugned matter ials available on record as to whether the impugned matter ials available on record as to whether the impugned matter of transfers and changes in shareholdings effected by the of transfers and changes in shareholdings effected by the of transfers and changes in shareholdings effected by the assessee during the FY 2016 assessee during the FY 2016-17 are related to any incriminating 17 are related to any incriminating material that has been unearthed during the search or finds material that has been unearthed during the search or finds material that has been unearthed during the search or finds mention in the mention in the materials unearthed during the search. There is no materials unearthed during the search. There is no information available at this time that such is not the case. information available at this time that such is not the case. information available at this time that such is not the case. Presumably, the materials including documents seized during the Presumably, the materials including documents seized during the Presumably, the materials including documents seized during the search and analyzed thereafter would contain information that search and analyzed thereafter would contain information that search and analyzed thereafter would contain information that mention or relate mention or relate to the impugned matter of changes/transfers in to the impugned matter of changes/transfers in shareholdings shareholdings shareholdings that that that were were were omitted omitted omitted to to to be be be or or or were were were improperly/incompletely appreciated by the Investigating Officer improperly/incompletely appreciated by the Investigating Officer improperly/incompletely appreciated by the Investigating Officer who had organized the search as well as by the Assessing Officer who had organized the search as well as by the Assessing Officer who had organized the search as well as by the Assessing Officer who had the opportunity to exami who had the opportunity to examine and analyse the relevant ne and analyse the relevant materials including the documents as above. Whether the material materials including the documents as above. Whether the material materials including the documents as above. Whether the material would be visibly incriminating or not would be the result of such would be visibly incriminating or not would be the result of such would be visibly incriminating or not would be the result of such examination or analysis, in the absence of which such material examination or analysis, in the absence of which such material examination or analysis, in the absence of which such material would be incriminating but undisco would be incriminating but undiscovered as these had not been vered as these had not been examined, analysed and appreciated in the proper sense and examined, analysed and appreciated in the proper sense and examined, analysed and appreciated in the proper sense and meaning of what it represented and presented about the reported meaning of what it represented and presented about the reported meaning of what it represented and presented about the reported financial affairs and incomes of the assessee. The Assessing financial affairs and incomes of the assessee. The Assessing financial affairs and incomes of the assessee. The Assessing Officer is now directed to examine the issue Officer is now directed to examine the issue of the changes and of the changes and transfers in shareholdings made in the AY 2017 transfers in shareholdings made in the AY 2017-18 leading to the 18 leading to the disallowance of the carry forwards in A.Y. 2017 disallowance of the carry forwards in A.Y. 2017-18 as narrated 18 as narrated above through the prism of whether these relate to material above through the prism of whether these relate to material above through the prism of whether these relate to material unearthed during the search that are provenly in unearthed during the search that are provenly incriminating to the criminating to the case of the assessee. case of the assessee. 10.6 While carrying out this exercise, the Assessing Officer shall 10.6 While carrying out this exercise, the Assessing Officer shall 10.6 While carrying out this exercise, the Assessing Officer shall consider and examine the import and applicability of the judicial consider and examine the import and applicability of the judicial consider and examine the import and applicability of the judicial ratios cited by the assessee including that of the Apex Court in the ratios cited by the assessee including that of the Apex Court in the ratios cited by the assessee including that of the Apex Court in the case of M/s. AbhisarBuildwell Pvt. Ltd. and the other judicially AbhisarBuildwell Pvt. Ltd. and the other judicially binding ratios of the Hon'ble Bombay High Court and the judicial binding ratios of the Hon'ble Bombay High Court and the judicial binding ratios of the Hon'ble Bombay High Court and the judicial positions in the matter that stand indicated by the ratios of the positions in the matter that stand indicated by the ratios of the positions in the matter that stand indicated by the ratios of the other judicial authorities. The order of assessment will therefore other judicial authorities. The order of assessment will therefore other judicial authorities. The order of assessment will therefore need to incorporate the position as to whether any of these ratios to incorporate the position as to whether any of these ratios to incorporate the position as to whether any of these ratios are pari materia applicable on the facts of the case of this are pari materia applicable on the facts of the case of this are pari materia applicable on the facts of the case of this assessee. The Assessing Officer shall take these facts into assessee. The Assessing Officer shall take these facts into assessee. The Assessing Officer shall take these facts into consideration and proceed to carry out the assessment and pass consideration and proceed to carry out the assessment and pass consideration and proceed to carry out the assessment and pass the order accordingly. Needless to say, if the binding ratios are so accordingly. Needless to say, if the binding ratios are so accordingly. Needless to say, if the binding ratios are so applicable there would be no case of assessment of any impugned applicable there would be no case of assessment of any impugned applicable there would be no case of assessment of any impugned amount emerging out of the discussions above. amount emerging out of the discussions above.” 3.4 The Ld. PCIT further further noticed that no inquiry was carried out noticed that no inquiry was carried out by the Assessing Officer on the issue of carry forward and set off of by the Assessing Officer on the issue of carry forward and set off of by the Assessing Officer on the issue of carry forward and set off of Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025 loss and therefore, the assessment order was deemed to be loss and therefore, the assessment order was deemed to be loss and therefore, the assessment order was deemed to be erroneous in so far as prejudicial to the interest of the Revenue in erroneous in so far as prejudicial to the interest of the Revenue in erroneous in so far as prejudicial to the interest of the Revenue in terms of Explanation 2 to section 263 of the Act. The relevant on 2 to section 263 of the Act. The relevant on 2 to section 263 of the Act. The relevant finding of the Ld. PCIT is reproduced as under: finding of the Ld. PCIT is reproduced as under:
“14. It is clear from the non 14. It is clear from the non-examination by the Assessing Officer examination by the Assessing Officer of the applicability of Section 79 of the Act in the matter of the of the applicability of Section 79 of the Act in the matter of the of the applicability of Section 79 of the Act in the matter of the allowing of the carry forward allowing of the carry forward of Business losses (and their set off of Business losses (and their set off if and as applicable) in AY 2017 if and as applicable) in AY 2017-18 and onwards thereafter to the 18 and onwards thereafter to the successor Assessment Years that the necessary inquiries and successor Assessment Years that the necessary inquiries and successor Assessment Years that the necessary inquiries and investigation have NOT been carried out during the impugned investigation have NOT been carried out during the impugned investigation have NOT been carried out during the impugned assessment proceedings in the m assessment proceedings in the manner these were to have been anner these were to have been carried out. Therefore, the assessee's contention about the non carried out. Therefore, the assessee's contention about the non carried out. Therefore, the assessee's contention about the non- applicability of the revisionary power u/s 263 of the Act on the applicability of the revisionary power u/s 263 of the Act on the applicability of the revisionary power u/s 263 of the Act on the facts of this case are not acceptable and are rejected. The matter facts of this case are not acceptable and are rejected. The matter facts of this case are not acceptable and are rejected. The matter in hand involves the disallowa in hand involves the disallowance u/s. 79 of the Act of business nce u/s. 79 of the Act of business losses (and their set off if and as applicable) brought forward from losses (and their set off if and as applicable) brought forward from losses (and their set off if and as applicable) brought forward from the AY 2012- -13 and 2013-14 in the impugned AY 2017 14 in the impugned AY 2017-18. The facts presented by the Department before the assessee show that facts presented by the Department before the assessee show that facts presented by the Department before the assessee show that the shares of Ms. Vidya Joshi the shares of Ms. Vidya Joshi and Shri Jagdish Prasad Joshi, who and Shri Jagdish Prasad Joshi, who held 50% apiece of the shares of the assessee company in the FY held 50% apiece of the shares of the assessee company in the FY held 50% apiece of the shares of the assessee company in the FY 2015-16 had reduced to 0.63% in the FY 2016 16 had reduced to 0.63% in the FY 2016-17 apiece while 17 apiece while those of their son, Shri Sachin Joshi, who held 0% of the shares in those of their son, Shri Sachin Joshi, who held 0% of the shares in those of their son, Shri Sachin Joshi, who held 0% of the shares in FY 2015-16 stood enhanced to 16 stood enhanced to 88.06% in FY 2016 88.06% in FY 2016- 17. The argument based on facts made here is that from the FY 2015 argument based on facts made here is that from the FY 2015 argument based on facts made here is that from the FY 2015-16 to the impugned FY 2016 the impugned FY 2016-17, the percentage share holdings of the 3 17, the percentage share holdings of the 3 Individuals above stood changed from 50%, 50% and 0% to 0.63%, Individuals above stood changed from 50%, 50% and 0% to 0.63%, Individuals above stood changed from 50%, 50% and 0% to 0.63%, 0.63% and 88.06% respectively with a 0.63% and 88.06% respectively with a new shareholder Viz. M/s. new shareholder Viz. M/s. Solution FZC introduced in holding a shareholding percentage of Solution FZC introduced in holding a shareholding percentage of Solution FZC introduced in holding a shareholding percentage of 10.68% in the impugned FY 2016 10.68% in the impugned FY 2016-17. The statutory position here is that since the shareholding pattern The statutory position here is that since the shareholding pattern The statutory position here is that since the shareholding pattern had changed substantially as above in FY 2016 had changed substantially as above in FY 2016-17, the business 17, the business losses brought forward from that earlier years should NOT have losses brought forward from that earlier years should NOT have losses brought forward from that earlier years should NOT have been so allowed to be carried forward in the AY 2017 been so allowed to be carried forward in the AY 2017 been so allowed to be carried forward in the AY 2017-18 per the mandate of Section 79 of the Act. Therefore, these brought forward mandate of Section 79 of the Act. Therefore, these brought forward mandate of Section 79 of the Act. Therefore, these brought forward losses would NOT be available for set off against the incomes losses would NOT be available for set off against the incomes losses would NOT be available for set off against the incomes assessed for the impugned AY 2017 assessed for the impugned AY 2017-18. Also, any portion of these 18. Also, any portion of these carried forward losses, if determined as available, would not be carried forward losses, if determined as available, would not be carried forward losses, if determined as available, would not be allowed to be carried forward for set offs against any taxable allowed to be carried forward for set offs against any taxable allowed to be carried forward for set offs against any taxable incomes for the succeeding AYs 2018 incomes for the succeeding AYs 2018-19,2019-20, 2020 20, 2020-21, 2021- 22.
Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025
From the above discussions, it is clear that the AO has failed 15. From the above discussions, it is clear that the AO has failed 15. From the above discussions, it is clear that the AO has failed to decide on the matters in reference in consonance with the to decide on the matters in reference in consonance with the to decide on the matters in reference in consonance with the applicable and binding statutory provisions and legal positions applicable and binding statutory provisions and legal positions applicable and binding statutory provisions and legal positions and/or accounting standards and reporting requirements and/or and/or accounting standards and reporting requirements and/or and/or accounting standards and reporting requirements and/or logical and arithmetical inconsistencies. Hence, these matters have logical and arithmetical inconsistencies. Hence, these matters have logical and arithmetical inconsistencies. Hence, these matters have been and remain unverified and unexamined by the Assessing been and remain unverified and unexamined by the Assessing been and remain unverified and unexamined by the Assessing Officer (AO) as well as have been and remain unexplained by the Officer (AO) as well as have been and remain unexplained by the Officer (AO) as well as have been and remain unexplained by the assessee during the course of the above stated assessment assessee during the course of the above stated assessment assessee during the course of the above stated assessment proceedings for the AY 2017 dings for the AY 2017-18. Thus, the order passed by the 18. Thus, the order passed by the A.O. is erroneous and prejudicial to the interests of revenue for the A.O. is erroneous and prejudicial to the interests of revenue for the A.O. is erroneous and prejudicial to the interests of revenue for the reasons as mentioned above. Therefore, action under inder Section reasons as mentioned above. Therefore, action under inder Section reasons as mentioned above. Therefore, action under inder Section Section: Section 263 of the Income Tax Act, 1961 is necessary. Section: Section 263 of the Income Tax Act, 1961 is necessary. Section: Section 263 of the Income Tax Act, 1961 is necessary.
Considering the facts and circumstances of the case as 6. Considering the facts and circumstances of the case as 6. Considering the facts and circumstances of the case as detailed above and the applicable and binding judicial ratios and detailed above and the applicable and binding judicial ratios and detailed above and the applicable and binding judicial ratios and precedents as presented, I hold that the assessment order passed precedents as presented, I hold that the assessment order passed precedents as presented, I hold that the assessment order passed u/s 143(3) r.w.s153A of the Act dated 01.04.2022 by the u/s 143(3) r.w.s153A of the Act dated 01.04.2022 by the u/s 143(3) r.w.s153A of the Act dated 01.04.2022 by the Assessing Officer is at this time erroneous and prejudicial to the fficer is at this time erroneous and prejudicial to the fficer is at this time erroneous and prejudicial to the interests of Revenue, within the meaning of Section 263 of the Act, interests of Revenue, within the meaning of Section 263 of the Act, interests of Revenue, within the meaning of Section 263 of the Act, 1961, in that the merits of the impugned matter of the carry 1961, in that the merits of the impugned matter of the carry 1961, in that the merits of the impugned matter of the carry forward of business losses from earlier years should not be forward of business losses from earlier years should not be forward of business losses from earlier years should not be allowed to be carried forward and set off, if and as applicable, in be carried forward and set off, if and as applicable, in be carried forward and set off, if and as applicable, in AY 2017-18 as well as the carry forward of these losses or any 18 as well as the carry forward of these losses or any 18 as well as the carry forward of these losses or any part of these to the successor part of these to the successor Assessment Years u/s 79 of the Act, have not been correctly and Assessment Years u/s 79 of the Act, have not been correctly and Assessment Years u/s 79 of the Act, have not been correctly and comprehensively examined by the Assessing comprehensively examined by the Assessing Officer per the Officer per the applicable statutory mandates. Inquiries and investigations that applicable statutory mandates. Inquiries and investigations that applicable statutory mandates. Inquiries and investigations that were required to be carried out by the Assessing Officer have not were required to be carried out by the Assessing Officer have not were required to be carried out by the Assessing Officer have not been carried out thereby attracting squarely the applicability of been carried out thereby attracting squarely the applicability of been carried out thereby attracting squarely the applicability of Explanation 2 of Section 263 of the Act. I Explanation 2 of Section 263 of the Act. I therefore, set aside the therefore, set aside the assessment order passed u/s 143(3) r.w.s. 153A of the Act dated assessment order passed u/s 143(3) r.w.s. 153A of the Act dated assessment order passed u/s 143(3) r.w.s. 153A of the Act dated 01.04.2022 for this AY 2017 01.04.2022 for this AY 2017-18 to the Assessing Officer with a 18 to the Assessing Officer with a direction to complete the assessment order de novo afresh after direction to complete the assessment order de novo afresh after direction to complete the assessment order de novo afresh after conducting necessary verification and e conducting necessary verification and enquiries on all of the nquiries on all of the matters involved including those identified and detailed above matters involved including those identified and detailed above matters involved including those identified and detailed above being the examination of the allowability of the set offs in this A.Y. being the examination of the allowability of the set offs in this A.Y. being the examination of the allowability of the set offs in this A.Y. 2017-18 of the business losses of Rs. 4,23,00,687/ 18 of the business losses of Rs. 4,23,00,687/ 18 of the business losses of Rs. 4,23,00,687/- carried forward from the earlier years when vie forward from the earlier years when viewed through the lens and wed through the lens and prism of Section 79 of the Act and after affording proper prism of Section 79 of the Act and after affording proper prism of Section 79 of the Act and after affording proper opportunity to the assessee. opportunity to the assessee.” 4. Before us, the Ld. counsel for the assessee filed a Paper Book Before us, the Ld. counsel for the assessee filed a Paper Book Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 102. The Ld. counsel supported the containing pages 1 to 102. The Ld. counsel supported the containing pages 1 to 102. The Ld. counsel supported the submission made befo submission made before the Ld. PCIT.
Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025
We have heard rival submissions of the parties and peru We have heard rival submissions of the parties and peru We have heard rival submissions of the parties and perused the relevant material the relevant material on record. The core issue before us is whether The core issue before us is whether the AO’s failure to pursue a query to its logical conclusion renders the AO’s failure to pursue a query to its logical conclusion renders the AO’s failure to pursue a query to its logical conclusion renders the assessment "erroneous and prejudic the assessment "erroneous and prejudicial" within the meaning of ial" within the meaning of Section 263.
5.1 In the case, the Ld. PCIT issued show cause notice u/s 263 of case, the Ld. PCIT issued show cause notice u/s 263 of case, the Ld. PCIT issued show cause notice u/s 263 of the Act for the reason that Assessing Officer had eason that Assessing Officer had not carried out inquiry on the issue of carry forward and set off of the loss of earlier inquiry on the issue of carry forward and set off of the loss of earlier inquiry on the issue of carry forward and set off of the loss of earlier years despite there being change in the shareholding of the years despite there being change in the shareholding years despite there being change in the shareholding assessee company by assessee company by more than 50%.
5.2 The Ld. counsel for the assessee referred to notice u/s 142(1) The Ld. counsel for the assessee referred to notice u/s 142(1) The Ld. counsel for the assessee referred to notice u/s 142(1) of the Act dated 18.12.2021 the Act dated 18.12.2021, a copy which is available on paper a copy which is available on paper book page 30 to 35. On perusal of the said questionnaire, we find book page 30 to 35. On perusal of the said questionnaire, we find book page 30 to 35. On perusal of the said questionnaire, we find that the Assessing Officer had sing Officer had asked the assessee regarding change asked the assessee regarding change in shareholding and eligibility of the carry forward of the losses of in shareholding and eligibility of the carry forward of the lo in shareholding and eligibility of the carry forward of the lo the earlier years. The relevant questionnaire is reproduced as the earlier years. The relevant questionnaire is reproduced as the earlier years. The relevant questionnaire is reproduced as under:
“3. It is seen from your ITR for the relevant year that during the year 3. It is seen from your ITR for the relevant year that during the year 3. It is seen from your ITR for the relevant year that during the year under consideration, 100% shareholding has been changed from under consideration, 100% shareholding has been changed from under consideration, 100% shareholding has been changed from Shri Jagdish Joshi & Smt. Vidhya Joshi to Shr Shri Jagdish Joshi & Smt. Vidhya Joshi to Shri Sachiin Joshi & i Sachiin Joshi & Solution FZC. Therefore, during the year 100% shareholding of the Solution FZC. Therefore, during the year 100% shareholding of the Solution FZC. Therefore, during the year 100% shareholding of the assessee company has changed. As there is change in shareholding assessee company has changed. As there is change in shareholding assessee company has changed. As there is change in shareholding having voting rights exceeding 51%, set having voting rights exceeding 51%, set-off and carry forward of off and carry forward of earlier years losses are not allowable in earlier years losses are not allowable in accordance with the accordance with the provision of Section 79 of the Act. In this regard, you are hereby provision of Section 79 of the Act. In this regard, you are hereby provision of Section 79 of the Act. In this regard, you are hereby asked to show cause as to why your claim of carry asked to show cause as to why your claim of carry-forward and / forward and / or set-off of the losses incurred in any year prior to the A.Y. 2017 off of the losses incurred in any year prior to the A.Y. 2017 off of the losses incurred in any year prior to the A.Y. 2017- 18 of Rs.45,69,04,080/ 18 of Rs.45,69,04,080/- should not be rejected as per the provision be rejected as per the provision of Section 79 of the Act of Section 79 of the Act.”
Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025 5.3 The assessee filed a reply of the query letter dated 22.03.2022 The assessee filed a reply of the query letter dated 22.03.2022 The assessee filed a reply of the query letter dated 22.03.2022 which is available on Paper Book page 36. which is available on Paper Book page 36. However, upon perusal of the Assessee’s reply, we find a conspicuous silence perusal of the Assessee’s reply, we find a conspicuous silence perusal of the Assessee’s reply, we find a conspicuous silence on this specific query. Curiously, despite the Assessee’s failure ific query. Curiously, despite the Assessee’s failure ific query. Curiously, despite the Assessee’s failure to respond, the AO proceeded to allow the claim of carry to respond, the AO proceeded to allow the claim of carry to respond, the AO proceeded to allow the claim of carry forward of losses. forward of losses. It is a settled principle of law that the mere It is a settled principle of law that the mere issuance of a query does not constitute an "inquiry." An issuance of a query does not constitute an "inquiry." An issuance of a query does not constitute an "inquiry." An inquiry is a cognitive process that requires the AO to apply his inquiry is a cognitive process that requires the AO to apply his inquiry is a cognitive process that requires the AO to apply his mind to the response received. Where a specific show mind to the response received. Where a specific show mind to the response received. Where a specific show-cause is issued by the AO but left issued by the AO but left unaddressed by the Assessee and unaddressed by the Assessee and subsequently ignored by the AO in the final order, it subsequently ignored by the AO in the final order, it subsequently ignored by the AO in the final order, it constitutes a classic case of "non constitutes a classic case of "non-application of mind." This application of mind." This brings the case squarely within the ambit of Explanation 2 to Explanation 2 to brings the case squarely within the ambit of Section 263, which deems an order to be erron , which deems an order to be erron , which deems an order to be erroneous and prejudicial if it is passed without making inquiries which prejudicial if it is passed without making inquiries which prejudicial if it is passed without making inquiries which "ought to have been made." "ought to have been made."
5.4 As far as issue on the merit is concerned though the Assessing As far as issue on the merit is concerned though the Assessing As far as issue on the merit is concerned though the Assessing Officer has filed submission before the Ld. PCIT that case of the Officer has filed submission before the Ld. PCIT that case of the Officer has filed submission before the Ld. PCIT that case of the assessee is not covered u/s assessee is not covered u/s 79 of the Act but that entire issue need 79 of the Act but that entire issue need to be examined properly in the light of the evidences properly in the light of the evidences, which were properly in the light of the evidences not filed before the ld AO not filed before the ld AO and therefore, the Ld. CIT(A) has set aside and therefore, the Ld. CIT(A) has set aside the matter to the file of the Assessing Officer for proper verification the matter to the file of the Assessing Officer for proper verification the matter to the file of the Assessing Officer for proper verification of the documentary evidence in support thereof and then decide the documentary evidence in support thereof and then decide the documentary evidence in support thereof and then decide the Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025 issue in accordance with law. We do not find any infirmity in the issue in accordance with law. We do not find any infirmity in the issue in accordance with law. We do not find any infirmity in the said direction of the Ld. PCIT. direction of the Ld. PCIT.
5.5 As far as contention of the Ld. counsel for the assessee that As far as contention of the Ld. counsel for the assessee that As far as contention of the Ld. counsel for the assessee that this this being being unabated unabated assessment assessment year and there there was was no no incriminating incriminating incriminating material material material qua qua qua the the the assessment assessment assessment year year year under under under consideration and therefore, consideration and therefore, following the decision of Hon’ble following the decision of Hon’ble Supreme court in the case of Abhisar Buildwell P Ltd 454 ITR Supreme court in the case of Abhisar Buildwell P Ltd 454 ITR Supreme court in the case of Abhisar Buildwell P Ltd 454 ITR 212(SC), the Assessing Officer was not required to make the Assessing Officer was not required to make the Assessing Officer was not required to make any inquiry on the issue other than the incriminating on the issue other than the incriminating material, the ld Counsel material, the ld Counsel relied on the decision of Shark Mines and Minerals pvt ltd 151 relied on the decision of Shark Mines and Minerals pvt ltd 151 relied on the decision of Shark Mines and Minerals pvt ltd 151 taxmann.com 71 (ori) and submitted that the ld PCIT cannot do taxmann.com 71 (ori) and submitted that the ld PCIT cannot do taxmann.com 71 (ori) and submitted that the ld PCIT cannot do something that the Assessing Officer could have not have done. But something that the Assessing Officer could have not something that the Assessing Officer could have not in that case the Tribunal set aside the order of the revision order of Tribunal set aside the order of the revision order of Tribunal set aside the order of the revision order of the Commissioner on the ground that the Commissioner on the ground that in instant case limited in instant case limited scrutiny was in respect of excess liability shown and disallowance scrutiny was in respect of excess liability shown and disallowance scrutiny was in respect of excess liability shown and disallowance under section 40A(3), under section 40A(3), whereas show cause notice under section 263 notice under section 263 was regarding FIFO method of valuation of closing stock adopted by was regarding FIFO method of valuation of closing stock adopted by was regarding FIFO method of valuation of closing stock adopted by assessee and these were unconnected issues, assessment order assessee and these were unconnected issues, assessment order assessee and these were unconnected issues, assessment order could not be held to be erroneous and prejudicial to interest of could not be held to be erroneous and prejudicial to interest of could not be held to be erroneous and prejudicial to interest of revenue when Assessing Officer could n revenue when Assessing Officer could not have travelled beyond ot have travelled beyond issues forming subject matter of limited scrutiny. The Order of issues forming subject matter of limited scrutiny. issues forming subject matter of limited scrutiny. Tribunal quashing the revision order is affirmed byb the Hon’ble quashing the revision order is affirmed byb the Hon’ble quashing the revision order is affirmed byb the Hon’ble High Court. Thus, ratio of said decision is not applicable over the High Court. Thus, ratio of said decision is not applicable over the High Court. Thus, ratio of said decision is not applicable over the facts of the case.
Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025 5.6 The Ld. Departmental Representative (DR) pointed out that in partmental Representative (DR) pointed out that in partmental Representative (DR) pointed out that in the case lot of material was seized but Assessing Officer has not the case lot of material was seized but Assessing Officer has not the case lot of material was seized but Assessing Officer has not made any inquiry as to whether any seized material was related to made any inquiry as to whether any seized material was related made any inquiry as to whether any seized material was related the year under consideration or not and therefore, also the order of the year under consideration or not and therefore, also the order of the year under consideration or not and therefore, also the order of the Assessing Officer is erroneous in so far as prejudicial to the Assessing Officer is erroneous in so far as prejudicial to the Assessing Officer is erroneous in so far as prejudicial to the interest of the Revenue. He submitted that the Assessing Officer has interest of the Revenue. He submitted that the Assessing Officer has interest of the Revenue. He submitted that the Assessing Officer has not even verified this aspect not even verified this aspect and unless it is established that no unless it is established that no incriminating material qua the assessment year incriminating material qua the assessment year exits, exits, the objection of the assessee cannot be decided of the assessee cannot be decided and the assessee is it liberty to assessee is it liberty to raise such an objection in the consequent proceedings before the raise such an objection in the consequent proceedings before the raise such an objection in the consequent proceedings before the Assessing Officer. The ld PCIT has rejected the contention of the The ld PCIT has rejected the contention of the The ld PCIT has rejected the contention of the assessee in this regard assessee in this regard in paragraphs 10.5 and 10.6 of 10.6 of impugned order, which we have already reproduced above. order, which we have already reproduced above.
5.7 Having considered submission of both parties on this issue, Having considered submission of both parties on this issue, Having considered submission of both parties on this issue, we concur with ld PCIT that the we concur with ld PCIT that the Assessing officer was required to officer was required to examine existence of seized material qua the assessment year under examine existence of seized material qua the assessment year examine existence of seized material qua the assessment year consideration in the light of ratio of Hon’ble Supreme Court in the consideration in the light of ratio of Hon’ble Supreme Court in the consideration in the light of ratio of Hon’ble Supreme Court in the case of Abhisar Buildwell P Ltd (supra case of Abhisar Buildwell P Ltd (supra), which he did not and thus , which he did not and thus case squarely falls under the Explanation under the Explanation -2 of section 263 and 2 of section 263 and deemed to be erroneous in so far as prejudicial to the interest of deemed to be erroneous in so far as prejudicial to the interest of deemed to be erroneous in so far as prejudicial to the interest of Revenue.
5.8 Before us, the Ld. counsel for the assessee also Before us, the Ld. counsel for the assessee also Before us, the Ld. counsel for the assessee also advanced secondary argument that the issue of carry forward and set off of that the issue of carry forward and set off of brought forward business losses was decided in the original t forward business losses was decided in the original t forward business losses was decided in the original
Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025 assessment order passed on 31.12.2019 and therefore, order of assessment order passed on 31.12.2019 and therefore, order of assessment order passed on 31.12.2019 and therefore, order of revision u/s 263 of the Act could have been passed within the revision u/s 263 of the Act could have been passed within the revision u/s 263 of the Act could have been passed within the period of the two years from the end of the relevant order. But since period of the two years from the end of the relevant order. But since period of the two years from the end of the relevant order. But since this present order of the revision has been passed on 31.03.2025 sent order of the revision has been passed on 31.03.2025 sent order of the revision has been passed on 31.03.2025, therefore, said order order is barred by limitation. The Ld. counsel relied is barred by limitation. The Ld. counsel relied on various judicial pronouncement on various judicial pronouncements on this issue. We note that this We note that this plea was neither raised before the Ld. PCIT nor has it been plea was neither raised before the Ld. PCIT nor has it been plea was neither raised before the Ld. PCIT nor has it been articulated in the grounds of appeal or by way of additional grounds articulated in the grounds of appeal or by way of additional grounds articulated in the grounds of appeal or by way of additional grounds before this Tribunal. In the absence of a formal challenge or factual before this Tribunal. In the absence of a formal challenge or factual before this Tribunal. In the absence of a formal challenge or factual foundation laid in the lower proceedings, we refrain from foundation laid in the lower proceedings, we refrain from foundation laid in the lower proceedings, we refrain from adjudicating upon this limb of the argument. adjudicating upon this limb of the argument.
6. In view of above discussion, we do not find any infirmity in the above discussion, we do not find any infirmity in the above discussion, we do not find any infirmity in the order of the Ld. PCIT on the issue in dispute and accordingly we order of the Ld. PCIT on the issue in dispute and accordingly we order of the Ld. PCIT on the issue in dispute and accordingly we uphold the same.
The parties are in agreement that the issues in the remaining The parties are in agreement that the issues in the remaining The parties are in agreement that the issues in the remaining appeals are identical, involving the same shareholding shifts and appeals are identical, involving the same shareholding shifts and appeals are identical, involving the same shareholding shifts and Section 79 implications. Therefore, our findings for AY 2017-18 Section 79 implications. Therefore, our findings for AY 2017 Section 79 implications. Therefore, our findings for AY 2017 shall apply mutatis mutandis mutatis mutandis to the other assessment years under to the other assessment years under appeal.
Before parting with the matter, we deem it appropriate to place Before parting with the matter, we deem it appropriate to place Before parting with the matter, we deem it appropriate to place on record that, by order dated on record that, by order dated 6th November, 2025, this Bench had , this Bench had imposed costs of ₹ ₹11,000/- in each case on the assessee on on the assessee on account of its non-compliant conduct. It is noted that compliant conduct. It is noted that the said costs compliant conduct. It is noted that Viiking Media and Entertainment Pvt. Ltd Viiking Media and Entertainment Pvt. Ltd to 3433/MUM/2025 have since been duly have since been duly deposited by the assessee on 10.11.2025 with deposited by the assessee on 10.11.2025 with the Hon’ble High Court Legal Services Authority the Hon’ble High Court Legal Services Authority, and the and the receipts evidencing such payment have been placed on record. evidencing such payment have been placed on record evidencing such payment have been placed on record
In the result, all the appeals of the assessee are dismissed. In the result, all the appeals of the assessee are dismissed. In the result, all the appeals of the assessee are dismissed.
Order pronounced in the open Court on ounced in the open Court on 20/01/2026. /01/2026.