CEIGALL INDIA LIMITED, LUDHIANA,LUDHIANA V. PRINCIPAL COMMISSIONER OF INCOME TAX, LUDHIANA, LUDHIANA

ITA 540/CHANDI/2025

AI Insights

The case involves CEIGALL India Limited, which appealed against the order of the PCIT, Ludhiana, setting aside the assessment made by the AO under section 143(3) of the Income Tax Act, 1961. The PCIT had invoked section 263, claiming the assessment was erroneous and prejudicial to the interests of the revenue due to inadequate inquiries by the AO on various issues including stock valuation, professional and technical services, and capital gains. The Tribunal examined whether the AO had indeed failed in his duties and whether the PCIT was justified in setting aside the assessment order. The Tribunal concluded that the AO had made sufficient inquiries and that the PCIT's concerns did not meet the threshold for invoking section 263.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779389 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2020-2021
• Appeal Filed On: 14-04-2025
• Other Referred Cases: Malabar Industrial Co. Ltd. v. CIT, Gabriel India Ltd., V-Con Integrated Solutions, PCIT v. Aculife Healthcare Pvt. Ltd., Kanubhai Vanmalibhai Patel v. CIT, Sidharth J Desai v. CIT, Aryan Arcade Ltd. v. PCIT, Nirma Chemical Works (P) Ltd v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARUNDEEP KAUR; VIRTUAL
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Set aside; Business income; Opportunity of being heard; Corroborative evidences; Depreciation; Cost of acquisition; Period of limitation; Capital Gains; TDS; Assessment record; Revision of order
• Section: 143(3); 142(1); 263; 11; 54B; 63

Judgement Text

"आयकर अपीलीयअिधकरण,चǷीगढ़ Ɋायपीठ “ए” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: HYBRID MODE ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी क ृणवȶ सहाय, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM &SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No. 540/Chd/ 2025 िनधाŊरण वषŊ / Assessment Year : 2020-21 CEIGALL INDIA LIMITED A-898, Tagore Nagar, Ludhiana H.O Ludhiana (East), Punjab-141001 बनाम The Pr. CIT Ludhiana ˕ायीलेखासं./PAN NO: AADCC0088N अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राजˢ की ओर से/ Revenue by : Smt. Tarundeep Kaur, CIT, DR(Virtual) सुनवाई की तारीख/Date of Hearing : 07/10/2025 उदघोषणा की तारीख/Date of Pronouncement : 13/10/2025 आदेश/Order PER LALIET KUMAR, J.M: This appeal is directed against the order passed u/s 263 of the Income Tax Act, 1961 by the Ld. Principal Commissioner of Income Tax, Ludhiana-1 (“PCIT”) dated 30.03.2025 for A.Y. 2020-21, whereby the Ld. PCIT held that the assessment framed u/s 143(3) on 20.09.2022 was erroneous and prejudicial to the interests of the Revenue. 2. Briefly the facts of the case are that the assessee is a company engaged in the business of construction of roads, bridges and highways for Central and State Government authorities. For A.Y. 2020-21, the assessee filed its return of income on 15.02.2021 declaring income of Rs.121,16,56,290/-. 2.1 The return was selected for scrutiny under CASS for the following issues:  Claim of “any other amount” allowable as deduction in Schedule BP;  Stock valuation;  Refund claim; Printed from counselvise.com 2  ICDS compliance and adjustments;  Credit of brought forward TDS; and  Expenditure by way of penalty or fine 2.2 The AO issued notices u/s 143(2) and 142(1) and called for detailed information. The assessee furnished comprehensive replies on 07.12.2021 and 14.02.2022, enclosing computation, audit report, financial statements, and reconciliations. After considering submissions, the AO framed a speaking order on 20.09.2022, making an addition only in respect of disallowance of Health & Education Cess of Rs.1,17,28,143/- 2.3 The PCIT issued a show cause notice dated 17.03.2025 alleging that the AO failed to conduct proper verification in respect of:  difference between professional & technical services as per Form 3CD and ITR,  substantial increase in “other expenses”,  deduction of capital gains from business income,  stock valuation,  additions to fixed assets,  penalty expenditure,  brought forward TDS credit, and  ICDS adjustments 2.4 The assessee, had filed the reply on 26/03/2025 and had submitted that all the issues were duly examined by the Assessing Officer after issuing the questionnaire. The assessee had submittedthe table of issues raised by the Assessing Officer and the learned. PCIT in the following manner : Sr No. ISSUE RAISED BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS ISSUE TAKEN BY THE PCIT REMARKS 1. Claim of any other amountallowable under schedule BP Professional & Technical Services (New Issue)(Beyond the issue for which scrutiny assessment was undertaken) Issue considered by the PCIT and set aside to the file of Assessing Officer. Printed from counselvise.com 3 2. Stock Valuation Stock Valuation(Alreadydiscussedduringoriginal proceedings) as is borne out from therelevant query raised by the AO Issue again considered by the PCIT and set aside to the file of Assessing Officer. 2.5 The assessee, on the basis of the above table, submitted that the issues no. 2-7 were already forming part of the assessment order. Further, it was submitted that the issue of professional consulstancy, other expenses claimed by the assessee, scheduled BP were not subject matter of the scrutiny assessment and it was not permissible for the ld. PCIT to raise the fresh issue which was not subject matter of the scrutiny assessment proceedings. Further, with respect to professional consultancy services it was submitted as under; The reply to this issue has been given by the assessee before the PCIT as per Page 68-70 of the Paper Book in detail and facts are as under:-  Please refer to page 20 of the Paper Book, which is part of the Tax Audit Report and at Point No. 34 (a) serial no.4 i.e. Schedule relating to whether assessee is required to deduct or collect tax as per the provision of Chapter XVII-B or Chapter XVII-BB, if applicable, the assessee has declared that, assessee had paid `professional consultancy with applicability of TDS' on amount of Rs. 15,98,35,720/-, on which, applicable rate of TDS u/s 194J have been deducted i.e. 10% at Rs. 1,59,83,572/- of total professional fee paid, TDS is deducted by the assessee.  TDS has been deducted on account of fee for professional and technical services, All such figures are part and parcel of the income and expenditure 3. Refund Claim Capital Gain (New Issue)(Beyond the issue for which scrutiny assessment was undertaken) Issue considered by the PCITand set aside to the file of Assessing Officer. 4. ICDS compliance and adjustment Issue of ICDS (Already discussed during original proceedings) as is borne out from the relevant query raised by the AO and also discussed in the order. Issue considered by the PCIT and set aside to the file of Assessing Officer. 5. Credit of bought forward TDS Credit of bought forward TDS Already discussed during original proceedings No adverse view was taken by the PCITon this issue. 6. Expenditure by way of penalty relevant query raised by the AO and fine of violation of any law. Fee&Penalty(Alreadydiscussedduringoriginal proceedings) No adverse view was taken by the PCIT on this issue. 7. - AdditionintheFixed Asset(NewIssue) (beyond assessment was undertaken) Issue considered by the PCIT and set aside to the file of Assessing Officer. Printed from counselvise.com 4 account and the figure of Rs. 1,88,43,799/- at page of 41 of PB pointed by the PCIT, assessee had been disclosed such amount under the head of 'Professional and Legal charges' and the PCIT has stated that, the balance amount has been not enquired. In this regard, it is submitted that, this issue had been looked into by the AO. Since the Assessing Officer had before him profit Et Loss account and schedule complete audit report, balance sheet, Income Et Expenditure account and notes on accounts, and all figures are borne out from there. Also, the reconciliation was filed by the assessee before Ld. PCIT vide reply to SCN u/s 263, where the assessee has given the breakup of total expenses, claimed under the head`Professional charges' at Rs. 16,10,52,291 /- and out of which Rs. 15,98,35,720/- was liable for TDS deduction and balance amount of Rs. 12,16,571/ - were those kinds of professional expenses which were under the prescribed limits of section 194J i.e. upto Rs. 30,000/-, on which no TDS was liable to be deducted upto this limit. Please refer to our reply to the SCN notice relevant page 69 of the PB. The chart is self-explanatory and all figures are matching with Profit and Loss Account.  Since, we had deducted the TDS on much larger sum and all such figures are part and parcel of the regular books of accounts and audited set and the nature of the said expenses are clear from the profit and loss account. All such expenses have been reflected in the Profit and Loss Account (page 26) wherein Note number 28 of the profit and loss account is given at page 40 to 41 of the 'paper book', such expenses have been disclosed and the same includes- >Royalty(Page 40) of Rs. 127,554,526/-, Audited remuneration at Rs 5,75,000/-, Legal & Professional Charges at Rs. 1,88,43,799/-, and the profit and loss account also reflects, Misc. Expenses at Rs. 10,90,99,746/-, out of which, amount of Rs. 1,03,65,450/- is relating to Professional in Nature and the remaining expenses of Rs. 37,13,516.96 is relating Rates and Taxes, which has been reported in Schedule No.28 at page 41, under the head of Rate & Taxes, which amounts to Rs. 50,04,868/- and Rs. 37,13,516/- is included in it, as it relates to Professional in nature, is at page 41 of the paper Book. Thus, since all such detail were as per profit and loss account and schedule to notes on account, the AO had verified the same during the assessment proceedings and there is no SO CALLED DIFFERENCE AS ALLEGED BY THE PCIT which makes the said ground void-ab-initio as the said allegation is against the documents furnished during the course of the assessment proceedings and which were part of the record and we had deducted the TDS on much large amount.  It is reiterated that all such figures are part and parcel of return of income and reflected in the profit and loss account and even the PCIT could have easily verified the same from the profit and loss account and schedules, for which, the reply had been filed by the assessee. Further, no adverse inference was drawn the PCIT against the reply filed by the assessee against the SCN and the PCIT has merely stated that, \"Moreover, the submission of the assessee during proceedings u/s 263 regarding reconciliation of expenses on account of professional or technical services as per audit report and as per return of income should have been filed during the course of then assessment proceedings.\" which means that the PCIT has also not been able to negate the said explanation of the assessee and thus, the genuineness of expenses and the figures are as per our return of income as filed before the Assessing Officer and, therefore, the same is not a ground for revision proceedings u/s 263. Printed from counselvise.com 5 2.6 After considering the assessee’s reply dated 26.03.2025, the PCIT held that the AO failed to make adequate enquiries, invoked Explanation 2(a) to section 263, and set aside the assessment for de novo consideration. The finding of the Ld. PCIT is given in paragraphs5.1 to 5.67 and 8. In para 8, it was held as under:- Therefore, considering the entire gamut of facts and in the circumstances of the case and also relying upon the judgments as discussed above, I am of the firm opinion that the Assessing Officer's failure in not examining the impugned issues by way of enquiries/verification that were required in this case, has rendered the assessment order, dated 20.09.2022, passed u/s 143(3)r.w.s. 144B of Income Tax Act, 1961 by the AO in the case of the present assessee, erroneous in so far as it is prejudicial to the interest of the revenue. Both the conditions specified u/s 263 of the Act are satisfied in this case and it is a fit case to invoke provisions of Explanation 2 to the said section. Therefore, as per the provisions of section 263 of the Income Tax Act, I hereby set aside the impugned assessment order dated 20.09.2022, passed u/s 143(3) r.w.s. 144B of Income Tax Act, 1961. Needless to state, the Assessing Officer shall give the assessee reasonable opportunity of being heard and pass a speaking order after taking into consideration the explanation and supporting evidence submitted by the assessee. The assessment order dated 20.09.2022, passed u/s 143(3) r.w.s. 144B Income Tax Act, 1961 is being set aside for the limited purpose for examining the issues as mentioned above in para 5. 3. Feeling aggrieved by the order passed by the Ld. PCIT the assessee is in appeal before us, on the grounds mentioned in the memo of appeal. 3.1 During the course of the hearing, the learned AR submitted that the case was selected for limited scrutiny, the AO raised specific queries on all six CASS issues, and the assessee filed detailed written replies with supporting evidence. 3.2 The AO applied his mind and passed a reasoned order. Once due enquiries have been made, the PCIT cannot substitute his judgment. Reliance was placed on Malabar Industrial Co. Ltd. v. CIT (243 ITR 83, SC), Gabriel India Ltd. (203 ITR 108, Bom), V-Con Integrated Solutions (476 ITR 526, SC, 2025) and PCIT v. Aculife Healthcare Pvt. Ltd. (477 ITR 398, SC, 2025). 3.3 The AR submitted that the alleged difference noted by PCIT is misconceived. The assessee paid professional fees of Rs.15.98 crores on which TDS of Rs.1.59 crores was deducted u/s 194J. The balance amount shown under “Legal & Professional Charges”includes items falling below the threshold of TDS Printed from counselvise.com 6 or classified under other schedules (such as royalty and auditor’s remuneration). A reconciliation was filed both before the AO and PCIT. The AO had all financials, audit report, and schedules before him; hence there was no lack of enquiry. 3.4 It was contended that the PCIT merely compared the figure of Rs.257.12 crores with the preceding year’s figure of Rs.86.94 crores without appreciating that turnover had increased by 218%. In proportion to sales, expenses had actually decreased. The AO examined comparative statements during assessment; therefore, raising a generic suspicion at 263 stage is not permissible. 3.5 The AR argued that the so-called discrepancy arose on account of “profit on sale of depreciable assets” of Rs.24.22 lakhs which was adjusted in block of assets u/s 50. The computation of income clearly reflected this treatment and the AO had accepted the same. The PCIT overlooked section 50 which mandates such treatment. 3.6 The AR emphasized that this was a specific CASS issue. The AO called for details, perused the tax audit report, financials, and reconciled opening and closing stock. After satisfaction, he recorded findings in assessment order. Once AO has examined the issue, PCIT cannot term it as “lack of enquiry” merely because he preferred a different line of enquiry. 3.7 The assessee submitted a detailed reconciliation of ICDS adjustments vide letter dated 07.12.2021. The AO referred to and accepted the same in the assessment order. The PCIT’s observation that Annexure was not available is factually incorrect. 3.8 The AR pointed out that the assessee furnished details vide reply dated 14.02.2022. The AO verified and accepted the claim. The PCIT’s remark that documents were not filed is contrary to record. Printed from counselvise.com 7 3.9 The AR submitted that only Rs.2.32 lakhs was debited, which was apparent in accounts. The AO examined and recorded his satisfaction. 3.10 The AR argued that this was never a CASS issue. Without converting the case into “complete scrutiny”, the PCIT could not travel beyond the limited scrutiny scope. Moreover, purchases were reflected in audited accounts and routed through banking channels. 3.11 In sum, the AR contended that the AO had raised queries, assessee replied, and AO took a possible view. The PCIT has not pointed out any error of law or fact; he has merely directed re-enquiry, which is impermissible. 4. The learned DR, on the other hand, strongly supported the order of Ld. PCIT. It was argued that the AO accepted submissions of assessee at face value without independent verification. No third-party evidence or stock registers were called for. On issues like professional fees, capital gains, and fixed asset additions, AO had not gone deep. Therefore, the order was erroneous and prejudicial to Revenue. 5. We have carefully considered rival submissions and examined the record. The following position emerges: a. The case was selected for limited scrutiny on six specified issues. The AO issued detailed questionnaire dated 23.11.2021 and obtained replies. Assessment order records findings issue-wise b. On stock valuation, AO reconciled opening and closing stock figures and found them acceptable. c. On ICDS adjustments, AO considered assessee’s letter dated 07.12.2021 and accepted computation. d. On TDS credit and penalty expenditure, AO examined submissions and found them in order. e. On professional fees, reconciliation was available on record; TDS was deducted; no discrepancy was shown. f. On capital gains, AO adopted a legally tenable view consistent with section 50. Printed from counselvise.com 8 g. On fixed asset additions, the issue was never part of scrutiny; PCIT travelled beyond his jurisdiction. 5.1. The Ld. PCIT in the order in para 5.2 had mentioned with respect to other expensesmentioned as under: Further, during the course of original assessment proceedings, vide point 3 of reply filed dated 07.12.2021 and against notice issued u/s 142(1) Dt. 23.11.2021, the assessee filed before the Ld. AO, the copy of audit report, Balance Sheet, Trading, Profit and Loss account, along with all the annexure for the assessment year AY 2019¬20, 2020-21. The said documents duly reflects the comparative figures of sales and expenses and since the hike in sales as well as expenses claimed by the assessee were part of reply filed by the assessee therefore, the revision u/s 263 on this issue is not called for. From perusal of assessment record and reply of the assessee, it is observed that AO did not call for the party wise details of these expenses amounting to Rs. 257.12 crores, and did not call for the invoices and details of the payments made from bank for these expenses even on test check basis to establish genuineness of these expenses. Therefore, AO failed to make inquiry/ verification on the above mentioned issues. 5.2. Similarly with respect to theissued relating to capital gain as shown under 'Schedule-BP of ITR Form' whereinassessee has shown capital gain amounting to Rs. 69,59,354/- whereas, amount deducted from the computation of income was of Rs. 45,37,109/- only as profit on sale of mutual funds The Ld. PCIT in the order in para 5.3 had noted as under: Further, it is submitted that during the course of assessment proceedings questionnaire dated 23.11.2021 issued by Ld. AO wherein, assessee was asked to file the computation of income for AY 2020-21, which has been filed by the assessee along with reply dated 07.12.2021 vide point no. 4, wherein it is clearly evident that we have duly shown the treatment of above capital gains as per compotation of income. From a collective reading of the Fixed Assets chart and computation of income it is clear that suchso called profit on sale of fixed assets was not liable to be disclosed under the head capital gains since the block of assets have not been exhausted. Thus, no revision u/s 263 in respect of the above issue is called for. However, from perusal of assessment record and reply ofthe assessee, it is observed that AO asked to furnish computation of income for the AY 2020-21 only vide notice u/s 142(1) dated 23.11.2021. However, no specific query regarding capital gains was raised by the AO during the course of assessment proceedings. AO should have called for the details and supporting documents of the fixed assets sold and then would have verified the admissibility of the contention of the assessee. Therefore, the AO failed to examine and verify the issue during assessment. Printed from counselvise.com 9 5.3 Further, With regards to the issue of \"Stock Valuation\", the Ld. PCIT noted in para 5.4 as under: It is submitted that during the course of the assessment proceedings, the said issue has been considered by the Ld. AO and the findings of the same have been given. Thus, it is clearly evident that, the Ld. AO has duly applied his application of on the above said issue of Stock. However, from perusal of assessment record and reply of the assessee, it is observed that the AO has only analyzed tax audit report and financials submitted by the assessee on the issue of stock valuation. Further, perusal of assessment record reveals that no documentary evidence was called for by the AO. The AO has not examined the stock register, quantitative tally of stock and valuation of the same. AO failed to verify the purchases and sales with respect to stock register even on test check basis. Therefore, the AO has failed to make further inquiry and verification which should have been made in respect of this issues. 5.4. Furthermore, regarding the source and genuineness of the addition made to building block of Rs. 4,71,394 and to furniture and fitting block of Rs. 39,11,207 & plant & machinery of Rs. 26,23,71,173, the Ld. PCIT noted in para 5.5 as under: “However, notwithstanding the same, it is submitted that the audit report already reflects the dates and amount of purchases made by the assessee during the year under consideration and the same has been considered by the Ld. AO during the course of the original assessment proceedings. Furthermore, the copy of Accounts of the parties from which the respective purchases have been made are being enclosed and further, it can also be seen that majority of the purchases route through bank account of the assessee company making the transaction genuine. Notwithstanding above, it is submitted that, issue pointed out in SCN is attribute to the issues already discussed during original assessment proceedings, thus, revision proceedings u/s 263 cannot be made.” 5.5 The Ld. PCIT with respect to issue of ICDS compliance and adjustment had noted in para 5.6 as under: Further, as per the assessment order dated 20.09.2022, it has been stated by our Ld. AO in regards of this point that the assessee has provide the details of the ICDS adjustments vide reply dated 07.12.2021 explaining the ICDS adjustments. The same was found to be acceptable, thus no variation proposed. Thus, it is clearly evident that, the Ld. AO has duly applied his mind on the above said issue of ICDS adjustments. On perusal of assessment record, it is observed that the AO called for the details of ICDS adjustment and its effect of taxable income. In response, the assessee vide reply dated 07.12.2021 submitted that the relevant adjustments as per ICDS has been made in the computation of income, wherein it has added the amount of depreciation as per Companies Act, 2013 and the depreciation as per Income Tax Act, 1961. However, the AO did not make inquiries to verify the submission of the assessee, thus, the AO failed to verify the genuineness and admissibility of depreciation as claimed by the assessee in computation of income. AO did not Printed from counselvise.com 10 call for the documentary evidence in respect of the additions made in fixed assets and their date of installation to ascertain the amount of depreciation as per provisions of Income Tax Act. 5.6 From the summary of the findings of the Ld. PCIT reproduced hereinabove we can safely conclude that  The AO did conduct enquiries on all scrutiny issues, considered assessee’s submissions, and recorded findings.  The PCIT has not demonstrated what specific further enquiry was necessary or how AO’s view was unsustainable.  Merely because PCIT would have conducted deeper verification, revision cannot be invoked.  On issues beyond limited scrutiny, assumption of jurisdiction is itself invalid. 5.7 It is well settled by Malabar Industrial Co. (SC) that both conditions—error and prejudice—must co-exist. Gabriel India Ltd. (Bom HC) has held that mere inadequacy of enquiry does not justify revision. The Hon’ble Supreme Court recently in V-Con Integrated Solutions (476 ITR 526) quashed 263 where AO had raised queries and assessee furnished replies, and PCIT did not specify further enquiry required. Similarly, in Aculife Healthcare Pvt. Ltd. (477 ITR 398, SC), it was held that once AO has adopted a plausible view, revision is not permissible. The Hon’ble Gujarat High Court in case of KanubhaiVanmalibhai Patel[2025] 178 taxmann.com 133 (Gujarat)has held as under: 18. Being aggrieved the assessee preferred an appeal before the Tribunal. Tribunal after considering the submissions of both the sides held as under: \"13. We find that though, it was accepted by ld PCIT that the assessing officer raised question for seeking evidence of agriculture income, the assessee failed to prove that land was being used for agricultural purpose by furnishing valid documentary evidence. The assessee claimed that agricultural income was shown in all past three years, is not supported by evidence of actual carrying out of agriculture operations. No cross verification or investigation was made during assessment about the letter issued by Shree Maruti Gaushala regarding taking entire product/crops grown on the said land and donated to such Gaushala. The Assessing Officer has not made any enquiry from agriculture department or revenue agency about the crop cultivation. 14. As recorded above the ld AR for the assessee during the hearing of appeal invited our attention on the various show cause notices issued under Printed from counselvise.com 11 section 142(1) and their reply filed by the assessee. We find that during assessment the assessing officer, in case of assessee, the assessing officer, vide notice dated 23/07/2018 directed assessee to file computation of income, profit and loss account with balance sheet, which was duly responded alongwith all details vide reply dated 13/09/2018. Again vide notice dated 01/10/2018, assessing officer asked the assessee to furnish copy of sale deed of the land sold during the year under consideration with copies of their respective purchase deed to show the cost of acquisition, copy of purchase deed of new property in order to clarify of deduction under Section 54B. The Assessing Officer also sought evidence regarding agriculture activities immediately preceeding year before transfer of agricultural land on which deduction under Section 54B is claimed and details of crops grown and yield of each crop for F.Y. 2013-14 to 2015-16. Details of head wise of agricultural expenses like labour, irrigation, transportation, seeds expenses fertilizer expenses etc. Complete name, address, PAN to whom the agricultural produce were sold in F.Y. 2013-14 to 201516, justification of claim of agriculture income with cogent and sufficient evidence with Hak Patra, Form-6, sales of bills of agriculture product. We find that the assessee in its reply dated 11/12/2018 furnished required details. The Assessing Officer again vide notice dated 16/10/2018 asked various details about the deduction under Section 54B to 54G of the Act and sale consideration of property in Income tax return is less than the consideration reported in Form 26QB, details of long term capital gain. The assessee further vide its reply dated 24/10/2018 furnished complete details. We find that the assessee again in response to show cause notice dated 06/11/2018, furnished the details of immovable property purchased vide its reply dated 14/11/2018. From the various reply furnished by the assessee, it can be concluded that the assessing officer thoroughly examined the issue of the deduction under section 54B. No doubt that there is no such observation about conducting such detailed inquiry, in the assessment order. 15. The Punjab & Haryana High Court in S.K. Kantilal (supra) held that when the assessee having sold the land after holding it for two decades and using it for agriculture purpose without effecting any improvement on the land, the earning from such sale of is to be treated as capital gain and not income from business and profession. Further, Punjab & Haryana High Court in Harjeet Sing Sangha (supra) also took the view that when the assessee purchased agriculture land and it was being used as such by assessee, later on it was sold in a small plots to different persons, it was held that activity could not be termed as adventure in nature of trade and cannot be taxed as business income. Again adverting to the facts of present case, the assessee before sale of land has only got its conversation from agriculture to non- agriculture purpose as it is the condition precedent for selling the land to the person who is not registered farmer in the revenue record of the State Government. The Hon'ble Gujarat High in CIT v. Sidharth J Desai (1983) 139 ITR 628 (Guj) held that there are several factor to determine the real and held that permission under section 63 of the Bombay Tenancy and Agricultural Lands Act was obtained by the assessee to sell the lands to the society for residential purposes would not, militate against the land continuing to be agricultural on the date of its sale, as the permission was obtained only about two and a half months prior to the sale. Therefore, till the land was held by the assessee its character as agricultural land was not changed either as a result of its reclassificanon in the revenue records or by the actual alteration of its use. Printed from counselvise.com 12 16. In view aforesaid legal and factual discussions coupled with the facts the assessing officer has examined the issue in depth and allow relief to the assessee. Therefore, the view taken by the assessing officer is one of the reasonable and plausible and legally sustainable, which cannot be said as erroneous. 17. We also find that before ld PCIT, it was submitted that the assessee was owner of 2/3 part which is sought to be taxed as business income, however, on remaining part of 1/3 shareholders case the department has accepted capital gain. To strengthen such contention, the assesse has filed copy of assessment order dated 067.12.2018 passed under section 143(3) in case of co- owner namely Ramesh Chandra Purshottamdas Dass Patel alongwith the copies of the notices issued by his assessing officer. Similar submissions were made before us by ld AR for the assessee. We find that on such submissions, ld PCIT while setting aside the assessment order held that such objection is not acceptable as the fact in case of co-owner of said case with regard to involvement of said person in the real estate business, frequency of land transaction, intention of that person to purchase the land for resale or for personal use etc have not been stated. And that there is no basis to raise such objection that consciously no revision was proposed in that case. In our view the observation of Id PCIT is not correct. Once, the department has accepted the capital gain in the hand of co-owner in respect of the common transaction, the assessee cannot be treated indifferently. Thus, on such principle the assessment order cannot be branded as erroneous. 18. The Supreme Court in a celebrated case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 832 (SC), held that the prerequisite for the exercise of jurisdiction by the Commissioner suo-motu is that the order of the Income- tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue recourse cannot be had to section 263(1) of the Act. It can be exercised only when an order is erroneous, the section 263 will be attracted. Further, Hon'ble Bombay High Court in CIT v. Gabriel India Ltd (233 ITR 108 Bom /71 Taxman 585) held that the power of suo-motu revision under sub- section (1) of section 263 is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; and (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the revenue. 19. The Hon'ble Jurisdictional High Court in Aryan Arcade Ltd., v. PCIT (2019) 412 ITR 277 (Gujarat) held that merely because Commissioner held a different belief that would not permit him to take the order in revision, it if further held that when Assessing Officer made full enquiry, he made up his mind, the notice of revision is not valid. In CIT v. Nirma Chemical Works (P) Ltd (309 ITR 67 Gujarat)/ 182 Taxman 183 Gujarat, the Hon'ble High Court also held that when assessing officer after making due inquiries had adopted one of the view and granted partial relief, merely because Commissioner took a different view of the matter, it would not be sufficient to permit commissioner to exercise his powers under section 263. The Hon'ble Court in para 22 of its order on the objection of the revenue that there is no discussion of the issue in the assessment order held that the contention on behalf of the revenue that the assessment order does not Printed from counselvise.com 13 reflect any application of mind as to the eligibility or otherwise under section 80-I of the Act requires to be noted to be rejected. An assessment order cannot incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic some. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he carries and the period of limitation within which an order is required to be made; and, secondly, the order is an appealable order. An appeal lies, would be filed, only against disallowances which an assessee feels aggrieved with. (* emphasis added by us). 20. Thus, in view of the above discussion the twin conditions as enunciated under section 263 cannot be said to have been fulfilled. Thus, the order passed by ld PCIT under section 263 failed in our legal scrutiny, hence order dated 21.02.2022 is set aside.\" 19. From the above observations and findings arrived at by the Tribunal, it appears that the Assessing Officer while passing the assessment order made full inquiry and therefore, Commissioner having different belief would not permit him to take the order in revision. Once the Assessing Officer after making detailed inquiry has adopted one of the view and granted relief, merely because the commissioner took a different view of the matter, jurisdiction under section 263 of the Act could not have been exercised by the Commissioner. The Tribunal has also arrived at the findings of the fact that the Assessing Officer has examined the issue in depth and allowed the relief to assessee of exemption under section 54B of the Act. Therefore, view taken by the Assessing Officer is one of the reasonable, plausible and legally sustainable view which cannot be said to be erroneous. As held by the Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66 /243 ITR 83(SC), the prerequisite for the exercise of jurisdiction of Commissioner under section 263 of the Act is that the order of the Income Tax Officer is erroneous so far as it is prejudicial to the interests of the Revenue then both the conditions are required to be satisfied, and if one of them is absent, the Commissioner cannot have recourse to section 263 of the Act. It was held that section 263 of the Act can be exercised only when order is erroneous and prejudicial to the interest of the Revenue as suo motu revisional power under sub-section(1) of section 263 is in nature of supervisory jurisdiction and same can be exercised only if circumstances specified therein existing as held by the Apex Court. The Hon'ble Supreme Court has dismissed the SLP filed by the Department against the above said decision of Hon'ble High Court vide its order dt. 01/09/2025 in the case of CIT Vs. KanubhaiVanmalibhaiPatel reportedas 2025] 178 taxmann.com 342 (Hon'ble Supreme Court). The sum and substance of the order of the Hon'ble High Court was that if the adequate enquiries were made by the Assessing Officer then there is no reason to substitute the opinion of the Ld. PCIT and direct the Assessing Officer to conduct the assessment in a particular manner or raise particular questions. Printed from counselvise.com 14 5.8 In view of the above we are of the considered opinion that the order of the AO cannot be held “erroneous and prejudicial to the interest of Revenue” within the meaning of section 263. The order of PCIT is thus unsustainable. 6. We accordingly set aside the order of PCIT u/s 263 dated 30.03.2025 and restore the assessment order dated 20.09.2022. 7. In the result, the appeal of the assessee stands allowed. Order pronounced in the open Court on 13/10/2025. Sd/- Sd/- क ृणवȶ सहाय लिलत क ुमार (KRINWANT SAHAY) (LALIET KUMAR) लेखासद˟/ ACCOUNTANT MEMBER Ɋाियक सद˟/JUDICIAL MEMBER AG आदेशकीŮितिलिपअŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकरआयुƅ/ CIT 4. आयकरआयुƅ (अपील)/ The CIT(A) 5. िवभागीयŮितिनिध, आयकरअपीलीयआिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊफाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "