SHILPI MODI,KOLKATA vs. DCIT, CENTRAL CIRCLE 3(2),, KOLKATA

Ravi Modi & Shilpi Modi after taking into consideration the reply of the assessee revised the assessment directing the AO to make necessary enquiry/verification of the said issue and passed afresh assessment order and recompute the income after affording a reasonable opportunity of being heard to the assessee.

Ravi Modi & Shilpi Modi the jurisdiction exercised by the Ld. PCIT u/s 263 of the Act is invalid and may be quashed. The Ld. AR, defence his argument, relied on the decision of the Ld. PCIT Vs. Kesoram Industries Limited 423 ITR 180(Cal), wherein a similar issue has been decided in favour of the assessee. Similarly, the Ld. AR relied on the decision of the PCIT Vs. Britannia Industries Limited, of 2022 dated 23.12.2022. wherein similar issue has been decided in favour of the assessee. Ld. DR on the other hand relied on the order of Ld. PCIT and therefore, prayed that appeal of the assessee may be dismissed.

“The Court: The appeal was admitted by an order of November 12, 2018 and the following questions of law framed: "i) Whether on the facts and in the circumstances of the case the Tribunal should have entertained and decided the subject appeal without giving an opportunity to the Assessing Officer to make a relook into the assessment in terms of the order of the Principal Commissioner of Income Tax dated 29th March, 2016 under Section 263 of the Income Tax Act, 1961? ii) Whether the appeal before the Tribunal was premature and the Tribunal ought not to have entertained the same? iii) Whether the exercise of jurisdiction by the Tribunal in passing its impugned order dated 4th November, 2016 was erroneous without compliance of the said order of remand made by the Principal Commissioner of Income Tax?" There is no dispute that the appeal before the Tribunal was maintainable. Certain matters had been directed by the Commissioner of Income Tax to be looked into afresh by the assessing officer. The assessee perceived that such matters had already been gone into by the assessing officer and did not require a re-look. The assessee was also entitled to carry an appeal from the order of the Commissioner and the Tribunal agreed with the assessee that the various matters that were sought to be opened up by the order of the Commissioner could not have been done. The first and second questions framed appear to be one and the same and they imply that the Tribunal should have allowed the fresh assessment or fact-finding enquiry to be completed by the assessing officer. The third question appears also to be the same except the third question may be bereft of any legal import. Appeals entertained in this jurisdiction are only on substantial questions of law. For the guidance of the Court, the Revenue has referred to a judgment reported at 243 ITR 83 (Malabar Industrial Co. Ltd. v. CIT) where the Supreme Court emphasised that both limbs of the provision had to be complied with before jurisdiction under Section 263 of the Income Tax Act, 1961 could be assumed. The Commissioner had to find that the order of the assessing officer sought to be revised was erroneous and that such error prejudiced the interest of the Revenue. The Court reiterated that the fulfilment of one condition in the absence of the other would not suffice in such a situation as the provision required compliance with both conditions. In the present case, four broad aspects were questioned before the Tribunal. By the order impugned dated November 4, 2016, the Tribunal held in favour of the assessee. The first aspect pertains to an order under Section 143(3) of the Act which was found to be erroneous and prejudicial to the interest of the Revenue. The specific matter pertained to the difference in the addition of fixed assets of about Rs.1.10 crore. The notice under Section 263 of the Act was issued to Ravi Modi & Shilpi Modi clarify the difference. The assessee clarified the difference by its written submission and a reconciliation statement was also used. However, the Commissioner, instead of considering the reply, recorded that the issue had not been verified by the assessing officer. The Tribunal set aside the decision of the Commissioner on the ground that the show-cause notice indicated a specific purpose but the matter was dealt with on another count after the receipt of the reply. The Tribunal relied on a view taken by a coordinate bench reported at 54 SOT 172 (Visuvius India Limited v. CIT) and a judgment of the Andhra Pradesh High Court reported at 211 ITR 336 (CIT v. G.K. Kabra). In both cases, it was held that if the object of the notice was one and the matter was treated for a different purpose in the ultimate order, that may not be the appropriate exercise of the jurisdiction. In the light of a possible view taken on the facts as they presented themselves in such regard, the order of the tribunal in respect of the first of the four heads does not call for any interference. The tribunal found that the Commissioner had not even indicated in the show- cause notice that "adequate enquiries were not carried out." The tribunal found that the assessing officer had conducted an enquiry regarding the addition of fixed assets. The tribunal referred to the notice issued under Section 142(1) of the Act and the reply of the assessee. The tribunal reasoned that the order passed by the assessing officer in such circumstances could neither be held to be erroneous nor prejudicial to the interest of the Revenue. In such regard, the tribunal referred to a judgment of the Allahabad High Court where it was observed that the Commissioner could exercise his jurisdiction under Section 263 of the Act "only in cases where no enquiry is made by the assessing officer." On the second aspect pertaining to disallowance under Section 14A of the Act read with Rule 8D (2) (ii) of the Income Tax Rules, 1962, the tribunal found that the assessing officer had netted off the interest paid with the interest income for working out the disallowance under Rule 8D. According to the tribunal, the assessing officer had applied his mind to the issue and it was not something that escaped the attention of the assessing officer for the Commissioner to assume jurisdiction under Section 263 of the Act on the ground that no enquiry in such regard had been conducted by the assessee. Apropos the third aspect pertaining to trade discount, the tribunal found that the Commissioner had issued the notice for addition of trade discount on the ground that the assessee's claim for trade discount was not in order. The tribunal also found that details of the trade discount had been furnished by the assessee to the assessing officer at the time of assessment under Section 143(3) of the Act and the details of such discount had been included in the paper-book filed before the tribunal. Further, the tribunal found that the Commissioner had changed his stand as indicated in the notice and at the time of passing the order under Section 263 of the Act. For the same reasons, as in respect of the first head pertaining to fixed assets, the tribunal found that the Commissioner had acted without basis. Finally, as regards the fourth issue pertaining to depreciation, the tribunal found that the Commissioner had raised the issue in the notice under Section 263 of the Act for excess depreciation but concluded in his order that proper enquiries had not been made by the assessing officer. Again, the tribunal Ravi Modi & Shilpi Modi found that there was a change in stand with regard to the notice and in the revision order, which was impermissible. In matters of the present kind where there is a specialized tribunal in place for dealing with matters pertaining to a particular subject, the scope of interference is limited in the present jurisdiction. Once it is seen that a plausible or reasonable view has been taken by the tribunal upon a fair discussion of the matter, this Court in exercise of the authority available in this jurisdiction would not supplant its view in place of the tribunal's unless the error is apparent and palpable. The tribunal has given adequate reasons, and relied on precedents, as to why the manner in which the jurisdiction exercised by the Commissioner under Section 263 of the Act was found to be erroneous. There does not appear to be any legal error committed by the tribunal in either taking up the appeal or in deciding the same, particularly since cogent grounds have been indicated for interfering with the order of the Commissioner passed under Section 263 of the Act. The questions framed are answered in the negative in every case. of 2018 is dismissed.”

“11. The assessee also furnished the relevant extracts of the financial statement for the financial year 2015-2016 highlighting all the relevant ITAT NO. 211 OF 2022 REPORTABLE details. Further the location wise break up of those items of expenses as reflected in the profit and loss account were also placed before the learned tribunal and it was explained that the items set out in the Column (B)(C)(D)(E) in the above table formed part of the depreciation on scientific research assets; assets written off and profit and loss on sales of asset debited in the profit and loss account. Thus, it was explained that the sum of Rs. 1,34,45,166/- was added back in the computation of income. This aspect of the matter has been analyzed by the learned tribunal and it has found that the said sum was added back in the computation of income and therefore there was absolutely no basis for the PCIT to invoke his power under Section 263 of the Act. Furthermore, records clearly show that the assessing officer had issued notices to the assessee on the very same issue considered their reply thereafter pointing out certain discrepancies issued show cause notice for which reply was submitted by the assessee and after a detailed enquiry the assessment has been completed. Thus, itPrincipal Commissioner Of Income Tax vs M/S. Britannia Industries Limited on 23 December, 2022is not a case of lack of enquiry or lack of proper enquiry. The PCIT does not in as many words state that there was lack of enquiry or lack of proper enquiry and all that is said is that the assessing officer did not verify these aspects which is factually incorrect. Therefore, it is not a case where the PCIT could have invoked his jurisdiction under Section 263 of the Act.

Ravi Modi & Shilpi Modi 12. With regard to the second issue, the learned tribunal had noted the facts that the invoices issued by the "LINKED IN" towards advertisement expenses in June 2014 were admitted as liability and crystallized for payment in the year under consideration owing to the fact that the "LINKED IN" being non- resident had furnished the necessary documents in ITAT NO. 211 OF 2022 REPORTABLE the such as TRC under Section 90(4) of the Act read with Rule 21 AB of the Rules and no PE certificate etc. only in the assessment year under consideration. Further the tribunal noted it is not the case where these expenses were charged as deduction in the preceding year more importantly, the tribunal noted that there is no revenue implication and no prejudice is caused to the revenue since the tax rate applicable to the assessee during the assessment year 2015-2016 to which invoices relates and the tax rates applicable for the assessment year 2016-2017 in which the invoices were accounted and paid were the same.

Order pronounced on17.02.2026

Sd/- Sd/- (Pradip Kumar Choubey) (Rajesh Kumar) Judicial Member Accountant Member Dated:17.02.2026 AK,Sr.P.S. Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR)