RAVI MODI,KOLKATA V. DCIT, CENTRAL CIRCLE 3(2), KOLKATA

ITA 1964/KOL/2025

AI Insights

The case involves appeals by Ravi Modi and Shilpi Modi against the orders passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961, which revised the assessments made under section 143(3). The PCIT's revision was based on the grounds that the Assessing Officer (AO) had not properly examined the claims under section 54 of the Act concerning the sale and purchase of properties. The Tribunal examined whether the PCIT was justified in invoking section 263, considering the detailed responses and evidence provided by the assessee during the original assessment proceedings. The Tribunal concluded that the AO had adequately examined the issues during the assessment, and thus, the PCIT's order under section 263 was not sustainable.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 837956 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2022-2023
• Appeal Filed On: 28-08-2025
• Other Referred Cases: PCIT Vs. Kesoram Industries Limited, PCIT Vs. Britannia Industries Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Opportunity of being heard; Depreciation; Sale consideration of property below Jantri Value; Cost of acquisition; Assessment record; Rule 8D; Revision of order; Liquidation
• Section: 143(3); 142(1); 263; 54; 54F; 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH,KOLKATA SHRI RAJESH KUMAR, ACCOUNTANT MEMBER SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER I.T.A. No.1964/Kol/2025 (Assessment Year 2022-23) Ravi Modi, Flat 2C, Block C & D, 12C Lord Sinha Road, Middletown Row S.O. Kolkata - 700071 [PAN: ADTPM5363Q] ..……..…...……………....Appellant vs. DCIT, Central Circle 3(2), Kolkata, Aayakar Bhawan Poorva, 110 Shantipally, E.M. Bypass, Kolkata – 7000107 ................................ Respondent I.T.A. No. 1965/Kol/2025 (Assessment Year 2022-23) Shilpi Modi, 19 Canal South Road, Paridhan Garment Park, SDF01, Tangra, S.O., Kolkata - 700015 [PAN: AEXPM7841J] ..……..…...……………....Appellant vs. DCIT, Central Circle 3(2), Kolkata, Aayakar Bhawan Poorva, 110 Shantipally, E.M. Bypass, Kolkata – 700107 ................................ Respondent Appearances by: Assessee represented by : S.M. Surana, Adv. Department represented by : Sanat Kumar Raha, CIT(DR) Date of concluding the hearing : 08.12.2025 Date of pronouncing the order : 17.02.2026 Printed from counselvise.com 2 ITA Nos. 1964 & 1965/Kol/2025 Ravi Modi & Shilpi Modi O R D E R Per Rajesh Kumar, AM The present appeals filed by the assessee arise from order dated 20.08.2025 passed u/s 263 of the Income Tax Act, 1961 (hereafter referred to as “the Act”) by the Ld. Principal Commissioner of Income Tax (Central), [hereafter referred to as “the Ld. PCIT]. Since both appeals having common issue, therefore they are heard together and are being disposed of through a common order. ITA No. 1964/Kol/2025 2. The only issue raised by the assessee is against the invalid exercise of jurisdiction u/s 263 of the Act and consequently passing revisionary order u/s 263 of the Act thereby setting aside the assessment framed by the AO u/s 143(3) of the Act dated 02.03.2024. 3. The facts in brief are that the assessee filed the return of income on 29.07.2023 declaring total income at Rs. 8,86,86,869/-. The case was selected for scrutiny and accordingly assessment was completed u/s 143(3) of the Act vide order dated 02.03.2024 accepting the returned income. Thereafter, the Ld. PCIT upon perusal of the assessment records observed that the company M/s Produce and Textiles Pvt. Ltd. held 2 bigha 5cottah, 9 chhittak and 29 sqft of land which was situated at 98, Tollygunge Circular Road, Alipore. The Ld. PCIT also observed that Mr. Ravi Modi and Mrs Shilpi were shareholders of the company in the ratio of 74% and to 26% but the said company went into the liquidation and at the time of liquidation, there was a G+2 storey main building and G+1 staff quarter on the said land. This deed of conveyance was executed on 18.09.2017 in FY 2017-18 relevant to the assessment year 2018-19. The Ld. PCIT noted that the Hon’ble Court liquidated the company vide order dated 30.11.2018. The stamp duty value of the property as on the date of execution of deed was Rs. 32,32,13,108/- for the land and Rs. Printed from counselvise.com 3 ITA Nos. 1964 & 1965/Kol/2025 Ravi Modi & Shilpi Modi 70,62,750/- for the structure. The Ld. PCIT noted that Mr. Ravi Modi had shown full value of consideration of Rs. 45,62,83,506/- and cost of acquisition of Rs. 86,38,98,998/- in the ITR for the AY 2018-19 thereby declaring a Short-Term Capital Loss of Rs. 40,76,15,492/-. Thereafter, Mr. Ravi Modi sold 25 cottahs and Mr. Mehul Mohanka through a conveyance deed dated 08.10.2021 in FY 2021-22 along with structure measuring 10531 square meter. The sale value of the property was 54.55 lacs. Mr. Ravi Modi entered into an agreement with PS Group Realty Pvt. Ltd. on 26.08.2021 in FY 2021-22 for purchase of total land of 325.16 decimals along with 24 two storied incomplete residential building structures having a collective build-up area of 1452 square meter in Rajarhat. Mr. Ravi Modi paid Rs. 20,20,00,000/- as advance against the total cost of Rs. 53,26,50,652/- to be paid by Mr. Ravi Modi and Smt. Shilpi Modi. The deed of conveyance executed on 29.09.2022 to PS Group Realty Pvt. Ltd. Mr. Ravi Modi has claimed deduction u/s 54 of the Act amounting to Rs. 23,03,35,491/- in his return of income filed on 29.07.2022 along showing LTCG on sale of immovable property at Rs. 23,03,35,491/- before taking deduction u/s 54 of the Act in respect of property sold on 08.10.2021. The assessee showed full consideration in the return of income of Rs. 40,33,00,000/- and the cost of acquisition of Rs.14,35,10,898/-without indexation (after indexation Rs. 16,72,53,510/-). According to the Ld. PCIT the land and structure comprising the property sold did not qualify to the residential house as ascertained from the verification report of the departmental Inspector and therefore deduction claimed u/s 54 of the Act should have been at Rs. 23,03,35,491/- and should have been disallowed. The Ld. PCIT observed that the AO has not examined and verified the issue in the assessment proceedings thereby rendering the assessment framed to be the erroneous and prejudicial to the interest of the revenue and consequently, show cause notice u/s 263 of the Act was issued u/s 263 of the Act on 28.03.2025 which was replied by the assessee. Thereafter, the Ld. PCIT Printed from counselvise.com 4 ITA Nos. 1964 & 1965/Kol/2025 Ravi Modi & Shilpi Modi after taking into consideration the reply of the assessee revised the assessment directing the AO to make necessary enquiry/verification of the said issue and passed afresh assessment order and recompute the income after affording a reasonable opportunity of being heard to the assessee. 4. The Ld. AR vehemently submitted before us that the issue was examined thoroughly during the assessment proceedings by the AO after raising a specific query into the issue which was replied by the assessee and the AO only passed the assessment after considering the evidences filed by the assessee and therefore, allowed the claim u/s 54 of the Act. Ld. AR referred to notice issued u/s 142(1) of the Act dated 29.08.2023 a copy of which is available at page 24 and 25 and submitted that on page 204 to 2026 at page 6 para 2. The Ld. AO specifically raised the query that assessee has claimed benefit u/s 54, 54E, 54F, 54G and called upon the assessee to furnish the details of property and purchase details along with deed. The Ld. AR submitted that the assessee replied the said notice by uploading the response on the portal on 06.09.2023 acknowledgement of e-proceedings response at page no. 207, 208 and 209, a copy of reply available at page no. 210-211. The Ld. AR submitted that the assessee specifically replied the said query by narrating all the facts that were discussed by the Ld. PCIT in the order passed u/s 263 of the Act. Therefore, only after considering the said reply of the assessee, the ACIT accepted the plea of the assessee and allowed the exemption claimed u/s 54 of the Act. Therefore, the assessment order passed is neither erroneous nor prejudicial to the interest of the revenue which is the main condition for invoking jurisdiction u/s 263 of the Act. The Ld. AR submitted that if the AO is raised the specific query, the assessee has replied the same by the furnishing all the evidence qua that the AO framed assessment after taking into account the said reply of the assessee, it is presumed that the issue has been examined by the AO only after that this has been accepted. The Ld. AR submitted that therefore, Printed from counselvise.com 5 ITA Nos. 1964 & 1965/Kol/2025 Ravi Modi & Shilpi Modi the jurisdiction exercised by the Ld. PCIT u/s 263 of the Act is invalid and may be quashed. The Ld. AR, defence his argument, relied on the decision of the Ld. PCIT Vs. Kesoram Industries Limited 423 ITR 180(Cal), wherein a similar issue has been decided in favour of the assessee. Similarly, the Ld. AR relied on the decision of the PCIT Vs. Britannia Industries Limited, ITA No. 211 of 2022 dated 23.12.2022. wherein similar issue has been decided in favour of the assessee. Ld. DR on the other hand relied on the order of Ld. PCIT and therefore, prayed that appeal of the assessee may be dismissed. 4. We have heard the rival contention and perusing the material on record. We find that in this case, the assessment was framed u/s 143(3) of the Act vide order dated 02.03.2024. The said order was revised by Ld. PCIT by passing the order u/s 263 of the Act on the ground that same was erroneous and prejudicial to the interest of the revenue on the ground that the AO has not examined and verified the exemption claimed u/s 54 of the Act of Rs. 23,03,35,491/-, whereas the facts available on record and as brought our notice by counsel that the issue stood examined during the assessment proceedings by the AO by issuing notice u/s 142(1) of the Act, a copy of which is available at page no. 204 to 206 in which the AO vide para 2 in the annexure at page 206 specifically called upon the assessee to furnish the details of exemption claimed u/s section 54, 54C and 54E and also provide the details property purchased and the assessee replied to the said notice by uploading all the details and conveyance deed on 06.09.2023 and the copy of e-proceeding response acknowledgment and the reply of the assessee are available from page 207 to 2011. We observe that the assessee has replied in comprehensive manner to the said query of the AO by furnishing all the details/evidences with respect to the claim u/s 54F of the Act and only thereafter, AO passed the assessment. Therefore, the assessment framed by the AO cannot be said to be erroneous and prejudicial to the interest of the revenue. The case of the assessee find supports from the decision Printed from counselvise.com 6 ITA Nos. 1964 & 1965/Kol/2025 Ravi Modi & Shilpi Modi of the Hon’ble Calcutta High Court in the case of PCIT Vs. Kesoram Industries Limited (supra), wherein the Hon’ble Court has held as under: “The Court: The appeal was admitted by an order of November 12, 2018 and the following questions of law framed: \"i) Whether on the facts and in the circumstances of the case the Tribunal should have entertained and decided the subject appeal without giving an opportunity to the Assessing Officer to make a relook into the assessment in terms of the order of the Principal Commissioner of Income Tax dated 29th March, 2016 under Section 263 of the Income Tax Act, 1961? ii) Whether the appeal before the Tribunal was premature and the Tribunal ought not to have entertained the same? iii) Whether the exercise of jurisdiction by the Tribunal in passing its impugned order dated 4th November, 2016 was erroneous without compliance of the said order of remand made by the Principal Commissioner of Income Tax?\" There is no dispute that the appeal before the Tribunal was maintainable. Certain matters had been directed by the Commissioner of Income Tax to be looked into afresh by the assessing officer. The assessee perceived that such matters had already been gone into by the assessing officer and did not require a re-look. The assessee was also entitled to carry an appeal from the order of the Commissioner and the Tribunal agreed with the assessee that the various matters that were sought to be opened up by the order of the Commissioner could not have been done. The first and second questions framed appear to be one and the same and they imply that the Tribunal should have allowed the fresh assessment or fact-finding enquiry to be completed by the assessing officer. The third question appears also to be the same except the third question may be bereft of any legal import. Appeals entertained in this jurisdiction are only on substantial questions of law. For the guidance of the Court, the Revenue has referred to a judgment reported at 243 ITR 83 (Malabar Industrial Co. Ltd. v. CIT) where the Supreme Court emphasised that both limbs of the provision had to be complied with before jurisdiction under Section 263 of the Income Tax Act, 1961 could be assumed. The Commissioner had to find that the order of the assessing officer sought to be revised was erroneous and that such error prejudiced the interest of the Revenue. The Court reiterated that the fulfilment of one condition in the absence of the other would not suffice in such a situation as the provision required compliance with both conditions. In the present case, four broad aspects were questioned before the Tribunal. By the order impugned dated November 4, 2016, the Tribunal held in favour of the assessee. The first aspect pertains to an order under Section 143(3) of the Act which was found to be erroneous and prejudicial to the interest of the Revenue. The specific matter pertained to the difference in the addition of fixed assets of about Rs.1.10 crore. The notice under Section 263 of the Act was issued to Printed from counselvise.com 7 ITA Nos. 1964 & 1965/Kol/2025 Ravi Modi & Shilpi Modi clarify the difference. The assessee clarified the difference by its written submission and a reconciliation statement was also used. However, the Commissioner, instead of considering the reply, recorded that the issue had not been verified by the assessing officer. The Tribunal set aside the decision of the Commissioner on the ground that the show-cause notice indicated a specific purpose but the matter was dealt with on another count after the receipt of the reply. The Tribunal relied on a view taken by a coordinate bench reported at 54 SOT 172 (Visuvius India Limited v. CIT) and a judgment of the Andhra Pradesh High Court reported at 211 ITR 336 (CIT v. G.K. Kabra). In both cases, it was held that if the object of the notice was one and the matter was treated for a different purpose in the ultimate order, that may not be the appropriate exercise of the jurisdiction. In the light of a possible view taken on the facts as they presented themselves in such regard, the order of the tribunal in respect of the first of the four heads does not call for any interference. The tribunal found that the Commissioner had not even indicated in the show- cause notice that \"adequate enquiries were not carried out.\" The tribunal found that the assessing officer had conducted an enquiry regarding the addition of fixed assets. The tribunal referred to the notice issued under Section 142(1) of the Act and the reply of the assessee. The tribunal reasoned that the order passed by the assessing officer in such circumstances could neither be held to be erroneous nor prejudicial to the interest of the Revenue. In such regard, the tribunal referred to a judgment of the Allahabad High Court where it was observed that the Commissioner could exercise his jurisdiction under Section 263 of the Act \"only in cases where no enquiry is made by the assessing officer.\" On the second aspect pertaining to disallowance under Section 14A of the Act read with Rule 8D (2) (ii) of the Income Tax Rules, 1962, the tribunal found that the assessing officer had netted off the interest paid with the interest income for working out the disallowance under Rule 8D. According to the tribunal, the assessing officer had applied his mind to the issue and it was not something that escaped the attention of the assessing officer for the Commissioner to assume jurisdiction under Section 263 of the Act on the ground that no enquiry in such regard had been conducted by the assessee. Apropos the third aspect pertaining to trade discount, the tribunal found that the Commissioner had issued the notice for addition of trade discount on the ground that the assessee's claim for trade discount was not in order. The tribunal also found that details of the trade discount had been furnished by the assessee to the assessing officer at the time of assessment under Section 143(3) of the Act and the details of such discount had been included in the paper-book filed before the tribunal. Further, the tribunal found that the Commissioner had changed his stand as indicated in the notice and at the time of passing the order under Section 263 of the Act. For the same reasons, as in respect of the first head pertaining to fixed assets, the tribunal found that the Commissioner had acted without basis. Finally, as regards the fourth issue pertaining to depreciation, the tribunal found that the Commissioner had raised the issue in the notice under Section 263 of the Act for excess depreciation but concluded in his order that proper enquiries had not been made by the assessing officer. Again, the tribunal Printed from counselvise.com 8 ITA Nos. 1964 & 1965/Kol/2025 Ravi Modi & Shilpi Modi found that there was a change in stand with regard to the notice and in the revision order, which was impermissible. In matters of the present kind where there is a specialized tribunal in place for dealing with matters pertaining to a particular subject, the scope of interference is limited in the present jurisdiction. Once it is seen that a plausible or reasonable view has been taken by the tribunal upon a fair discussion of the matter, this Court in exercise of the authority available in this jurisdiction would not supplant its view in place of the tribunal's unless the error is apparent and palpable. The tribunal has given adequate reasons, and relied on precedents, as to why the manner in which the jurisdiction exercised by the Commissioner under Section 263 of the Act was found to be erroneous. There does not appear to be any legal error committed by the tribunal in either taking up the appeal or in deciding the same, particularly since cogent grounds have been indicated for interfering with the order of the Commissioner passed under Section 263 of the Act. The questions framed are answered in the negative in every case. ITA No. 169 of 2018 is dismissed.” 5. Similarly, the Hon’ble Calcutta High Court in the case of PCIT Vs. Britannia Industries Limited (supra) has decided the similar issue in favour of the assessee, the operative part as extracted below: “11. The assessee also furnished the relevant extracts of the financial statement for the financial year 2015-2016 highlighting all the relevant ITAT NO. 211 OF 2022 REPORTABLE details. Further the location wise break up of those items of expenses as reflected in the profit and loss account were also placed before the learned tribunal and it was explained that the items set out in the Column (B)(C)(D)(E) in the above table formed part of the depreciation on scientific research assets; assets written off and profit and loss on sales of asset debited in the profit and loss account. Thus, it was explained that the sum of Rs. 1,34,45,166/- was added back in the computation of income. This aspect of the matter has been analyzed by the learned tribunal and it has found that the said sum was added back in the computation of income and therefore there was absolutely no basis for the PCIT to invoke his power under Section 263 of the Act. Furthermore, records clearly show that the assessing officer had issued notices to the assessee on the very same issue considered their reply thereafter pointing out certain discrepancies issued show cause notice for which reply was submitted by the assessee and after a detailed enquiry the assessment has been completed. Thus, itPrincipal Commissioner Of Income Tax vs M/S. Britannia Industries Limited on 23 December, 2022is not a case of lack of enquiry or lack of proper enquiry. The PCIT does not in as many words state that there was lack of enquiry or lack of proper enquiry and all that is said is that the assessing officer did not verify these aspects which is factually incorrect. Therefore, it is not a case where the PCIT could have invoked his jurisdiction under Section 263 of the Act. Printed from counselvise.com 9 ITA Nos. 1964 & 1965/Kol/2025 Ravi Modi & Shilpi Modi 12. With regard to the second issue, the learned tribunal had noted the facts that the invoices issued by the \"LINKED IN\" towards advertisement expenses in June 2014 were admitted as liability and crystallized for payment in the year under consideration owing to the fact that the \"LINKED IN\" being non- resident had furnished the necessary documents in ITAT NO. 211 OF 2022 REPORTABLE the such as TRC under Section 90(4) of the Act read with Rule 21 AB of the Rules and no PE certificate etc. only in the assessment year under consideration. Further the tribunal noted it is not the case where these expenses were charged as deduction in the preceding year more importantly, the tribunal noted that there is no revenue implication and no prejudice is caused to the revenue since the tax rate applicable to the assessee during the assessment year 2015-2016 to which invoices relates and the tax rates applicable for the assessment year 2016-2017 in which the invoices were accounted and paid were the same. 13. At this juncture, we take note of the decision in the case of the Hon'ble Supreme Court in Malabar Industrial Company Limited Versus Commissioner of Income Tax 1 wherein it was held that every loss of revenue cannot be treated as prejudicial to the interest of revenue and if the assessing officer has adopted one of the courses permissible under law or where two views are possible and the assessing officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the assessing officer is unsustainable under law. Furthermore, on facts the tribunal found that the PCIT has not carried out any enquiry on his own and merely set aside the assessment order and sent the file back to the assessing officer to re-examine the issues which is contrary to the law as laid down in several decisions and the tribunal rightly noted the decision in Income Tax Officer Versus DG Housing Projects Limited 2. (2000) 243 ITR 83 (SC) (2012) 343 ITR 329 (Del) ITAT NO. 211 OF 2022 REPORTABLE 14. Thus, for all the above reasons, we find that no questions of law much less substantial questions of law arises for consideration in this appeal. Accordingly, the appeal fails and is dismissed. (T.S. SIVAGNANAM, J) I agree (HIRANMAY BHATTACHARYYA, J) (P.A - SACHIN)” 6. We therefore, respectfully following the ratio laid down in the above decisions hold that the PCIT has invalidly exercised the jurisdiction u/s 263 of the Act. Consequently, we allow the appeal of the assessee by quashing the order framed u/s 263 of the Act. Printed from counselvise.com 10 ITA Nos. 1964 & 1965/Kol/2025 Ravi Modi & Shilpi Modi ITA No. 1965/Kol/2025 7. Since the facts and issues involved in the appeal is identical, except difference in figures or calculations, therefore, our findings/directions given above in ITA No. 1964/Kol/2025 will, mutatis mutandis, apply to ITA No.1965/Kol/2025. 8. In result, appeals of the assessee are allowed. Order pronounced on17.02.2026 Sd/- Sd/- (Pradip Kumar Choubey) (Rajesh Kumar) Judicial Member Accountant Member Dated:17.02.2026 AK,Sr.P.S. Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR) //True copy// By order Assistant Registrar, Kolkata Benches Printed from counselvise.com "