SHAHI EXPORTS PRIVATE LIMITED,DELHI V. PCIT (CENTRAL), DELHI - 1, DELHI

ITA 1561/DEL/2024

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The case involves Shahi Exports Private Ltd., a company engaged in manufacturing and exporting readymade garments, which appealed against the revisionary orders passed by the Pr. Commissioner of Income-tax (Central), Delhi-1. The revisionary orders were issued under section 263 of the Income Tax Act, 1961, claiming that the original assessments for the years 2017-18 and 2018-19 were erroneous and prejudicial to the interests of the revenue as they failed to disallow certain deductions for delayed payments of PF/ESI contributions. The Tribunal examined whether the assessing officer had erred in not making these disallowances and whether the revisionary powers under section 263 were correctly applied.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41738 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2018-2019
• Other Referred Cases: CIT vs. AIMIL Ltd., Bharat Hotels Ltd. vs. PCIT, PCIT vs. Pro Interactive Services (India) Pvt. Ltd., Checkmate Services (P) Ltd. vs. CIT, PCIT vs. SPPL Property Management (P) Ltd., CIT vs. Honda Siel Power Products Ltd., Lakhotia Diagnostic Service Pvt. Ltd. vs. PCIT, KiranSanran Associates vs. PCIT, Heylands Exports Pvt. Ltd. vs PCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYA CHAUDHARY
• Assessee Lawyers: SHIVAM MALIK
• Keywords: Bad and doubtful debts; Revision of order
• Section: 143(3); 142(1); 263; 43; 2

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G : NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITAs No.1446 & 1561/Del/2024 Assessment Years: 2017-18 & 2018-19 Shahi Exports Private Ltd., F-88, Okhla Industrial Area, Phase-I, New Delhi – 110 020. PAN: AAJCS1175L Vs PCIT (Central), Delhi -1, Delhi. (Appellant) (Respondent) Assessee by : Shri Shivam Malik, Advocate Revenue by : Ms Jaya Chaudhary, CIT-DR Date of Hearing : 27.02.2025 Date of Pronouncement : 07.03.2025 ORDER PER ANUBHAV SHARMA, JM: These are appeals preferred by the assessee against the orders dated 11.03.2024 and 30.03.2024 of the Pr. Commissioner of Income-tax (Central), Delhi-1 (hereinafter referred to as ‘the ld. PCIT’, for short) in Revisionary orders No.PCIT (Central), Delhi-1/Revision-263/100000657534/2024 and No.PCIT (Central), Delhi-1/Revision-263/100000674503/2024 u/s 263 of the of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) arising out of the orders dated 22.04.2021 and 04.06.2021, respectively, passed u/s 143(3) r.w.s. ITAs No.1146 & 1561/Del/2024 2 144C(3) by the ACIT, Central Circle-8, Delhi (hereinafter referred to as the Ld. AO). 2. The assessee is a private limited company engaged in the business of manufacturing and export of readymade garments. For all the aforementioned assessment years, the assessment of the assessee was framed under section 143(3) of the Income Tax Act vide assessment orders dated 22.04.2021 for Assessment Year 2017-18 and 04.06.2021 for Assessment Year 2018-19. The same were subject to proceedings u/s 263 of the Act and the ld. PCIT has held that the respective assessment orders are erroneous in so far as it is prejudicial to the interests of the revenue since income has been under assessed on account of failure of the assessing officer to make disallowance u/s 36(1)(va) of Act as required by law. Accordingly, income of the assessee was enhanced. The assessee has challenged the same before us and raised various grounds, which only allege that impugned order u/s 263 of the Act is erroneous as ld. AO had followed the proposition of law as then existed. 3. In aforesaid context the ld. AR has submitted that when the assessment orders were passed in the relevant years, at that time, the settled law from the Hon’ble jurisdictional High Court was that of CIT vs. AIMIL Ltd., 321 ITR 508 (Del). Therefore, the assessment was completed in a valid manner without making any disallowances on account of delayed payments/deposits of PF/ESI ITAs No.1146 & 1561/Del/2024 3 contributions of the employees. So there is no case of holding the assessment erroneous so far prejudicial to the interest of the Revenue. 4. The ld. DR has, however, supported the impugned order submitting that there was lack of inquiry and the AO has not examined the issue of delayed payment of PF/ESI at all as no query in that regard was raised. It was further submitted that at the same time, there was judgement of the Hon’ble Delhi High Court in favour of the Revenue in Bharat Hotels Ltd. (2019) 103 taxman 295 Del) wherein it was held that such a disallowance was valid. 5. We have considered the rival contentions and are of the considered view that the issue arises out of the judgement of the Hon’ble Supreme Court in the case of Checkmate Services (P) Ltd. vs. CIT, 448 ITR 518 (SC) which is dated 12.10.2022. There is no dispute that the impugned assessments were passed well before this judgement of the Hon’ble Supreme Court. On a query from the bench, the ld. AR has admitted that when notices u/s 142(1) were issued, no specific query was raised with regard to the disputed disallowances. However, there is no denial to the fact that on the date of assessment orders, judgement of the Hon’ble jurisdictional High Court in CIT vs. AIMIL Ltd. was there and, as a matter of fact, the same judgement was being followed by various Benches of Delhi ITAT. The ld. AR has pointed out that after the judgement in CIT vs. Bharat Hotels, the Hon’ble Delhi High Court in PCIT vs. Pro Interactive Services (India) Pvt. Ltd., ITA 983/2018, order dated 10.09.2018 has held that the judgement in CIT vs. AIMIL Ltd. still holds the field. ITAs No.1146 & 1561/Del/2024 4 6. Further, there is no dispute with regard to the settled provisions of law that the exceptional powers of revision u/s 263 of the Act cannot be invoked when the issue is debatable. Reliance can be placed on the decision of Hon’ble Delhi High Court in the case of CIT V. Honda Siel Power Products Ltd. 333 ITR 547(Del). 7. Now only because a specific query has not been raised by the AO in notice u/s 142(1) of the Act, that cannot lead to an inference that the AO has not applied its mind to the issue at all. Where the ld. AO was bound by the judgement in CIT vs. AIMIL Ltd. (supra) and he was supposed to complete the assessment following the same, then there was no necessity for ld. AO to have issued any query on that count. 8. The ld. AR has then brought to our notice the judgement of the Hon’ble Calcutta High Court in PCIT vs. SPPL Property Management (P) Ltd., 293 Taxman 458 (Cal) holding that invocation of the provisions of section 263 of the Act to hold an assessment order erroneous on the basis of the judgement in Checkmate Services (P) Ltd. when such assessment was done prior to the judgement in the case of Checkmate Services (P) Ltd. (supra) was not sustainable. In that case, the Hon’ble Calcutta High Court has found that the AO was bound to follow the jurisdictional High Court judgement in the case CIT vs. Vijay Shree Ltd. (2014) 43 taxmann.com 396. For completeness, we consider it appropriate to reproduce para 7 of the order:- ITAs No.1146 & 1561/Del/2024 5 “7. Before we go into the three heads, under which action was initiated under Section 263 of the Act, we have to first examine as to whether the assumption of jurisdiction by the PCIT under Section 263 was just and proper. With regard to the first and third issues, the assessing officer had issued notice under section 142(1) on 1st of May, 2019 and issued a questionnaire form and the assessee had submitted all the relevant details which have been noted by the Tribunal. Further, there is another question with regard to the details of expenses head-wise, where assessee had deducted tax at source. The Tribunal on going through the assessment records found that the questionnaire on the issues raised by the assessing officer called for the details of expenses appearing in the audited P & L Account and various replies filed by the assessee and the Tribunal found that the assessing officer has specifically carried out an enquiry regarding provisions for doubtful debts and air-conditioner expenses and the specific reply given by the assessee was also taken note of. With regard to the issues regarding the provisions for doubtful debts, the Tribunal noted that the assessee during the regular course of business as claimed to have been shown sales, in the preceding years of which, some sales turned bad and the same has been written off in the books of accounts as bad debts which the assessee is entitled for and, therefore, found the claim to be admissible. Similarly, for air-conditioner charges the assessee had filed complete details along with tax deducted on the charges paid and the bills were also placed in the4 form of a paper book which the Tribunal perused and found the same to be acceptable. Thus, the Tribunal concluded that on both these issues, namely with regard to the provisions for doubtful debts and air- conditioner expenses, the assessing officer had conducted a detailed enquiry and thereafter completed the assessment. Secondly, it was held that the PCIT had erred in invoking the revisional jurisdiction under Section 263 of the Act. The law on the subject is well settled, that if it is found, that the assessing officer has in fact conducted an enquiry, merely because the PCIT is of a different opinion, it would not justify action under Section 263 of the Act. The other issue with regard to the provident fund contribution, as mentioned, the assessment order was of the year 2017-18 and on the date, when the assessing officer completed the assessment, the law on the subject as laid down by the jurisdictional High Court, namely this Court is in the case of Commissioner of Income Tax Circle – 1, Kolkata Vs. Vijay Shree Ltd. [2014] 43 taxmann.com 396 (Calcutta). Thus the assessing officer had followed the decision of this Court in the said case and had completed the assessment. Thus the assessing officer having followed the decision of the Jurisdictional High Court which held the field, at the relevant point of time, the assessment cannot be held to be prejudicial to the interest of revenue.” 9. The aforesaid proposition has been accepted in the case of Lakhotia Diagnostic Service Pvt. Ltd. vs. PCIT, ITA Nos.845-847/KOL/2024; M/s ITAs No.1146 & 1561/Del/2024 6 KiranSanran Associates vs. PCIT, ITA No.791/PUN/2024; and Heylands Exports Pvt. Ltd. vs PCIT, ITA 1539/Chny/2024. 10. We are thus inclined to accept the contention of ld. AR that assessment orders cannot be presumed to be erroneous by virtue of Explanation 2 to Section 263 of the Act, which provides that if the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person, then the assessment order shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue. Here is a case where infact the ld. AO has followed the decision in favour of the assessee from the Hon’ble jurisdictional High Court. 11. In the light of the aforesaid, we are of the considered view that the ld. PCIT has erred in invoking his powers u/s 263 of the Act. The grounds are sustained and the appeals of assessee are allowed with consequential effects. Order pronounced in the open court on 07.03.2025. Sd/- Sd/- (MANISH AGARWAL) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:07th March, 2025. dk ITAs No.1146 & 1561/Del/2024 7 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "