MAHASHIAN DI HATTI (P) LTD,NEW DELHI V. PCIT-4, NEW DELHI

ITA 1987/DEL/2025

AI Insights

The case involves Mahasian Di Hatti (P) Ltd., which appealed against the order of the Principal Commissioner of Income Tax (PCIT) that cancelled their earlier assessment order and directed a fresh assessment. The PCIT's order was based on perceived inadequacies in the original assessment concerning various financial transactions and claims. The Tribunal examined whether the PCIT's order was justified under Section 263 of the Income Tax Act, which allows for revision of an assessment order if it is found to be erroneous and prejudicial to the interests of the Revenue. The Tribunal concluded that the PCIT's order did not satisfy these conditions, leading to the quashing of the PCIT's order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775972 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2020-2021
• Appeal Filed On: 28-03-2025
• Other Referred Cases: Metacaps Engineering & Mahendra Construction Co. vs CIT, Sabarmati Capital One Ltd vs DCIT, PCIT vs Britannia Industries Ltd, CIT vs Usha International Ltd, Shankar Construction Co. v. Addl. CCT, Solidus Hi Tech Products (P.) Ltd. vs. State of Karnataka, Gabriel India Ltd, Malabar Industrial Co. Ltd. vs. CIT, Daffodills Pharmaceuticals Ltd. vs. CIT, Globus Infocom Ltd. vs. CIT, Aditya Mills Ltd, Mehsana District Co-operative Milk, Dev Milk Foods Pvt Ltd, Pr. Commissioner of Income Tax-1, Chandigarh Vs. M/s V-con Integrated Solutions Pvt. Ltd., CIT vs. Ashok Logani
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHESH KUMAR
• Assessee Lawyers: VINOD BINDAL; RINKI
• Keywords: Set aside; Difference of opinion; Change of opinion; Opportunity of being heard; Business expenditure; Question of law; Depreciation; Retraction; Reopening of assessment; Principle of natural justice; TDS; Valuation report; Assessment record; Revision of order
• Section: 147; 148; 143(3); 142(1); 263; 32; 12A; 2; 80G

Judgement Text

"1ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘G’ NEW DELHI) BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SH. YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 1987/Del/2025 (A.Y. 2020-21) Mahasian Di Hatti (P) Ltd. C/o Vinod Kumar Bindal& Co. D-219, VivekVihar, Phase-1, New Delhi PAN:AAACM4165F Vs . Pr. Commissioner of Income Tax-4 2nd Floor, Central Revenue Building, ITO, New Delhi Appellant Respondent Assessee by Sh. VinodBindal, CA, Ms. Rinki Sharma, ITP, Sh. Saurabh Sharma, Adv and AnmolJha, Adv Revenue by Sh. Mahesh Kumar, CIT(DR) Date of Hearing 07/08/2025 Date of Pronouncement 10/09/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of the Principal Commissioner of Income Tax-4, Delhi (‘Ld. PCIT’ for short) dated 27/03/2025 pertaining to Assessment Year 2020-21. 2. The grounds of Appeal are as under:- “1. The PCIT-4, New Delhi erred in law and on facts in passing the impugned order u/s 263 of the Act cancelling the entire assessment order passed earlier u/s 143(3) of the Act by the Assessment Unit NFAC on 25/08/2022 and directing the AO to pass fresh assessment order in terms of directions given in the impugned order though the earlier assessment order was not at all erroneous and prejudicial to the interest of the Revenue. Thus, the said order must be declared as bad in law and be quashed. 2. The PCIT-4. New Delhi erred in law and on facts in directing the AO to re-examine all issues which do not affect the assessment order in any manner depending on the past Printed from counselvise.com 2ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT history as well as nature of business of the assessee. Thus, the impugned order passed on a change of opinion must be cancelled. 3. The PCIT-4. New Delhi concluded the proceedings in a lopsided manner after conducting the hearing last on 23-09 2024 and thereafter the fresh notice was issued only on 18:03 2025 calling for no fresh information despite the fact that all information containing pages 1-1182 in the following written submissionsfiled online on 05/02/2024, 12 02 2024, 27.02 2024. 17 07 2024. 23/09/2024. 22/03/2025 and 25/03/2025 and physically also. Thus, the principle of natural justice has been violated besides cancelling the earlier order u/s 143(3) of the Act without showing as to how the same was not only erroneous but also prejudicial to the interest of the revenue. 4. The impugned order passed u/s 263 of the Act lacks the two mandatory conditions being erroneous and prejudicial to the interest of the Revenue needs to be quashed.” 3. Brief facts of the case are that, the Assessee filed its income tax return on 14/02/2021 declaring total income of Rs. 6,20,33,84,130/-. The return of income of the Assessee was picked up for ‘Complete Scrutiny’ by the ACIT, NAFAC-1 (1)(2) Delhi u/s 143(2) of the Act by issuing notice dated 29/06/2021 on the issue of ‘stock valuation’,‘loss from currency fluctuations’ and ‘refund claim’. In response to the notice, the Assessee produced details to NFAC. The NFAC vide order dated 25/08/2022, assessed the income of the Assessee at the returned income. 4. The Ld. PCIT on perusal of the assessment records was of the opinion that the Assessing Officer, had not verified/examined following issues before passing the Assessment Order and prima facie Printed from counselvise.com 3ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT considered that the assessment order being erroneous in so far as it is prejudicial to the interest of the Revenue for following reasons:- “a) On perusal of the assessment records, it was observed that there was sharp increase of Rs. 14,49,91,615/- under the sub-head \"Advance for properties and Rs. 42,85,51,442/- under sub-head \"Advance to suppliers\". (b)That on perusal of Column No. 23 of Form 3CD & P&L statement, it was observed that the assessee has made substantial payment of Rs. 257 Cr. to related parties under various heads during the year under consideration; (c)That payment of Rs. 12,00,00,000/- under the head Commission to Directors was made during the year under consideration. Further perusal of column no. 23 of Form 3CD, revealed that assessee also made commission payment of Rs. 27,00,50,650/- to the directors: (d)That On perusal of financial statements, it was observed that assessee declared sales of Rs. 13,20,31,83,839/- under the head \"Finished goods (Spices) (Net of Discount); (e) There was substantial increase in \"Other Expenses\" from Rs. 32,56,61,880/-in the previous year to this financial year of Rs.34,61,18,688/- (f) Expenditure of Rs. 13,22,51,232/- under the head other expenses on 100 Year's celebration MDH; (g) That assessee claimed deduction u/s 80G of Rs. 20,51,00,326/-during the year under consideration. Further, it was also noticed that the payments amounting to Rs. 2,50,00,000/- to PM Relief Fund in cash. Therefore, as per section 80(G) (5D), for which the assessee was not eligible to claim deduction u/s 80G. Furthermore, it was also observed that assessee claimed 50% deduction u/s 80G 18,00,00,326/- which remained unexamined with respect to its nature of payments and receipts. h) The outstanding trade payables in previous years are as under:- As on 31.03.2020 Rs. 47,71,84,855 Printed from counselvise.com 4ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT As on 31.03.2019 Rs. 46,96,85,985/- As on 31.03.2018 Rs. 38,62,91,826/- As on 31.03.2017 Rs. 26,90,31,069/- (i) That there has was substantial additions in property, plant and equipment to the tune of Rs. 25,04,24,309/- during the year under consideration.” 5. The Ld. PCIT issued show cause notice for initiation of proceedings u/s 263 of the Act and the Assessee has filed replies on various dates and after considering the reply of the Assessee,an order came to be passed u/s 263 of the Act on 27/03/2025 by the PCIT, wherein the Ld. PCIT held that the assessment order passed u/s 143(3) r.w. Section 144B of the Act dated 25/08/2022 is erroneous in so far as it is prejudicial to the interest of the Revenue. Accordingly,the Ld. PCIT cancelled the assessment order and directed the A.O. to make necessary examination, verification and enquires in respect of the issues involved thereon by giving adequate reasonable opportunity of being heard to the Assessee before finalizing assessment order. Aggrieved by the order of the PCIT dated 27/03/2025, Assessee preferred the present appeal on the grounds mentioned above. 6. The Ld. Counsel for the Assessee further submitted that the Ld. PCIT committed error in passing the order impugned u/s 263 of the Act in canceling the entire assessment order passed u/s 143 (3) of the Act dated 25/08/2022 though the Assessment Order was neither Printed from counselvise.com 5ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT erroneous nor prejudicial to the interest of the Revenue. The Ld. Counsel submitted that the Assessee has produced all the document before the A.O. during the original assessment proceedings and the Ld. A.O. has categorically stated in the assessment order that ‘the Assessee has furnished the complete details regarding reason of scrutiny online through the f-filing portal’. It is further submitted that, after verifying all the details, the Ld. A.O. completed the assessment.However, the Ld. PCIT without even recording the finding as to how the assessment proceedings are erroneous and prejudicial to the interest of the Revenue, set aside the assessment order. The Ld. Counsel has taken us through the notices issued by the A.O. and the reply filed by the Assessee and submitted that the A.O. after considering the details, framed the assessment, however, the Ld. PCIT without even examining the information/details filed by the Assessee, initiated the proceedings u/s 263 of the Act and set aside the order of assessment which is in utter violation of the settled principals of law.Thus submitted that, order impugned of the PCIT liable to be set aside. The Ld. Counsel also relied on following judicial precedents:- “(i) Metacaps Engineering &Mahendra Construction Co. vs CIT [2017] taxmann.com 128 (Mumbai-Trib) [DoD: 11/09/2017] (ii) Sabarmati Capital One Ltd vs DCIT 2025-TIOL-803-ITAT-MUM [Do 25/02/2025] (iii) PCIT vs Britannia Industries Ltd 2025-TIOL-1120-HC-KOL-IT 09/07/2025.” Printed from counselvise.com 6ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 7. The Ld. Counsel put forth one more argument that the assessment order was passed u/s 144B of the Act by National Faceless Appeal Centre, NFAC led by Principal Chief Commissioner of Income tax, an authority superior to PCIT. Therefore, the PCIT cannot invoke the provisions of Section 263 of the Act again the Assessment Order passed by the NFAC. Further submitted that the legislature in its wisdom has provided a detailed SOP to pass Assessment Orders u/s 144B by the NFAC, leaving no discretion on the AO. In fact, each assessment order is passed by different Units and not by any single officer and proceedings of each Unit are monitored by one PCIT in the NFAC. The entire NFAC is headed by one PCIT, the top most officer in the field formation of the income-tax department. It needs to be appreciated that an assessment order u/s 144B of the Act was passed by the NFAC which is a superior authority to the PCIT and not by any individual AO.,therefore it cannot be alleged by any PCIT under any circumstance that the NFAC failed to make requisite enquiries as the PCIT. Thus, submitted that very invocation of the provision of Section 263 of the Act by the ld. PCIT is erroneous. 8. Per contra, the Ld. Departmental Representative submitted that the Assessment Order is erroneous and prejudicial to the interest of the Revenue for following reasons:- Printed from counselvise.com 7ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT “1. Initial questionnaire u/s 142(1) is not based on the questionnaires ought to have been asked for the specific case under consideration. 2. Before issuing the internal questionnaire the FAO has not considered all internal data bases of the department like 360 degree in ITBA, Insight, E-filing, AO portal available to AU. 3. No enquiry has been conducted on the issues for which the assessments were selected for complete scrutiny. 4. The initial questionnaire issued by the Ld AO had not sought specific information and evidences for which the case was selected for scrutiny. 5. The initial questionnaire issued by the FAO has not sought specific information arising from the return of income or information available on record that led to the case being under compulsory scrutiny. The initial questionnaire was not comprehensive and to the points. 6. No questions have been seeking PAN/TAN, correspondence address, emails etc. in relation to facilitate third parties to facilitate verification/enquiry.” 9. The Ld. Departmental Representative further submitted that, as per the provisions of Section 263 of the Act, the responsibility cast upon the PCIT to examine the record of any proceedings under the Act if he considers that the order has been passed without making enquiry or verification which should have been made, the PCIT is empowered to treat the assessment order erroneous in so far as it is prejudicial to the interest of the Revenue. Therefore submitted that in the present case, the Ld. PCIT rightly invoked explanation 2 to Section 263 of the Act. The Ld. Departmental Representative further submitted that the Ld. PCIT has dealt with each and every issue and come to the Printed from counselvise.com 8ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT conclusion that the assessment order passed u/s 143(3) read with Section 144B of the Act dated 25/08/2022 is erroneous and prejudicial to the interest of the Revenue, therefore, submitted that the Ld. PCIT has rightly cancelled the assessment order and remanded the matter to the file of the A.O. for fresh adjudication of the matter, which requires no interference at the hands of the Tribunal. 10. Further submitted that in the assessment proceedings,the NFAC is not involved in framingthe assessment proceedings, the assessment will be framed by the designated A.O. and the assessment Unit is defined u/s 144B(4) of the Act having various authorities/ and the NFAC is only a monitoring Authority. If the argument of the Ld. Assessee's Representative that the assessment is done by the NFAC which is superior authority to the PCIT and not by any individual A.O., therefore the Ld. PCIT cannot decide the legality of the same, the entire provision of Section 263 of the Act becomes redundant in faceless regime. Further submitted that the intention of the legislature to bring Faceless Assessment is not to make provision of Section 263 of the Act redundant and there is no specific bar in the Act for invocation of provision of Section 263 in case of the Assessment framed in Faceless manner. Therefore, submitted that the order of the PCIT passed u/s 263 of the Act requires no interference at the hands of the Tribunal, thus sought for dismissal of the Appeal. Printed from counselvise.com 9ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 11. We have heard both the parties and perused the material available on record. During the original assessment proceedings initiated u/s 143(3) r.w. Section 144B of the Act, the case of the Assessee was picked up for scrutiny for following reasons:- i. Stock Valuation ii. Loss from currency fluctuations iii. Refund claim 12. The A.O. issued notice u/s 143(2) and 142(1) of the Actto the Assessee, in response; the Assessee furnished the details through e- filing portal. After considering the reply of the Assessee, the A.O. assessed the income of the Assessee at returned income in following manners:- “5. The complete description of issue is as under: 1. Stock Valuation:- The assessee has stated that during the close of relevant period i.e. as on31.03.2020 the assessee had an inventory of Rs. 142.68 crores as against the inventory of Rs. 131.99 crores in the preceding year as on 31.03.2019. The turnover of the assessee during the relevant period was Rs. 1319.71 crores as aginstRs. 1190.48 crores in the preceding year. This means that there was an increase of 10.85% in the turnover whereas the increase in the inventory was 8.10% which was slightly lower than the increase in the turnover because of proper inventory management particularly of the finished goods which reduced to Rs. 19.62Crores in the relevant period as against Rs. 23.09 crores in the preceding year. Similarly, the cost of material consumed during the relevant period was Rs. 610,96crores during the relevant period as against Rs. 574.60 crores in the preceding period and thus it was 46.29% of the sale during the relevant period as against 48.27% in the preceding year. Thus the consumption of raw material was lower by almost 2% resulting into increase in the assessable net profit by almost Rs. 26 crores just because of the better management of the inventory. Printed from counselvise.com 10 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT After perusal of the reply filed by the assessee, no adverse inference is drawn on this issue. 1. Loss from Currency fluctuations:- The assesse has stated that during the relevant period the assessee had a gain on foreign currency exchange fluctuation of Rs. 1,14,94,396/- which is verifiable from the Schedule 19 of other income. A copy of computation of the assessable income for relevant period is enclosed by the assessee. Hence, no adverse inference is drawn on this issue. 1. Refund claim: The assessee has stated in its reply that on perusal of the return of income of the assessee, it is clear that the assessee declared a net taxable income of Rs. 620.34 crores and the income tax due/payable thereon was Rs. 216.64 crores whereas the refund due was Rs. 16.06 crores i.e. just 7.4% of the total tax liability which was much less than 10% of the total income tax liability. Such excess payment was due to an estimate basis. The assesse has also stated that in the second fortnight of March, 2020 being part of the relevant previous year, the entire sales was practically closed in the nationwide complete dock down period because of the onset of Covid 19. This also resulted into a reduction of turnover. Then the refund due on account of the estimated advance income tax deposited would have also been significantly lower. After perusal of the reply filed by the assessee, no adverse inference is drawn on this issue. 6. The reply and details uploaded by the assessee were carefully examined. On the basis of material available on record, the explanation of the assessee on the issue(s) is accepted. Accordingly, the assessment is being completed u/s 143(3) of the Income Tax Act, 1961 by accepting the Income processed by the CPC u/s 143(1) of the I.T. Act. Considering the above remarks, the total income of the assessee is assessed as under: Income Processed u/s 143(1) by CPC :Rs. 6,20,42,83,460/-. Total Assessed Income:Rs. 6,20,42,83,460/- Printed from counselvise.com 11 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 13. The Ld. PCITin exercising the power conferred u/s 263 of the Act,issued notice dated 25/01/2024, which is reproduced as under:- “ Printed from counselvise.com 12 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT Printed from counselvise.com 13 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT Printed from counselvise.com 14 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT Printed from counselvise.com 15 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 14. In response to above show cause notice dated 25/01/2024 issued u/s 263 of the Act, the Assessee field submissions before the Printed from counselvise.com 16 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT PCIT vide letters dated 05/02/2024, 12/02/2024, 17/02/2204 and 25/03/2024 which are reproduce as under:- “(i) 05/02/2024 \"In response to the above SCN dated 25/01/2024 though issued on 29/01/2024, under instructions of the above assessee, it is stated that it seems that the facts of the assessee as on record have not been properly examined by the revenue before issuing the impugned SCN. It is patent from para 3 of your above notice stating that \"Hence, you are requested to file details of such advances given and whether the issue got examined by the FAU during assessment proceedings\", meaning undisputedly that you are not aware of the issues examined by the FAU. The above assessment order was passed u/s 143(3) of the Act by the NFAC where in terms of the detailed instructions of the CBDT by way of a SOP for faceless assessment proceedings bearing no. NaFAC/Delhi/CIT-1/2022-23/112/92 dated 03/08/2022, copy attached at PB page no. 1-34, and obviously, a very elaborate procedure laid in the said SOP must have been followed by the AO and every assessment unit in the NFAC must have vetted the return and other information in the assessment proceedings. It cannot be alleged that all the officers in the assessment unit could commit the error of not examining the information which are now being proposed in the SCN. The system of assessment in the Faceless is not in the hands of an individual AO as it used to be earlier in the physical procedure. Therefore, the allegations need to be levelled only in terms of the Faceless assessment proceedings procedures. As elaborated by the Hon'ble jurisdictional Delhi High Court in CIT v Usha International Ltd. [2012] 348 ITR 485 (Del) section 114 of Evidence Act raises presumption that official acts have been regularly done. There are no reasons to presume that the FAU has not followed the said SOP. 1.1 As per the SOP, the initial notice u/s 142(1) was required to be issued considering 360% information/ portal etc. where all the information including history and other nature of business of the assessee as well as the findings / additions in the earlier assessments before strategizing the approach to conduct the assessment proceedings. When such an elaborate assessment procedure has been laid by Printed from counselvise.com 17 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT the above SOP which pass through many authorities then how could it be presumed now that the verification of few necessary issues was left then by a team of many competent officers at different level. Thus, the assessee strongly objects to the proposed action u/s 263 of the Act asabove, which is just nothing more than a proposal to make roving enquiries. It is like a proposal where any and all assessment orders will be open to review u/s 263 of the Act on some flimsy pretext or the other at the whims of the revenue officers. This is never the intention of the legislature and such revisionary authority needs to be exercised with care and not for any reason otherwise for fishing/roving purposes. 1.2 On perusal of the same. it is seen that the said mandatory SOP prescribes as below: C. Initial Questionnaire u/s 142(1) C1 Initial questionnaire u/s 142(1) shall be, preferably, issued by AU within 15 days of assignment of cases. C.2 Before issuing the initial Questionnaire, AU shall: C.2.1 Consider all internal data bases of the Department 360 degree in ITBA, Insight, E-filing AO Portal available to the AU; C.2.2 Consider Structured questions, if available, and Guidance notes for each issue/scenario maintained by Insight, on the points of enquiry: C.2.3 Structured questions, if available, on the points of enquiry may be modified, as required; C.2.4 In Reopened cases The initial questionnaire shall seek specific information/evidence on the grounds that led to reopening: C.2.5 In Set aside cases The initial questionnaire shall seek specific information/evidence on the grounds that led to the case being set-aside; C.2.6 In Compulsory scrutiny cases The initial questionnaire shall seek specific information arising from the return of Printed from counselvise.com 18 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT income or information available on record that led to the case being under compulsory scrutiny. C3 Due care may be taken to ensure: C.3.1 Assessee is not asked to submit documents / information already filed by the Assessee and available on record that is accessible to the AU C.3.2 The initial questionnaire is comprehensive, so that multiple notices u/s 142(1) are avoided. C.3.3 Questions are asked relating to specific details of change in status of the assessee, due to events like restructuring, merger, demerger, amalgamation, cessation, death or dissolution etc. at the time of assessment proceedings. C.3.4 If so required, questions seeking PAN/TAN, correspondence address, emails etc. are asked in relation to third parties, to facilitate verification/inquiry. D. Process for issuance of notice w/s 142(1) D.1 Notice is to be served on the assessee with the approval of Unit Head of the AU, under the digital signature of the Assessment Unit through NaFAC. 1.3 Thus, the AO/AU had examined all the issues by taking care as mentioned in the SOP. The AO could not extend the scope of examination/verification just on his whims as is being proposed now in the impugned SCN, though none of the issues raised therein are erroneous much less prejudicial to the interest of the revenue. The impugned SCN completely fails to address as how the same was erroneous. It is a settled law that just to make roving enquiries to satisfy the whims of the revisionary authority in an already competed assessment u/s 143(3) of the Act, no proceedings u/s 263 of the Act can at all be initiated. 2. Further, on perusal of the attached copy of the notice dated 29/06/2021 issued u/s 143(2) of the Act at PB page no. 35-43, it is seen that only the following 4 issues were flagged for verification and the assessee submitted all the details to the AO who after examining the issues, passed the Printed from counselvise.com 19 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT assessment order u/s 143(3) of the Act, accepting the returned income: (1) Stock valuation (ii) Loss from currency fluctuations (iii) Refund claim 3. The assessee submits that the earlier assessment proceedings completed u/s 143(3) of the Act for this assessment year were faceless. There is and cannot at all also be otherwise any presumption much less allegation by anyone of any connivance of the said assessing officers of the AU with the assessee. It is submitted that the annual audited accounts of the assessee for the 3 past preceding years are also on record of the Revenue submitted on the online portal and in fact some extracts from the same have also been reproduced in the table given in para 8 of the impugned SCN. 4. However, for a quick appreciation of the facts on record of the revenue, the following chart gives comparative figures of the business of the assessee in the last 4 assessment years: In CroresRs. Sl No. A.Y Turnover Net profit as per P/L account Net Income returne d Net profit% to the sales Income tax paid Gross donations u/s 80G 1 2020-21 1319.71 600.42 640.42 45.50 216.64 38.51 2 2019-20 1190.48 527.03 574.41 44.27 189.88 44.69 3 2018-19 1095.09 486.23 496.25 44.40 169.16 12.17 4 2017-18 978.27 380.93 391.66 38.94 132.43 16.45 5. The assessment of incomes of all the above earlier 3 assessment years were also completed u/s 143(3) of the Act vide orders dated 12/12/2019, 21/04/2021 and 25/08/2022 for the AYs respectively where no additions were made except in the AYs 2017-18 and 2018-19 because of the incorrect depreciation claimed u/s 32 of the Act due to some clerical oversight. There is a continuous improvement in the scales of the business of the assessee year on year basis. This may be verified on the income-tax portal of the assessee. Printed from counselvise.com 20 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 6 It is also on record that the assessee is engaged in the business of processing and marketing spices, mixed masalas, ground spices, ever since under an internationally famous brand name of MDH. There has been no change in the business of the assessee and its nature during the relevant period as compared to the preceding assessment year which is very much mentioned in the tax audit reports for this AY as well as the preceding AY, copies attached at PB page no. 44-45, in particular where reference is made about the nature of business. 7. Not only the turnover of the assessee during the relevant period was higher than the immediately preceding AY by 10.85% but the declared assessable income was also higher in volume terms by Rs 66.43 crores and by 13.92% as compared to the preceding AY and the income tax paid on the same was Rs 216.64 crores and was higher by 14%. Interestingly, the net profit was 45.50% of the turnover, which is practically un-comparable in a highly competitive agricultural-based food processing industry. 8. Thus, there was no reason for the AO, NF AC to presume necessity of endless and futile verification on other issues and in fact not even in this proceeding, as there is nothing on record which may cause suspicion needing further examination particularly when the net profit declared to the turnover was more than 1% higher at 44.50% than the preceding AY when it was 44.27%. 9 It is also beyond apprehension as to what the AO NFAC, will examine in the proposed fresh proceedings now about the same and a mere allegation that something was not examined without stating therein as to what could be erroneous much less prejudicial to the interest of the Revenue for the impugned proceedings. 10. It is not understood as to how it has been alleged in para 7 therein that the assessee paid a sum of Rs 2.50 crores in the Prime Minister Relief Fund in cash during the relevant previous year and not through bank transfer which is beyond comprehension of any normal prudent person that such a huge amount could be given in cash, in hard currency to the PM Relief Fund which is something impossible and nothing has been mentioned therein to presume so. A copy of the bank statement of the assessee with state bank Printed from counselvise.com 21 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT showing payment of this amount to the PM Relief Fund and bank certificate dated 03/04/2020 are attached at PB page no. 130-133. In any case, if deduction u/s 80B(5D) of the Act is not allowable on cash donations, it is a matter of mistake apparent from record and not for a review w/s 263 of the Act. 11. In respect of remaining donation of Rs 36 crores on which deduction w's 80G of the Act was claimed and a doubt of the source of the same has been expressed therein, again shows a high immaturity. The assessee had declared a taxable income of more than Rs 640 crores/book profit of more than Rs 600 crores during the relevant period which was after deduction of such donation. Thus, the sources were very much on record particularly when the books of account of the assessee were not only audited under the Companies Act but also under the Income-tax Act and the reports for which were very much on record of the revenue as part of the income tax return. The details of all the donees being their names, complete addresses and PANs was very much given in the relevant column in the return of income and all of them were registered u/s 12A of the Income-tax Act as is mentioned therein. A copy of the relevant page of the said details submitted in the return of income is attached at PB page no. 46-49 for your ready reference. It needs to be appreciated that the AO of the donor is not supposed to see the usage of the funds received as donation by the donee as the same needs to be verified by the AO of the donee while assessing the income of the recipient donee. The requisite details of the donees were on record which were considered by the AO NFAC in terms of the SOP and accepted. It is on record that the assessee has been giving such donations every year as is mentioned in the chart herein above. Thus, now making any such enquiry will tantamount to making roving enquiries, not permitted to initiate a proceeding u/s 263 of the Act. It is again stated how non examination of the same could not be termed as erroneous much less prejudicial to the interest of the Revenue, the basic two conditions which need to be satisfied to initiate an action u/s 263 of the Act. 12. In respect of the outstanding trade payables of Rs 47.71 crores as against Rs 46.97 crores in the preceding AY which showed an increase of Rs 74 lakhs only i.e. approximately 1.5% as against the increase in business of the assessee by Rs 130 crores in turnover and by 66.43 crores in the Printed from counselvise.com 22 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT assessable profits, it is stated that perse is no reasons to presume any adverse surmise. However, in any case, one fails to understand that how quantum of trade payable affects the taxable income and cannot be prejudicial to the interest of the revenue? 13. It is not necessary that during such particularly faceless assessment proceedings where the officer is supposed to concentrate on the issues which are prima facie indicating deviation from normal and need examination. However, the assessee has attached herewith the list of said creditors as on 31/03/2020 showing dates of the payments to each of them through proper banking channel. 14. As regards the advances given for the fixed assets and to the suppliers, it is stated that since the assessee is engaged in the agricultural produce where advances to the suppliers are given for each crop because the suppliers have to give it to farmers and then the suppliers store the material purchased at their end by procuring from the farmers in each crop season. Such advances are adjusted in the subsequent years when the raw material is received by the assessee. Copies of accounts of all major suppliers having a balance of Rs 10 lakhs and above as on 31/03/2020 for the subsequent AYs are attached at PB page no. 50-53 showing such adjustment and which is a regular practise year on year basis. Thus, no adverse cognizance can be taken. In any case, advances given have no bearing upon determination of the taxable income and cannot be prejudicial to the interest of the revenue. 15. In respect of advance for assets/properties, it is stated that during the relevant period the assessee had given instalments of Rs 14.49.91,615/- as advances to builders for shops to be acquired as retail outlets of the produce of the assessee as per the list attached which were adjusted in the subsequent AYs when those assets were registered in the name of the assessee as per the dates mentioned therein. All these purchases are duly recorded in the audited financial accounts for the subsequent years which are on your record filed electronically. In any case, advances given to builders have no bearing upon determination of taxable income and cannot be prejudicial to the interest of the revenue. Printed from counselvise.com 23 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 16. In respect of the expenses of repair and maintenance during the year at Rs 6.88 crores branch wise details and copies of ledger accounts are attached at PB page no. 54-67, it is stated that the factory premises where the goods are processed and stored had become quite old buildings and needed major repairs. Thus, accordingly expenses incurred for such major repairs were claimed as revenue business expenditure. It must be appreciated that all the business premises of the assessee must be waterproof as any water seepage therein makes the entire produce whether finished or raw material unfit for human consumption, particularly when the product of the assessee covered in the Rules of the FSSAL. It is also because for many years such major repairs were kept on accumulating for one reason or the other but when during the relevant period, it became inevitable, the assessee incurred the said expenses. It is also stated that the expenses incurred in the preceding year were Rs 1,85,74,338/- and not Rs 18,74,338/- and can be verified from the Note 25 in the annual audited accounts. It is submitted with utmost respects that Repairs and Maintenance Expenses are not comparable on year to year basis as these expenses, not only include routine recurring expenses but also incurred due to some contingencies/ break down/ modern technology and host of other factors. For example, if a motor car suffer accident or a boiler bursts, extra expenses would be required in that year only. 17. In respect of expenses of Rs 1,91,80,031/- incurred as Repairs Others during the period under consideration as compared to Rs 80,74,446/- in the preceding year, it is stated that those are normal business expenses branch wise details and copies of ledger accounts are attached at PB page no. 68118 and cannot be considered as not authentic for the business necessities. 18. In respect of the GST input credit not available, it is stated that GST became applicable w.e.f. 01/07/2017 and as per the said Act input credits are available on each purchase against GST payable on each sale by the assessee for which necessary forms have to be filed on the GST portal by the purchaser and the seller both. In case the seller failed to file the requisite returns of GST in time or fail to deposit the GST in time then the required GST input credit of the same is not available to the assessee, purchaser. Thus, the said amount was determined by the assessee at the Printed from counselvise.com 24 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT yearend finding that the sellers had not deposited the GST on their sales / services and which was not reflectingon the GST portal of the assessee. This is equivalent to the Form no. 26.AS where if the TDS is not reflected then the assessee is not given any credit for the said TDS made on his behalf. The details of the GST input credit not available for the relevant period on the issue are attached at PB page nos. 134. This details as per copy of ledger account in respect of GST input -not available. However, complete details purchaser wise are too voluminous as it includes numerous petty amounts starting from lesser than Rs.100. In case, complete details are required, these can be submitted on demand but sufficient time is required, since details have to collected from each branch. Thus, the same is not can be called erroneous much less prejudicial to the interest of the Revenue. 19. In respect of the advertising expenses incurred during the relevant period at Rs 34.16 crores as against Rs 32.56 crores in the preceding AY, it is stated that the increase of Rs 2 crores is just approximately 6% as compared to the preceding year, whereas the turnover of the assessee increases from Rs 1190 crores to Rs 1320 crores, an increase of more than 10%. It also needs to be appreciated that cost of advertising expenses was increased due to many factors including inflation. Moreover, in such a large volume of FMGC sector the advertisement plays a very important role, particularly where women are to convinced. In fact, the expenses of the assessee were far lower as compared to the other masala companies as the assessee did not hire any film industry celebrity as others are doing but the managing director MahashiaDharampal Gulati himself was the centre point of the advertisements and for which nothing was paid to him except his remuneration. 20. In respect of the commission paid to the directors of the company, it is stated that the same was paid to the then CMD, late MahashiaDharam Pal Gulati who died on 03/12/2020 during Covid and the Executive Director, Mr Rajeev Gulati, presently CMD as per the preceding years. This was part of their remuneration package as they were the pillars of the business of the assessee which was being carried for the last 100 years. Copies of their income-tax returns showing the said amounts as part of their salaries are attached at PB page nos. 119-129. The TDS was also Printed from counselvise.com 25 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT made on such commissions as per rates of salaries and not commissions. Purchases made from the related parties, is a regular phenomenon for the last many decades and has been accepted by the Revenue year on year basis as which are at arms-length always rather lower than the prevalent market price. Thus, the same is not at all erroneous much less prejudicial to the interest of the Revenue. 21. In respect of expenses of Rs 13.22 crores incurred during the relevant period on centenary celebration of the company, it is not understood as to how this has been alleged that it is not justified as an admissible business expenses. The Revenue must spell out as to how this allegation has been levelled. It is well known that any business house achieving a milestone of a centenary existence, celebrates the same where all suppliers, distributors, staff and other business associates assemble when they not only pay tribute to the founders of the company but also to the persons at the helm of affairs of the company as all of them earning from and contributing to the existence of the company. The invited all of them and met their boarding, lodging, assembly and other expenses incurred for continuous 3 days. On such occasions, group discussions areheld, business strategies are decided to maintain continuous growth of the business by looking ahead for another centenary. It needs to be appreciated that a generation gap is normally considered ax 25 years and in a centenary 4 generations are involved to keep the business intact with substantial growth which is in itself is a Herculean task for the business in which contributions of all the sectors connected with the business participate planning for future growth by considering past experiences and setbacks/losses/deficiencies etc. Thus, the expenses incurred the business necessity as a business- brought on record as to how the allowance of said claim was erroneous much less expenses cannot be considered for any disallowance on surmises. The Revenue has not prejudicial to the interest of the Revenue 22. Thus, it is stated that the impugned SCN issued u/s 263 of the Act must be dropped. In case, some more clarification is desired the same shall be submitted on before disposing off the proceedings.\" receipt of necessary instructions. A personal hearing must be granted to the assessee Printed from counselvise.com 26 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT (ii) 12/02/2024 \"In respect of the above proceedings, under instructions of the above assessee and in continuation to the submissions made earlier vide letter dated 05/02/2024, the assessee encloses a chart showing the purchases made from the related parties as mentioned in the impugned SCN page 2, in the period relevant to the four AYs including the 3 preceding AYs is attached at PB page no. 137. The assessee had been making purchases from them ever since with no adverse finding ever. Photocopies of few purchase bills showing arms-length purchases price of those products from them are also attached at PB page no. 138-198. 2. Photocopies of the TDS returns of salary showing deduction of income-tax at source on salary which included commission paid also as a part of salary to late MahashianDharampal Gulati and Mr Rajeev Gulati are also attached at PB page no. 199-210 for the relevant period under consideration to support the contention that the same was paid as salary.\" (iii) 27/02/2024 \"In respect of the above proceedings and as desired by the learned authority during the course of personal hearing on 15/02/2024, in addition to the submissions filed earlier, under instructions of the above assessee, the following is submitted: 1. Copies of the ledger accounts for the advances given for properties till date and copies of purchase agreements, conveyance deeds etc. for the said 2 properties are attached at PB page no. 211-457. 2 Copies of the ledger accounts of the trade suppliers for the period from 01/04/2019 το 31/03/2021 showing regular payments to them for raw material, services and facilities purchase/ availed from them are attached at PB page no. 458-715. 3 Details of raw material purchased item wise in the two periods relevant to the AYs 2019-20 and 2020-21 are given in an attached chart in the desired format at PB page no. 716. Printed from counselvise.com 27 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 4. Details of finished goods sold in the two periods relevant to the AYs 2019-20 and 2020-21 are attached in the above format at PB page no. 717-722. 5 It needs to be appreciated that no raw material is sold in the same form as purchased after purchases. Each item of the raw material is dried, cleaned, processed and besides kept for processing at later period in bags in the cold storages. It is because every raw material is an agricultural produce which is purchased in crop season from the farmers as it is. 6. It must also be appreciated that every raw material losses weight after passage of time due to dryness, evaporation of moisture therein besides while cleaning some quantity not fit for consumption is also thrown out, losses during packing repacking etc. in each process. Even few items like KasooriMethi, etc. which are sold without machine processing are cleaned, sorted and dried which result into heavy loss of weight. All these processes are manual and labour intensive 7. Barring few ground spices like Haldi, Mirch, Amchur, Dhaniaetc all mix masalas have many compositions of different raw spices including salt, etc. Further, such mixture is sometimes altered considering the season and local requirement of the particular area. 8. Comparative rates of purchases, raw material made from related parties has already been given vide letter dated 12/02/2024. However, a chart showing quantity purchased in the period relevant to the AY 2020-21 from the related parties and comparable partiesalongwith relevant evidences are attached showing average rates of purchases from each of them. It also needs to be appreciated that agriculture produce is seasonal and where rates vary due to harvesting pattern, production, demand and supply not only every year but also during the year. Further, the rates also increase after close of the season when the produce stocks already in the market get depleted. It is further submitted that market price of the agricultural commodities is susceptible upon many factors. Usually, price would starts declining on arrival of new crop, may increase on spurt in demand on festivals. Printed from counselvise.com 28 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT However, in today's global economy, international factors like failure of crop in some other country, ban on exports and host of other factors also influence the same sometimes in a very short period. By way of an illustration, your kind attention is drawn to the data available on https://www.statista.com/statistics/1069770/average- price-of-turmeric-india/showing average price of turmeric in Chennai, India from the financial year 2015 to 2022, showing variation between Rs. 101 to Rs 120.87 per kg almost 20%. 9 MahashiaDhramapal Gulati, the then CMD of the company was not only a great saint but also one of the top most philanthropist for charitable activities ever since. The amount of donations given by the company on his instructions for social causes and nation building was eligible u/s 80G of the Act. Donations given in the latest four AYs including this AY are given in the letter dated 05/02/2024. Your kind attention is drawn to CIT VS MAHASHIAN DI HATTI LTD 2015-TIOL-2850-HC-DEL-IT (copy attached at PB page no. 723-728) holding that \"MDH deals primarily in household products. The contention of MDH that Mr. Dharam Pal Gulati is a pioneer of packaged spices in India and has built the business by his vision and hard work for over six decades has been unable to be contradicted by the Revenue. It is entirely up to the assessee as to how it promotes its products. The Court finds no basis for the AO to have concluded that the expenses on advertisement was not for business purposes and for disallowing 20% of it. The ITAT rightly upheld the order of the CIT (A) deleting the said disallowance.\" 10. Details of the Centenary Year celebration of the company are given alongwith the evidences in the following broader heads: (1) Payment to hotels for 2-3 days stay of distributors, dealers, suppliers, business associates etc. from the globe are attached at PB page nos. 729-1017. (ii) Centenary Event Celebration at Indira Gandhi Indoor Stadium, copy of bills of event manager are attached at PB page nos. 1018-1023, describing the artists who performed and payments made to each of them. Printed from counselvise.com 29 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT (iii) List of other facilities availed. (PB page nos. 1024-1156) (iv) Taxies, Cars hired for them including airfare paid. (v) Business promotions souvenirs etc. 11. It must also be appreciated that existence of any entity for 100 years is not a small occasion and which needs to be celebrated in a grand manner with global coverage as it enhances not only the image / consumer confidence of the consumes in the products but also goodwill of the company globally. Expenditure on the celebration of the 10th anniversary was allowed in Aditya Mills Ltd 209 ITR 933, 938 (Raj) (attached at PB page no. 1168-1179) and the annual day celebration expenses were allowed in Mehsana District Co-operative Milk 207 ITR 140 (Guj) (attached at PB page no. 1180-1189). On perusal of the chart attached of the turnover and advertising expenses, it is seen that the percentage increase of the expenses in the relevant period was much lessor than the growth.13. As submitted earlier, issues flagged for verification by the AO were Stock valuation, loss from currency fluctuations and the refund claim and the AO required the assessee to submit details/ material for verification of the same and the AO who after examining the material on record and the other issues as per his wisdom on the facts and the CBDT directions in the SOP, passed the assessment order u/s 143(3) of the Act on 25/08/2022. Thus, it cannot at all be alleged in present case that the said assessment was finalised in haste as proceedings commenced with a notice issued u/s 143(2) of the Act on 29/06/2021 and completed on 25/08/2022 after collection of material/ information through three notices issued u/s 142(1) of the Act on 16/11/2021, 27/12/2021 and 25/02/2022. This assessment order may fall under the ambit of section 263 of the Act either when the available material/ information as discussed in the SOP dated 03/08/2022 issued by the CBDT (placed at PB page nos. 1 to 34 vide letter dated 05/02/2024) required selection of more issues; or when proper investigation was not conducted in respect of the selected issues: or conclusions drawn were erroneous. Thus, the review powers cannot be invoked for stepping into the shoes of an AO and for making Printed from counselvise.com 30 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT fresh assessment by way of roving enquiries which the PCIT thinks should have been done by the AO. It was held in Shankar Construction Co. v. Addl. CCT [2001] 124 STC 265 (Kar.) that\" While we have no hesitation in accepting the greater part of the submissions canvassed by the learned Government Advocate that the revisional authority does have wide powers exercisable in cases where the decision has been prejudicial to the interest of the revenue and in exercise of those powers modifications are permissible, and furthermore that if the authority is of the view that the assessment is required to be redone that such a direction can still be issued to the assessing officer, we need to at the same time uphold the argument canvassed by the appellant's learned counsel Sri S Narayana that it is wholly impermissible for the revisional authority to step into the shoes of the assessing officer and to redo the assessment or pass a fresh assessment order..\" Same has been reiterated in Solidus Hi Tech Products (P.) Ltd. vs. State of Karnataka [2015] 57 taxmann.com 203 (Karnataka). 4. Roving and fishing expedition was also disapproved by the Hon'ble Bombay High Court in Gabriel India Ltd. 203 ITR 108 holding that \"There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. Therefore, in order to exercise power under section 263(1) there must be material before the Commissioner to consider that the order passed by the ITO was erroneous insofar as it is prejudicial to the interests of the revenue and that it must be an order which is not in accordance with the law or which has been passed by the ITO without making any enquiry in undue haste. An order can be said to be prejudicial to the interests of the revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on therecord called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suomotu revision under such circumstances will amount to arbitrary exercise of power. It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1) Printed from counselvise.com 31 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT Theconsideration of the Commissioner as to whether an order is erroneous insofar as it is prejudicial to the interests of the revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity- See Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC), at page 10 15. Further, it is submitted with due respects that as has been mentioned in Para 2 of the SCN dated 25/01/2024 that the case was selected for 'complete scrutiny' is not fully correct appreciation of facts. This is grossly contrary to the facts on record. Kindly refer to the notice issued u/s 143(2) of the Act as ITBA/AST/S/2021-22/103378 3788 dated 29/06/2021 at PB page nos. 35-43 filed with the letter dated 05/02/2024 wherein it is mentioned under the heading \"What are the issues on which further clarification is required initially' and it has been further mentioned therein only that since it is complete scrutiny, further queries may arise during the course of assessment proceedings. The importance of the word initially cannot be lost sight of. It only means that issues may be expanded later during the course of proceedings in respect of the identified issues but, it can never be said that the AO was required to examine each item which appeared on both sides of the relevant balance sheet/P&L Account. The complete scrutiny mandate was only sort of enabling mandate but it does not mean that the AO must repeat /raise query on all and sundry items even though those issues do not arise during the assessment proceedings or did not require any deep verification. This notice was issued by the ITBA and not by the FAO or Faceless AO. Kindly appreciate that a notice u/s 143(2) of the Act is to accord an opportunity to the assessee to substantiate his return of income and here, the assessee Printed from counselvise.com 32 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT was asked to substantiate his return only for the restrictive issues which makes it in reality a selective scrutiny case. Kindly note that vide para C of the said SOP, the initial Questionnaire is issued by the ITBA after considering all internal data bases of the Department - 360 degree in ITBA, Insight, E-filing AO Portal available to the AU. Para F of the said SOP pertains to manner in which replies/ information submitted by assessee was to be considered. It readsF. Analysis of Information submitted in response to questionnaire w/s 142(1) and Issue of Additional Questionnaire F1 Examine reply of the assessee with reference to the issue involved in the case: and F.2 Cross-verify reply of the assessee with the information available to the AU: F.3 AU will decide, generally within 10 days of receipt of reply. F.3.1 Whether reference to VU/TU is required; F.3.2 Where the assessee contests or gives information at variance with that available with the AU, such information/ data may be re-verified through: F.3.2.1 Insight in case of SFT data, Financial Institutions and Government Agencies, F.3.2.2 ITBA- in other cases: F.3.3 Whether additional questionnaire u/s 142(1) is required to be issued to obtain further information/clarification.\" 15.1 Thus, it is submitted with utmost respects that the AO was not expected to violate the SOP or must have expanded scrutiny even though the AO was fully satisfied with the information supplied by the assessee. Kindly refer to the Dev Milk Foods Pvt Ltd. ITA No.6767/Del/2019 (DoD 12/06/2020) for the legal proposition that the scrutiny be expanded on bonafide reasons and not for making fishing and roving enquires. Printed from counselvise.com 33 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 16. The assessee also submits that merely because the AO did not verify any item per se does not mean that the powers of the PCIT are unfettered to cover any issue. The PCIT is under an obligation not only to specify why any non- verification was erroneous on the overall facts of the assessee as well as it caused prejudice to the interest of the revenue. The PCIT has not only to quantify the amount of loss of revenue but also as to what was the material on record which could support the opinion of the PCIT that the AO erred in not verifying the same as it was relevant for the assessment proceedings, particularly in the faceless assessment scheme where the AO conducts the assessment proceedings as per the prescribed SOP and the PCIT cannot substitute his opinion on the SOP. It is a settled law that even each loss cannot result into an error or prejudice to the interest of the revenue. The assessee relies on the following legal propositions: i) Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law.ii) Daffodills Pharmaceuticals Ltd. [2023] 157 taxmann.com 195 (Delhi - Trib.) As seen from the above, the Ld. PCIT wants to do enquire on the issues, which are not subject matter of reopening of assessment u/s 147 r.w.s. 148 of the Act. In our humble opinion, when the assessment is reopened usually, it is not open to him to go beyond the issues raised in the reasons recorded for reopening of the assessment. In other words, the AO's jurisdiction is limited to the issues, which are subject matter of reopening. Printed from counselvise.com 34 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT (iii) CIT v. Gabriel India Ltd. [1993] 71 Тахтап 585/203 ITR 108 (Bom) From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the ITO. That would not vest the Commissioner with power to re-exmine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. (iv ) Globus Infocom Ltd. [2014] 50 taxmann.com 100 (Delhi) Where Assessing Officer had specifically examined issue relating to apportionment of common expenditure and was fully satisfied with apportionment made, Commissioner could not have invoked provision under section 263 merely on assumption that order passed by Assessing Officer could possibly have been erroneous. It is further submitted that the Explanation 2 to the section 263 of the Act has been reproduced in the impugned SCN without specifying the applicable limb. It was held by the Hon'ble Supreme Court in ORYX Fisheries Private Limited arising out of Special Leave Petition (C) No.27615/08)- on 29 Printed from counselvise.com 35 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT October, 2010 (copy attached at PB page no. 1157-1167) that \"It is of course true that the show cause notice cannot be read hyper-technically and it is well settled that it is to be read reasonably. But one thing is clear that while reading a show-cause notice the person who is subject to it must get an impression that he will get an effectiveopportunity to rebut the allegations contained in the show cause notice and prove his innocence. If on a reasonable reading of a show- cause notice a person of ordinary prudence gets the feeling that his reply to the show cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show cause notice does not commence a fair procedure expecially when it is issued in a quasi- judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence 32. Therefore, while issuing a show-cause notice, the authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proceeded against and especially when he has the power to take a punitive step against the person after giving him a show cause notice. 33. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi-judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subject to it.\". In present case, possibly clause 1 of the Explanation 2 may apply, but it is necessary to indicate therein, undoubtedly prima facie, which verification/ inquiry was required to be made by the AO and under which provision/ scheme and the same was not only erroneous but also prejudicial to the interest of the revenue. As submitted earlier, when certain issues were identified for verification after 360-degree appraisal by the CBDT, the AO made complete examination and no other issue sprang up during verification of identified issues, the impugned SCN w/s 263 of the Act is bad in law and must be filed as not maintainable.\" (iv) 25/03/2025 \"In respect of the above proceedings, in continuation of our letter dated 2/03/2025 filed in response to your above notice and personal hearing attended in your office, under instructions of the above assessee, the following information/documents as desired are further submitted: Printed from counselvise.com 36 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT A photocopy of the board resolution dated 01/04/2019 passed by the board of director approving director's remuneration for the FY 2019-20 is attached for your early appreciation at PB page no. 1190-1191. Details of addition made in fixed assets for the FY 2019-20 is attached along with few sample invoices at PB page no. 1192-1215. Further, even if any other information is desired, please let us know.\" 16. On going though the above proceedingsbefore the A.O. and also before the PCIT and also the reply filed by the Assessee to the show cause notice dated 25/01/2024, we find that the Ld. PCIT has not pointed out any error in the assessment order dated 25/08/2022 to conclude that the assessment order is both erroneous and prejudicial to the interest of the Revenue, which is a pre-requisite for invoking revisional Jurisdiction u/s 263 of the Act. The Ld. PCIT has asked the Assessee to show cause on the issues which are not examined in the assessment proceedings and nowhere in the noticeit is mentioned that the proceedings have been initiated u/s 263 of the Act, which gives an inference that the Ld. PCIT was only trying to enable the A.O. to make fishing and roving enquiry. The Ld. PCIT by way of issuing the show cause notice, tried to make enquiries regarding the very same information taken by the NFAC during the assessment proceedings. After gathering the information from the Assessee, the PCIT could not also point out any adverse inferences or deficiencies in Printed from counselvise.com 37 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT the explanation of the Assessee bringing on record any error committed by the A.O. which in turn had caused prejudice to the interest of the Revenue. The Ld. PCIT was of the opinion that A.O. should have made more enquiries and for which no reasons have been assigned as to why those enquiries necessitated particularly based on chequered history and fast information on record. 17. The Hon'ble Supreme Court in the case of Pr. Commissioner of Income Tax-1, Chandigarh Vs. M/s V-con Integrated Solutions Pvt. Ltd. vide order dated 04/04/2025 held as under:- “In our opinion, the order passed by the High Court, which upheld the decision of the Tribunal, is correct on facts and in law. This case does not involve a failure by the assessing officer to conduct an investigation. Instead, according to the Revenue, it a case where the assessing officer having made inquiries erred by not making additions. The assessee does not have control over the pen of the Assessing Officer. Once the Assessing Officer carries out the investigation but does not make any addition, it can be taken that he accepts the plea and stand of the assessee. In such cases, it would be wrong to say that the Revenue is remediless. The power under Section 263 of the Income Tax Act, 1961, can be exercised by the Commissioner of Income Tax, but by going into the merits and making an addition, and not by way of a remand, recording that there was failure to investigate. There is a distinction between the failure or absence of investigation and a can be wrong decision/conclusion. A wrong decision/conclusion corrected by the Commissioner of Income Tax with a decision on merits and by making an addition or disallowance. There may be cases where the Assessing Officer undertakes a superficial and random investigation that may justify a remit, albeit the Commissioner of Income Tax must record Printed from counselvise.com 38 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT the abject failure and lapse on the part of the Assessing Officer to establish both the error and the prejudice caused to the Revenue. Recording the aforesaid, the special leave petition is dismissed.” 18. Further the Hon'ble High Court of Punjab and Haryana in the case of Pr. Commissioner of Chandigarh Vs. M/s BCO solution Pvt. Ltd. vide order dated 12/09/2024 held as under:- “5. We find that the ITAT has examined the entire record. The FIAT has noticed that the Assessing Officer had raised several queries and had also demanded documents, the details of which have been mentioned in the ITAT order, which is quoted as under:- \"12. So far as the issue relating to the issue of shares to the two companies namely M/s Takecare India Pvt. Ltd. And Videocon Realty infrastructure Ltd. Was concerned, the assessee explained that the AO had made adequate enquiries on this issue and various replies and details were furnished to the AO, considering which the AO has accepted the claim of the assessee. The Id. Counsel, in this respect has submitted that the AO had issued questionnaire dated 28.12.2020 wherein, the following details were asked for from the assessee, on this issue: a) Name and address of the shareholders. b) PAN of the shareholders. c) Face Value of each share d) Number of shares allotted to each shareholder. e) Total value of the shares allotted to each shareholder. f) Payment received from each shareholder during the financial year. 2) Provide documentary evidence to substantiate the identity and ITR of the shareholders to substantiate Printed from counselvise.com 39 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT creditworthiness the shareholders as well as the proof of genuineness of transaction in respect of fresh credit of the share capital account. 3) EPS The valuation report with respect to the working of 4) The comparison of the working of EPS with the immediately prior instance, wherein the shares were allotted. 5) The year wise details of dividend declared during the year and three earlier years.\" 6. Therefore, it is noted that the Assessing Officer had issued a questionnaire on 28.12.2020 and had also asked for documents, which were answered and furnished to the Assessing Officer by the assessee and the same were also informed to the PCIT, who ensued proceedings under Section 263 of the IT Act. However, PCIT have not pointed out any further enquires, which were required to be made by the Assessing Officer in this case, which have not been so made. The scope of Section 263 of the IT Act, is apparently to see whether the concerned Assessing Officer has failed to conduct a proper inquiry, and therefore, committed an error resulting in causing loss to the revenue. Simply by holding that the Assessing Officer was required to make more enquiries, would not be a valid ground for treating the order of the Assessing Officer, as erroneous and prejudicial to the interests of the revenue. The power under Section 263 of the Act cannot be invokved in such circumstances by the PCIT. The order, therefore, passed by the PCIT is not sustainable in the eyes of law and the same has been quashed by the ITAT, which does not warrant any interference by this Court in appeal. 7. In view thereof, we do not find any substantial question of law has arisen in this appeal for consideration, as the factual aspects have completely and thoroughly been examined by the ITAT. Appeal stands dismissed accordingly.” Printed from counselvise.com 40 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 19. The Co-ordinate Bench of the Mumbai Tribunal in the case of Metach Engineering and Construction Company JV Vs. Commissioner of Income Tax, Mumbai in ITA No. 2895/Mum/ 2014 vide order dated 11/09/2017 held as under:- “15. We further find that the CIT had in the course of the revisional proceedings taken recourse to certain fishing and roving enquiries, which neither did form the basis on which the order passed by the A.O was sought to be revised, nor were relevant to the issues under consideration. We find that the CIT while deliberating on the issue as regards the „labour charges‟ of Rs. 1,30,22,495/- paid by the assessee to the sib-contractor, viz. Urja Infrastructure, had therein observed that no documentary evidence such as bills pertaining to expenditure incurred on sand, cement, brick, steel and other things required/essential for constructing pipeline by M/s Urja Infrastructure Ltd., were submitted by M/s Metakaps Engineering &Mahendra Construction Co, J.V, i.e the assessee. We are of the considered view that seeking of the aforesaid information in respect of the expenses incurred by the sub-contractor, viz. M/s Urja Infrastructure can safely be characterized as a fishing and roving enquiry on the part of the CIT, which had never formed the basis on which the order of A.O was sought to be revised by the CIT. We are further of the considered view that from a perusal of the order of the CIT it can safely be gathered that the CIT had as a matter of fact, not being in agreement with the mode and manner of verifications done by the A.O, had thus tried to impose the manner in which the same were required to be done. We would not hesitate to observe that unless the CIT is able to show as to how the manner in which the verifications in respect of the issues under consideration were carried out by the A.O, had rendered the assessment as erroneous and prejudicial to the interest of the revenue, he cannot in the garb of the revisional proceedings be permitted to substitute and impose his choice of mode and manner of carrying out the verifications on the A.O. We are constrained to record the aforesaid observations in order to make it clear beyond any doubt that the scope of revision under Sc. 263 is restricted only for the purpose of revising an order passed by the A.O, which is found to be both erroneous and prejudicial to the interest of the revenue, and failing the said fundamental requirements, the same cannot in guise of the said powers be exercised by the CIT to impose his view as against that of the A.O. We find that our aforesaid view that now when the A.O in the present case had after examining the accounts, making enquires and applying his mind to the facts and circumstances of Printed from counselvise.com 41 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT the case in accordance with law had framed assessment in the hands of the assessee, then merely for the reason that the CIT is not satisfied with the manner of the verifications and investigations carried out or conclusion arrived at by the A.O cannot form the basis for branding the assessment as erroneous, stands fortified by the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Gabrial India Ltd. (1993) 203 ITR 108 (Bom), held as under: “12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because according to him the order should have been written more elaborately. This section does not visualise a case of substitution of judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where ITO, while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and, left to the Commissioner, he would have estimated the income at a higher figure than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that, in the opinion of the Commissioner, the order in question is prejudicial to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suomotu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then also the power of suomotu revision cannot be exercised. Any and every erroneous order cannot be subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed”. Printed from counselvise.com 42 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 16. We further are persuaded to be in agreement with the contention of the ld. A.R that the CIT had even otherwise failed to show as to how the order passed by the A.O was found to be “prejudicial” to the interest of the revenue. We find that the specific contention raised by the assessee during the course of the revisional proceedings that the order passed by the A.O was in no way prejudicial to the interest of the revenue, had however not been addressed by the CIT. We are of the considered view that as per the mandate of law, for valid assumption of jurisdiction u/s 263 the order passed by the A.O must be found to be both erroneous and prejudicial to the interest of the revenue. The term „erroneous‟ used in conjunction with the term „prejudicial‟ makes it clear beyond any scope of doubt that both the preconditions have to be cumulatively satisfied, before the order passed by the A.O is revised by the CIT. Reliance in support of our aforesaid view is drawn from the judgment of the Hon’ble Supreme Court in the case of Ma labarIndustria l Ltd. Vs. CIT (2000 ) 243 ITR 83 (SC ). 17. We now advert to the contentions raised and the judicial pronouncements which had been relied upon by the ld. D.R. before us. The ld. D.R had during the course of hearing of the appeal relied on the judgment of the Hon ’ble H igh Court of De lhi in the case of CIT Vs. Ashok logani (2012) 347 ITR 22 (Del). We find that the facts involved in the case before the Hon‟ble High Court revolved around the aspect that though the assessee had surrendered certain amount during the course of survey proceedings conducted on him, however, the same was not offered as income by the assessee in his „return of income‟. That it was in the backdrop of the aforesaid facts, that the CIT observing that though the income surrendered by the assessee was thereafter retracted by him, however , no mention of the said material facts, i.e either as regards the „disclosure‟ made by the assessee or the validity of the retraction made by him thereafter did find a mention in the assessment order passed by the A.O, had thus for the said reason revised the order u/s 263, which thereafter was upheld by the Hon‟be High Court. We are of the considered view that as the facts involved in the said case are distinguishable as against those involved in the case of the present assessee, therefore, the reliance placed by the ld. D.R would not assist his case. That still further we are also unable to persuade ourselves to be in agreement with the contention raised by the ld. D.R that the Explanation 2 of Section 263 which had been made available on the statute vide the „Finance Act, 2015‟, w.e.f 01.06.2015, was to be construed as being retrospective in nature and thus would be applicable to the present case of the assessee for A.Y. 2009- 10. We are not impressed by the contention of the ld. D.R that as the A.O had passed the assessment order without making inquiries and verifications Printed from counselvise.com 43 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT which he should have made in the opinion of the CIT, therefore, the same rendered the order passed by him amenable for revision under Sec. 263. We have given a thoughtful consideration to the contentions of the assessee and do not find ourselves to be in agreement with his view. We are of the considered view that the Explanation 2 of Sec. 263 as had been had been made available on the statute vide the „Finance Act, 2015‟, w.e.f 01.06.2015, cannot be construed to be retrospective in nature. We are of the considered view that if the legislative would have intended a retrospective applicability of the same, then there would have been a specific mention as regards the same, which we find is not available. We find that a similar view in respect of prospective applicability of the Explanation 2 of Sec. 263 had been taken by the coordinate benches of the Tribunal in the following cases: (i). A.V Industries Vs. ACIT (ITA No. 3469/Mum/2010; dated, 06.11.2015)(Mum) (ii). Jayanth Murthy (supra) Thus in the backdrop of our aforesaid observations, we are not persuaded to accept the contention of the ld. D.R that as the A.O had passed the assessment order without making inquiries and verifications which he should have made in the opinion of the CIT, therefore, the same rendered the order passed by him amenable for revision under Sec. 263. We thus decline to accept the aforesaid contentions raised by the ld. D.R before us. 18. We thus after giving a thoughtful consideration to the order passed by the CIT under Sec. 263 in the backdrop of the submissions raised by the authorized representatives of both the parties, perusing the order passed by the A.O under Sec. 143(3) deliberating on the judicial pronouncements relied upon by the parties and the material available on record, thus, focusing on the proprietary of the order passed by the CIT by invoking his powers under s. 263, keeping in view the scope of the said statutory provision, are unable persuade ourselves to uphold the order passed by the CIT under Sec. 263 of the „Act‟. We thus in light of the observations and reasonings recorded hereinabove, set aside the order passed by the CIT under Sec. 263.” 20. In the present case, approach of the Ld. PCIT is nothing but an attempt to thrust his opinion on the AO to make further fishing and roving enquiries. Assessee provided entire information before the PCIT, which are also filed in the PB before us. The PCIT failed to Printed from counselvise.com 44 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT address any issue which could be determined/termed as erroneous, not brought to tax, so as to cause any prejudice to the interest of the Revenue. Even the non-application of mind of the PCIT is also clear from one fact that the Ld. PCIT alleged in the impugned letter, seeking information from the Assessee before actually initiating an action u/s 263 that the assessee had given a donation of Rs 2.50 crores in cash to the Prime Minister Relief Fund during Covid 19 and which proposition itself is factually incorrect. The assessee submitted the details specifically mentioning in the letter dated 05/04/2024 that payment was given through the banking channel and all evidences were filed. Yet in the impugned order, the PCIT instead of dropping the said query proceeded to remand the same to the AO. 21. In view of the above facts and circumstances and by relying on the ratio laid down by the Hon'ble Supreme Court, Hon'ble High Court and the Co-ordinate Bench of the Tribunal (supra), we are of the opinion that action of the PCIT in invoking provision of Section 263 of the Act is against the settled principles of law and nothing but enabling the A.O. to make fishing and roving enquiries. Accordingly, the order impugned dated 27/03/2025 for Assessment Year 2020-21 passed by the NFAC/PCIT u/s 263 of the Act is hereby quashed. Printed from counselvise.com 45 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT 21. Since, we have quashed the order impugned on its merit, the contention of the Ld. Assessee's Representative challenging the jurisdiction of the PCIT to pass order u/s 263 of the Act in the cases of assessment passed by the NFAC requires no adjudication at this point of time which remain academic in nature. 22. In the result, Appeal of the Assessee is allowed. Order pronounced in the open court on 10th September, 2025 Sd/- Sd/- (M. BALAGANESH) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date: 10.09.2025 R.N, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com 46 ITA No. 1987/Del/2025 Mahasian Di Hatti (P) Ltd. Vs. PCIT Printed from counselvise.com "