SANJIV SOSHIL MEHTA,MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 5(2), KAUTILYA BHAVAN

ITA 2096/MUM/2025

AI Insights

The case involves Mr. Sanjiv Mehta, who appealed against the order of the Principal Commissioner of Income-tax, Mumbai \\u2013 1, which pertained to the assessment year 2020-21. The ld. Pr. CIT had invoked section 263 of the Income-tax Act, claiming that the original assessment order was erroneous and prejudicial to the interests of the revenue. The Tribunal examined the proceedings and found that the ld. Pr. CIT had not applied his mind adequately and had acted on the basis of an audit objection without substantial evidence to support the claim that the assessment was erroneous or prejudicial to the revenue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711392 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2020-2021
• Other Referred Cases: Malabar Industrial Co. Ltd. vs. CIT, CIT vs. Gabriel India Ltd., CIT vs. Max India Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KANTI DATTA; DR
• Assessee Lawyers: KETAN VED; RIYA SHAH; ARS
• Keywords: Set aside; Revenue expenditure; Retrospective amendment; Salary income; Capital expenditure; Audit objection; Double taxation relief; Revision of order; Residential status
• Section: 143(3); 142(1); 263; 80HHC

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI ANIKESH BANERJEE, HON’BLE JUDICIAL MEMBER I.T.A. No. 2096/Mum/2025 Assessment Year: 2020-21 Mr. Sanjiv Mehta World Crest Lodha World Towers W-5701 and E-5703 Lower Parel Mumbai - 400013 [PAN: AANPM7571K] Vs Principal Commissioner of Income-tax – 1, Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Ketan Ved & Ms. Riya Shah, A/Rs Revenue by : Shri Arun Kanti Datta, CIT, D/R सुनवाई की तारीख/Date of Hearing : 16/07/2025 घोषणा की तारीख /Date of Pronouncement: /07/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order of the Principal Commissioner of Income Tax, Mumbai – 1 [hereinafter ‘the ld. Pr. CIT’] dated 10/03/2025 pertaining to AY 2020-21 framed u/s 263 of the Act. 2. The sum and substance of the grievance of the assessee is that the ld. Pr. CIT erred in assuming jurisdiction conferred upon him by the provisions of section 263 of the Act and further erred in holding that the assessment order dated 25/08/2022 framed u/s 143(3) r.w.s. 144B of the Act is erroneous insofar as it is prejudicial to the interest of the revenue. 3. Briefly stated the facts of the case are that the assessee derives income from salary and investments and filed his return of income on Printed from counselvise.com I.T.A. No. 2096/Mum/2025 2 10/12/2020 declaring total income at ₹ 23,71,38,203/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. After perusal of the return of income, materials available on record and reply furnished by the assessee on different dates in respect of the notices issued, no adverse inference was drawn and the return of income of the assessee was accepted as such. 3.1. Assuming powers conferred upon him by the provisions of section 263 of the Act, the ld. Pr. CIT, issued and served the following notice:- Printed from counselvise.com I.T.A. No. 2096/Mum/2025 3 Printed from counselvise.com I.T.A. No. 2096/Mum/2025 4 4. Before proceeding any further, it would be pertinent to understand the assessment proceedings and the notice and the queries raised during the course of assessment. On 29/06/2021, notice under section 143(2) of the Act was issued and the assessee was required to clarify in respect of the double taxation relief u/s 90/91 of the Act and the claim of refund. The assessee filed a detailed reply which reads as under:- Printed from counselvise.com I.T.A. No. 2096/Mum/2025 5 4.1. Notice u/s 142(1) of the Act dated 20/12/2021 was issued along with a questionnaire and the relevant question for our consideration read as under:- 4.2. The assessee filed detailed reply along with supporting documents in particular, the following need consideration:- “With respect to the relief claimed u/s 90/91 during the year under consideration, details are as follows: I qualify to be resident and ordinarily resident in India and have offered my global income to tax in India. As I had workdays in the United Kingdom (UK), the salary for these workdays has been taxed in the UK also. Given that this leads to double taxation, I have claimed credit of taxes paid in the UK in India. A copy of the UK tax return evidencing the tax paid in the UK is attached as Annexure 7. 5. The computation of income filed along with the return of income filed during the course of assessment proceedings is as under:- Printed from counselvise.com I.T.A. No. 2096/Mum/2025 6 Printed from counselvise.com I.T.A. No. 2096/Mum/2025 7 6. In the return of income under the head Schedule ‘S’ details of income as per salary, following details were furnished:- Printed from counselvise.com I.T.A. No. 2096/Mum/2025 8 ***This space has been left blank intentionally, P.T.O.*** Printed from counselvise.com I.T.A. No. 2096/Mum/2025 9 7. The aforementioned factual matrix goes to show that specific queries were raised to which specific replies were furnished by the Printed from counselvise.com I.T.A. No. 2096/Mum/2025 10 assessee along with supporting documentary evidence. The assessee has furnished complete details of the salary income received by him within India and outside India from Hindustan Unilever Limited, therefore, it cannot be said that any income was not offered for taxation. In fact, the ld. Pr. CIT assumed jurisdiction on the basis of the audit objection without there being ay application of mind. 8. Our view is fortified by the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd., 243 ITR 83 (SC), where the Hon’ble Supreme Court has laid down the following ratio:- “A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order 7 is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous \". 9. Further, the Hon’ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. reported in [1993] 203 ITR 108 (Bombay), while dealing with identical issue has held as under:- 13. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. 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 the record 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 Printed from counselvise.com I.T.A. No. 2096/Mum/2025 11 suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for and examined by such authority. Our aforesaid conclusion gets full support from a decision of Sabyasachi Mukharji J. (as his Lordship then was) in Russell Properties Pvt. Ltd. v. A. Chowdhury, Addl. CIT . In our opinion, any other view in the matter will amount to giving unbridled and arbitrary power to the revising authority to initiate proceedings for revision in every case and start re-examination and fresh enquiries in matters which have already been concluded under the law. As already stated it is a quasi judicial power hedged in with limitation and has to be exercised subject to the same and within its scope and ambit. So far as calling for the records and examining the same is concerned, undoubtedly, it is an administrative act, but on examination \"to consider\" or in other words, to form an opinion that the particular order is erroneous in so tar as it is prejudicial to the interests of the Revenue, is a quasi-judicial act because on this consideration or opinion the whole machinery of re-examination and reconsideration of an order of assessment, which has already been concluded and controversy which has been set at rest, is set again in motion. It is an important decision and the same cannot be based on the whims or caprice of the revising authority. There must be materials available from the records called for by the Commissioner. 14. We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be \"erroneous\" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. Without doing so, he does not get the power to set aside the assessment. In the instant case, the Commissioner did so and it is for that reason that the Tribunal did not approve his action and set aside his order. We do not find any infirmity in the above conclusion of the Tribunal.” Printed from counselvise.com I.T.A. No. 2096/Mum/2025 12 10. The Hon’ble Supreme Court in the case of CIT vs. Max India Ltd. reported in [2007] 295 ITR 282 (SC), had the occasion to consider a similar challenge to 263 proceedings and held as under:- “1. In our view at the relevant time two views were possible on the word 'profits' in the proviso to section 80HHC(3). It is true that vide 2005 amendment the law has been clarified with retrospective effect by insertion of the word 'loss' in the new proviso. We express no opinion on the scope of the said amendment of 2005. Suffice it to state that in this particular case when the order of the Commissioner was passed under section 263 of the Income-tax Act two views on the said word 'profits' existed. In our view the matter is squarely covered by the judgment of this Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 as also by the judgment of the Calcutta High Court in the case of Russell Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229 at 243. 2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase \"prejudicial to the interest of the revenue\" under section 263 has to be read in conjunction with the expression \"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 interest of the revenue. For example, when the Income- tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. According to the learned Additional Solicitor General on interpretation of the provision of section 80HHC(3) as it then stood the view taken by the Assessing Officer was unsustainable in law and therefore the Commissioner was right in invoking section 263 of the Income-tax Act. In this connection he has further submitted that in fact 2005 amendment which is clarificatory and retrospective in nature itself indicates that the view taken by the Assessing Officer at the relevant time was unsustainable in law. We find no merit in the said contentions. Firstly, it is not in dispute when the Order of the Commissioner was passed there were two views on the word 'profit' in that section. The problem with section 80HHC is that it has been amended eleven times. Different views existed on the day when the Commissioner passed the above order. Moreover the mechanics of the section have become so complicated over the years that two views were inherently possible. Therefore, subsequent amendment in 2005 even though retrospective will not attract the provision of section 263 particularly when as stated above we have to take into account the position of law as it stood on the date when the Commissioner passed the order dated 5-3-1997 in purported exercise of his powers under section 263 of the Income-tax Act.” 11. Considering the facts of the case in totality in the light of the judicial decisions referred hereinabove, we set aside the order of the ld. Printed from counselvise.com I.T.A. No. 2096/Mum/2025 13 Pr. CIT dated 10/03/2025 and restore that of the AO dated 25/08/2022 framed u/s 143(3) r.w.s. 144B of the Act. 12. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 23rd July, 2025 at Mumbai. Sd/- Sd/- (ANIKESH BANERJEE) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 23/07/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0014ितिलिप अ\u0019ेिषत /Copy of the Order forwarded to : 1. अपीलाथ\u001b / The Appellant 2. \u0014 थ\u001b / The Respondent 3. संबंिधत आयकर आयु! / Concerned Pr. CIT 4. आयकर आयु! ) अपील ( / The CIT(A)- 5. िवभागीय \u0014ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड% फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "