UCAL LIMITED,CHENNAI V. PCIT, CHENNAI-3, CHENNAI

ITA 1018/CHNY/2025

AI Insights

The case involves Ucal Limited, which appealed against a revision order passed by the PCIT, Chennai -3, under Section 263 of the Income Tax Act. The revision pertained to the assessment year 2020-21, where the PCIT challenged the scrutiny assessment order that accepted the company's return of income declaring nil income. The PCIT's revision was based on alleged underassessment of income and incorrect treatment of business losses related to impairment of investments and delayed remittance of employee contributions to EPF and ESI. The Tribunal found that these issues had been thoroughly examined during the original assessment, and the PCIT's revision was not justified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779750 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2020-2021
• Appeal Filed On: 09-04-2025
• Other Referred Cases: Commissioner of Income-tax v. G.M. Mittal Stainless Steel (P.) Ltd, Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1, Commissioner of Income Tax No.121, Nungambakkam High Road, Chennai. v. M/s. Heylands Exports Pvt. Ltd., Commissioner of Income-tax v. Vellore Institute of Technology, Aroni Commercials Ltd. v. Deputy Commissioner of Income-tax -2(1), Malabar Industries Ltd. vs. CIT, Marico Ltd. vs. ACIT, GKN Sinter Metals Ltd. vs. ACIT, PCIT vs. Clix Finance India Pvt. Ltd., PCIT vs. Shivshahi Punarvasan Prakalp Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C.N. BIPIN; C.I.T
• Assessee Lawyers: S. SRIDHAR; N. ARJUN RAJ
• Keywords: Set aside; Difference of opinion; Change of opinion; Opportunity of being heard; Reassessment proceedings; Depreciation; Tax effect; Capital receipt; Principle of natural justice; TDS; Assessment record; Wholly owned subsidiary; Revision of order
• Section: 148; 143(3); 142(1); 263; 43B

Judgement Text

" आयकर अपील य अ धकरण, ‘सी’ \u000eयायपीठ, चे\u000eनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI \u0015ी मनु क ुमार ग\u0019र, \u000eया\u001aयक सद य एवं \u0015ी एस. आर. रघुनाथा, लेखा सद य क े सम# BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:1018/Chny/2025 \u001aनधा$रण वष$ / Assessment Year: 2020-21 Ucal Limited, 11 B/2 (S.P.), First Cross Road, Ambattur Industrial Estate, Chennai - 600 058. vs. PCIT, Chennai -3. [PAN:AAACU-0541-K] (अपीलाथ&/Appellant) ('(यथ&/Respondent) अपीलाथ& क) ओर से/Appellant by : Shri. S. Sridhar, Advocate & Shri. N. Arjun Raj, Advocate '(यथ& क) ओर से/Respondent by : Shri. C.N. Bipin, C.I.T. सुनवाई क) तार ख/Date of Hearing : 22.07.2025 घोषणा क) तार ख/Date of Pronouncement : 15.10.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, AM : The present appeal is filed by the assessee in challenging the revision order passed by the PCIT, Chennai – 3 in terms of Section 263 of the Act dated 24.03.2025 in DIN & Order No. ITBA/REV/F/REV5/2024-25/1074945844(1) for the Assessment Year: 2020 – 21. Printed from counselvise.com :-2-: ITA. No.:1018/Chny/2025 2. The brief facts of the case is that the assessee company, M/s.Ucal Limited, is engaged in the business of manufacturing of automotive components for two-wheeler and four-wheeler. The assessee had filed its return of income for the Assessment Year (AY) 2020-21 on 15.02.2021 by declaring total income at Rs. Nil. Thereafter, the said return of income was selected for scrutiny and ultimately the scrutiny assessment order came to be passed u/s.143(3) of the Act dated 20.09.2022 by accepting the returned income. 3. Thereafter, the PCIT, Chennai – 3 had issued the show cause notice u/s.263 of the Act on 06.03.2025 upon the assessee in proposing to set aside the scrutiny assessment order dated 20.09.2022 passed in terms of Section 143(3) of the Act by invoking the revisionary powers u/s.263 of the Act. The contents of the said Show Cause Notice read as follows: “2. On perusal of assessment records for the assessment year 2020-21, it is seen that the assessee has debited a sum of Rs.105.09 crore towards exceptional items in the Profit and Loss account for F.Y 2019-20 towards impairment of investment in its wholly owned subsidiary company and the impairment loss has been treated as business loss. It is observed that as investment in shares is capital in nature, any decrease / diminution in value of investments represents provision which is not an admissible deduction u/s.37 of the Act. However, in the assessment order u/s.143(3) r.w.s. 144B dated 20.09.2022, the same has not been disallowed resulting in underassessment of income by Rs.25.81 crore and excess carry forward of loss of Rs.79.27 crore, involving tax effect of Rs.6.50 crore and potential tax effect of Rs.19.95 crore. 3. It is seen from the submission of the assessee during the course of assessment proceedings, the assessee company has Equity Investment aggregating to Rs.20,877.28 Lacs in UCAL Holdings Inc. USA (Previously Amtec Precision Products Inc.) a Wholly Owned Subsidiary. It has been stated by the assessee that the management carried out an Impairment test of this Investment and concluded that Impairment of the value of the equity investment for an amount of Rs.10,509 Lacs was necessary and accordingly, the Impairment was accounted for in the books of accounts and the impairment loss was treated as business loss as per provisions of Printed from counselvise.com :-3-: ITA. No.:1018/Chny/2025 Income Tax Act read with the facts of the case and decisions of higher judicial forums in this regard. 4. Impairment loss relating to the investment in equity shares cannot be held to be revenue in nature and hence not allowance as business loss. The assessee has also not substantiated during the assessment proceedings how the investment in the subsidiary was linked to augmenting the business of the assessee. The assessee has also not cited any specific judicial decision in support of its claim. 5. Employees contribution to EPF and ESI amounting to Rs.1,67,03,428/- has been remitted into the respective fund accounts beyond the due date as per the relevant statutes. Hence the same is required to be disallowed and treated as income of the assessee u/s.36(1)(va) r.w.s. 2(24)(x) of the Act. 6. However, the Assessing Officer has without making proper verification, which should have been made, has passed the assessment order without considering the above issue. In view of the above, the order passed u/s.143(3) r.w.s 144B of the Income Tax Act on 20.09.2022 by the Faceless Assessing Officer is erroneous and prejudicial to the interest of revenue in terms of clause (a) of Explanation 2 under sub-section(1) of section 263. Hence, this is fit case for initiating proceedings u/s 263 of the Income-tax Act, 1961.” 4. The assessee had objected to the said Show Cause Notice in contending that the issues on which revisionary proceedings in terms of Section 263 of the Act were being initiated was already scrutinised and accepted the Assessing Officer during the course of scrutiny assessment proceedings in terms of Section 143(3) of the Act and any attempt to assuming jurisdiction u/s.263 of the Act would amount to substitution of the view of the Assessing Officer, which is not permissible under the law. 5. However, the revision order came to be passed in terms of Section 263 of the Act in setting aside the original scrutiny assessment order passed in terms of Section 143(3) of the Act by the PCIT, Chennai – 3 by holding as follows: Printed from counselvise.com :-4-: ITA. No.:1018/Chny/2025 “8. I have considered the submissions of the assessee. However, as mentioned in the Page 14 of 16 AAACU0541K- UCAL LIMITED A.Y. 2020- 21 ITBA/REV/F/REV5/2024-25/1074945844(1) show-cause notice, the perusal of record shows that on the above issues the Assessing Officer did not verify the issues properly. When the Assessing Officer did not verify the issues properly, the order shall be prejudicial to the interests of the Revenue. Also, an incorrect assumption of facts by the AO would make the order of assessment erroneous and prejudicial to the interests of the Revenue. 9. Therefore, the failure of the Assessing Officer to cause necessary verification makes the assessment order dated 20.09.2022 as erroneous and prejudicial to the interests of revenue as per clause (a) and clause (b) of Explanation 2 to Section 263 of the Income-tax Act, 1961 and therefore, the order requires revision under section 263 of the Income-tax Act, 1961. 10. The issues are taken up for consideration on merits. As per section 2(24)(ix) income includes any sum received by the assessee from his employees as contributions to any Provident Fund and ESI. As per section 36(1)(va), the same is allowable only if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date under the relevant Act. In the instant case, as the contributions received from the employees were not remitted to the respective Accounts in time, which needs to be added to the total income of the assessee and brought to tax. As there was failure on the part of the assessing officer in the assessment order so passed, the order is considered erroneous and prejudicial to the interest of revenue to that extent. 11. However, during the course of proceedings u/s 263, the assessee has stated that actually there was delay in remittance to the respective account,yet the quantification is incorrect; only the amount of Rs.1,12,00,250/- was remitted belatedly. Moreover, with regard to these amounts also, the assessee has stated that as per the Hon’ble Supreme Court's order dated 08.03.2021, all the due dates were extended for a further period of 90 days from 15.03.2021.Therefore, the Assessing Officer is hereby directed to verify the correctness of the claim and then add or disallow the amounts accordingly. The assessee is also directed to provide case laws if any, justifying the claim that belated payment of Employee’s contribution towards ESI and PF will also be covered by this order. 12. It is seen that the assessee has debited a sum of Rs.105.09 crore towards exceptional items in the Profit and Loss account for F.Y 2019-20 towards impairment of investment in its wholly owned subsidiary company and the impairment loss has been treated as business loss. It is observed that as investment in shares is capital in nature, any decrease / diminution in value of investments represents provision which is not an admissible deduction u/s.37 of the Act. However, in the assessment order u/s.143(3) r.w.s. 144B dated 20.09.2022, the same has not been disallowed resulting in underassessment of income by Rs.25.81 crore and excess carry forward of loss of Rs.79.27 crore. Printed from counselvise.com :-5-: ITA. No.:1018/Chny/2025 13. Also, it is seen from the submission of the assessee during the course of assessment proceedings, the assessee company has Equity Investment aggregating to Rs.20,877.28 Lacs in UCAL Holdings Inc. USA (Previously Amtec Precision Products Inc.) a Wholly Owned Subsidiary. It has been stated by the assessee that the management carried out an Impairment test of this Investment and concluded that Impairment of the value of the equity investment for an amount of Rs.10,509 Lacs was necessary and accordingly, the Impairment was accounted for in the books of accounts and the impairment loss was treated as business loss as per provisions of Income Tax Act read with the facts of the case and decisions of higher judicial forums in this regard. 14. Impairment loss relating to the investment in equity shares cannot be held to be revenue in nature and hence not allowable as business loss. The AO has also not caused necessary enquiries during the assessment proceedings how the investment in the subsidiary was linked to augmenting the business of the assessee. 15. It is apparent from the records that the Assessing Officer had not made such enquiries and had not considered the above issues and without verifications completed the assessment u/s 143(3) accepting the income returned. Therefore, the assessment dated 20.09.2022 is erroneous as it is prejudicial to the interest of revenue. In view of this, the assessment is partly set aside to the file of the Assessing Officer to examine the above issues in detail and complete the assessment after affording reasonable opportunity of being heard to the Assessee.” 6. Aggrieved by the said order, the assessee is before us in challenging the revision order dated 24.03.2025 passed in terms of Section 263 of the Act. 7. Before us, the Ld. AR took us through the voluminous paperbook filed before us, wherein the notices and replies filed during the course of scrutiny assessment proceedings as detailed below: Sl. No. Date Particulars Page No. FINANCIALS FOR AY: 2020 – 21 1. 15.02.2021 Return of income 1 2. 14.01.2021 Form No. 3CA – 3CD 99 3. 31.07.2020 Audited Financials 161 SCRUTINY ASSESSMENT PROCEEDINGS IN TERMS OF SECTION 143(3) OF THE ACT Printed from counselvise.com :-6-: ITA. No.:1018/Chny/2025 4. 29.06.2021 Notice under Section 143(2) of the Act 163 5. 19.09.2021 Reply to Notice under Section 143(2) of the Act dated 29.06.2021 171 6. - Details of creditors 179 7. - Details of depreciation 180 8. - Detail of default statement 181 9. - Details of donation for scientific research 182 10. 08.12.2021 Notice under Section 142(1) of the Act 282 11. 20.01.2022 Notice under Section 142(1) of the Act 285 12. 09.02.2022 Reply to the Notice under Section 142(1) of the Act dated 20.01.2022 287 13. - Annual report for Assessment Year: 2020 – 21 293 14. - Details of ICDS compliance 456 15. - Details of creditors 461 16. - Details of borrowings 466 17. - Details of TDS / TCS 467 18. - Details of acquisition and use of assets 479 19. - Certificate for grant of expenses under Section 35(2AB) of the Act 481 20. 05.03.2022 Notice under Section 142(1) of the Act 485 21. 20.03.2022 Reply to the Notice under Section dated 05.03.2022 488 22. - Details of creditors 491 23. - Legal notices issued by parties 501 24. 25.08.2022 Show Cause Notice 503 25. 30.08.2022 Reply to the Show Cause Notice dated 25.08.2022 506 26. 20.09.2022 Scrutiny assessment order passed under Section 143(3) of the Act 512 REVISION PROCEEDINGS UNDER SECTION 263 OF THE ACT 27. 06.03.2025 Show Cause Notice under Section 263 of the Act 521 28. 13.03.2025 Reply to the Show Cause Notice under Section 263 of the Act dated 06.03.2025 524 29. 24.03.2025 Revision order (Impugned Order) 538 CITATIONS – I 30. 10.12.2002 Commissioner of Income-tax v. G.M. Mittal Stainless Steel (P.) Ltd - Supreme Court of India - 263 ITR 255 554 31. 12.10.2022 Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1 - Supreme Court of India - 448 ITR 518 558 32. 24.07.2015 Commissioner of Income Tax No.121, Nungambakkam High Road, Chennai. – High Court of Madras - Tax Case (Appeal) Nos.585 and 586 of 2015 578 33. 23.10.2024 M/s. Heylands Exports Pvt. Ltd. v. The PCIT-1, Chennai – Income Tax Appellate Tribunal, Chennai - ITA No.1539/CHNY/2024 584 CITATIONS – II Printed from counselvise.com :-7-: ITA. No.:1018/Chny/2025 34. 03.06.2025 Commissioner of Income-tax v. Vellore Institute of Technology - High Court of Madras - 175 taxmann.com 277 595 35. 11.02.2014 Aroni Commercials Ltd. v. Deputy Commissioner of Income-tax -2(1) - High Court of Bombay - 362 ITR 403 602 8. With regard to the first issue in the present case, the Ld.AR argued that said issue was one of the issues for which the return of income filed for the A.Y. under consideration was selected for complete scrutiny. The Ld.AR argued the notice under section 143(2) of the Act dated 29.06.2021 was issued wherein the specific issue was flagged for clarification. The said notice reads as follows: 9. The Ld.AR argued that the Assessing Officer had subsequently issued the notice u/s.142(1) of the Act dated 08.12.2021 in DIN & Notice No.ITBA/AST/F/142(1)/2021-22/1037612801(1) in calling for the following documents: Printed from counselvise.com :-8-: ITA. No.:1018/Chny/2025 10. The assessee in response to the above notice had responded in explaining the reasons for claim of the disputed deduction for the A.Y. under consideration vide Acknowledgement No. 146443251090222 and the same reads as follows: 11. The Ld.AR argued that the Assessing Officer after taking on record the details filed during the course of assessment proceedings in accepting the claim of deduction as business loss, had proceeded to pass scrutiny assessment order dated 20.09.2022 by allowing the said claim of Rs.105.09 crore as exceptional items in the P & L a/c. as impairment loss of investment in its wholly owned subsidiary company / treatment of such impairment loss as business loss. 12. Hence, the Ld.AR argued that there was complete application of mind by the Assessing Officer on the facts and in the circumstances of the present case Printed from counselvise.com :-9-: ITA. No.:1018/Chny/2025 inasmuch there exists no error in the order of the scrutiny assessment order passed on 20.09.2022 warranting interference in terms of Section 263 of the Act. 13. With respect to the second issue on the validity of claim of the employees’ contribution to EPF and ESI amounting to Rs.1,67,03,428/- on account of the same being remitted into the respective fund accounts beyond the due date as per the relevant statutes, the Ld.AR argued that although the said sum was remitted beyond the stipulated time limit prescribed under the respective statute, the same was remitted well before the due date prescribed for filing return of income in terms 139(1) of the Act, thereby establishing the fact of the said sum being eligible for deduction in terms of Section 43B of the Act in the computation of taxable total income. 14. The Ld.AR argued that the said submission was supported by the decision of the jurisdictional High Court in the case of CIT v. Industrial Security & Intelligence India P. Ltd. [TCA Nos.585 & 586 of 2015 dated 24.07.2015], which ratio was binding upon the assessee as well as the Jurisdictional Assessing Officer both at the time of filing of the return of income for the assessment year under consideration as well as at the time of passing of the scrutiny assessment order dated 20.09.2022. 15. The Ld.AR argued that the Hon’ble Madras High Court in the aforesaid decision had held that if the assessee had remitted the employee’s contribution towards PF/ESI before the due date of filing of the return of income u/s.139(1) Printed from counselvise.com :-10-: ITA. No.:1018/Chny/2025 of the Act, no disallowance was warranted in terms of Section 36(1)(va) r.w.s. 2(24)(x) of the Act. 16. The Ld.AR brought to our notice that the Assessing Officer had issued the Show Cause Notice dated 25.08.2022 in had proposed to disallow the aforesaid sum in terms of Section 36(1)(va) of the Act and the assessee had responded to the said Show Cause Notice by placing on record the above submissions in support of the prayer to drop the said proposal following which the Assessing Officer had proceeded to pass the scrutiny assessment order dated 20.09.2022 by not making proposed disallowance in accepting the return of income filed for the assessment year under consideration. 17. The Ld.AR thus argued that the present attempt to revise the said scrutiny assessment order triggered by the recent judgment of the Apex Court in the case of Checkmate Services P.Ltd. cannot be a valid ground for assuming jurisdiction u/s.263 of the Act especially in view of the fact that the said judgment was rendered on 12th October 2022 subsequent to the passing of the assessment order and accordingly pleaded for deleting directions issued by the ld.PCIT, Chennai – 3 for re-examining the said order by the Assessing Officer in pursuant to the revision order passed in terms of Section 263 of the Act. 18. Per contra, the learned Departmental Representative(ld.DR) argued that the issues flagged in the revision order passed u/s.263 of the Act were not examined properly by the Assessing Officer and as such the non-application of mind on part of the Assessing Officer while passing the scrutiny assessment Printed from counselvise.com :-11-: ITA. No.:1018/Chny/2025 order in terms of Section 143(3) of the Act in allowing the said claim / accepting the replies filed by the assessee would warrant interference by the ld.PCIT and accordingly pleaded for dismissing the appeal filed by the assessee in confirming the revision order passed u/s.263 of the Act. 19. We have heard rival contentions and gone through the facts and circumstances of the case as well as the voluminous paperbook filed before us. We find that before adjudicating the issues arising from the impugned order, it is pertinent to first examine the scope of revisional jurisdiction u/s.263 of the Act. For that, we take guidance from the law laid down by the Hon'ble Apex Court in the case of Malabar Industries Ltd. vs. CIT, reported [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions should be satisfied before jurisdiction u/s.263 of the Act is exercised by the Ld.CIT. 20. The twin conditions which need to be satisfied are that: (i) the order of the Assessing Officer must be erroneous and (ii) as a consequence of passing an erroneous order, prejudice is caused to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous i.e. (i) if the Assessing Officer's order was passed on assumption of incorrect facts; or assumption of incorrect law; (ii) Assessing Officer's order is in violation of the principles of natural justice; (iii) if the AO's order is passed without application of mind; or (iv) if the AO has not investigated the issue before him. Printed from counselvise.com :-12-: ITA. No.:1018/Chny/2025 21. In the circumstances enumerated above, the order passed by the Assessing Officer can be termed as erroneous for the purpose of Section 263 of the Act. Coming next to the second limb, the AO's erroneous order can be revised the Ld.CIT only when it is shown that the said order is prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. \"prejudicial to the interest of the revenue'' has to be read in conjunction with an \"erroneous\" order passed by the Assessing Officer. The Hon’ble Supreme Court, held that for invoking powers conferred by section 263; the ld.CIT should not only show that the AO's order is erroneous as a result of any of the situations enumerated above but ld.CIT must also further show that as a result of an erroneous order, some loss is caused to the interest of the revenue. Their Lordship in the said judgment held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. It was further observed that when the Assessing Officer adopts one of the course permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Ld. CIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 22. Keeping the aforesaid legal principles in mind, when we apply the same to the facts of the present case, we note that the both the issues that have been Printed from counselvise.com :-13-: ITA. No.:1018/Chny/2025 raised by the Ld.PCIT in the present case has emanated from assessment records, including the notices issued by the Assessing Officer flagging such issues as well as the reply filed by the assessee in relation thereto. 23. The aforesaid assertion of the ld.PCIT as recorded at para 15 of the impugned order that the Assessing Officer while scrutinizing the return of income filed for the assessment year under consideration has failed to verify the both the issues stated, is contrary to the facts revealed from the records and found to be incorrect assertion of the Ld.PCIT. From perusal of the Paper Book filed before us and the assessment order it reveals that the AO has properly conducted enquiry on the issue of deduction as business loss, / claim of Rs.105.09 crore as exceptional items in the P&L a/c. as impairment loss of investment. It is an undisputed fact that one of the reasons for selecting the return of income filed for assessment year under consideration was to examine the business loss claimed by the assessee. 24. Further the Assessing Officer had issued the notice under Section 142(1) of the Act dated 08.12.2021 in DIN & Notice No. ITBA/AST/F/142(1)/2021- 22/1037612801(1) in calling for the various documents (supra) and reply filed by the assessee on 09.02.2022 was explained and found to be acceptable by the Assessing Officer on the facts of the present case. 25. We find that the action of the ld.PCIT in invoking clause (a) and clause (b) of Explanation 2 to Section 263 of the Act in support of their action in Printed from counselvise.com :-14-: ITA. No.:1018/Chny/2025 assuming jurisdiction u/s.263 of the Act on the facts and in the circumstances of the present case was uncalled for. 26. We find that by virtue of the explanation 2 to Section 263 of the Act, the order sought to be set aside would be deemed to be erroneous insofar as prejudicial to the interest of revenue as per the circumstances elucidated thereon. However, we find that the Hon’ble High Court of Delhi in the case of PCIT vs. Clix Finance India Pvt. Ltd., ITA No.1428/2018, dated 01.03.2024 while examining the provisions under consideration and particularly Explanation 2(a) had held as follows: “19. A bare reading of sub-Section (1) of Section 263 of the Act makes it abundantly clear that the said provision lays down a two- pronged test to exercise the revisional authority i.e., firstly, the 17:06:54 assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verification which should have been made, the same would bestow a revisional power upon the Commissioner. However, the said Clause or any other condition laid down in Explanation 2 does not warrant recording of the said enquiry or verification in its entirety in the assessment order.” Further, we find that the Hon’ble High Court of Bombay in the case of PCIT vs. Shivshahi Punarvasan Prakalp Ltd., in ITA No.397 of 2018dated 05.08.2022 has considered the issue of no enquiry case or inadequate enquiry even after the insertion of Explanation 2, wherein at para 32, the Hon’ble Bombay High Court had held as under:- “32. In this appeal, we are concerned with the assessment year 2006-07. Prior to the insertion of Explanation 2, it was the prerogative of the Assessing Officer to determine what enquiry he wants to make while completing the Printed from counselvise.com :-15-: ITA. No.:1018/Chny/2025 assessment. We have already observed that an enquiry was made by the Assessing Officer and the assessment order passed. Therefore, the CIT could not invoke jurisdiction under Section 263 as the view taken by the Assessing Officer was a possible/plausible view. It was only if the Assessing Officer had not made any enquiry then it could be said that the order passed was erroneous. This is not a case of lack of enquiry though it may be a case of inadequate enquiry. Inadequacy of enquiry as elucidated above does not give jurisdiction to the CIT to invoke provisions of Section 263 prior to the insertion of Explanation 2. In our view, the Explanation 2 does not help the revenue in as much as the same is prospective and applicable with effect from 1st June, 2015.” 27. On the facts of the present case, a query was raised by the Assessing Officer during the course of scrutiny assessment with regard to the business loss claimed by the assessee and upon scrutinizing the reply filed by the assessee, the Assessing Officer being satisfied by the said reply, had proceeded not to make any variation to the taxable total income in this regard. 28. We find that under such identical factual circumstances, the Hon’ble High Court of Bombay in the case of Marico Ltd., vs. ACIT in writ petition No.1917 of 2019 dated 21.08.2019 had answered this question that what the AO should do in the assessment proceedings and what the assessee has to do. The Hon’ble High Court has clearly pointed out once a query has been raised by the AO during the assessment proceedings and the assessee has responded to that query, it would necessarily follow that the AO has accepted the assessee’s submission, so as to not deal with that issue in the assessment order. The Hon’ble High Court of Bombay Printed from counselvise.com :-16-: ITA. No.:1018/Chny/2025 considering another decision of the same High Court in the case of GKN Sinter Metals Ltd., vs. ACIT reported in 371 ITR 225 has categorically pointed out that an assessment order passed u/s.143(3) of the Act does not reflect any consideration of the issue, it must follow that no opinion was formed by the AO in the regular assessment proceedings. This submission was negated by the Hon’ble Bombay High Court and the relevant paras 10 & 11 reads as under:- “10. It is undisputed position before us, that query was raised on the very issue of reopening during regular Assessment proceedings. The parties have responded to it and the Assessment Order dated 30 January 2018 makes no reference to the above issue at all. However, once a query has been raised by the Assessing Officer during the assessment proceedings and the assessee has responded to that query, it would necessarily follow, as held by our Court that the Assessing Officer has accepted the Petitioner’s/Assessee’s submissions, so as to not deal with that issue in the assessment order. In fact, our Court in GKN Sinter Metals Ltd. V/s. Ms. Ramapriya Raghavan, Assistant Commissioner of Income Tax, Circle 2(1) (371) ITR 225 had occasion to dealt with the similar/identical submissions on behalf of the Revenue viz. that an assessment order passed under Section 143(3) of the Act does not reflect any consideration of the issue, it must follow that no opinion was formed by the Assessing Officer in the regular assessment proceedings. This submission was negatived by this Court by observing as follows :- 14. According to the Revenue, it could only be when the assessment order contains discussion with regard to particular claim can it be said that the Assessing Officer had formed an opinion with regard to the claim made by the assessee. This Court in Idea Cellular Ltd. v/s. Deputy Commissioner of Income Tax 301 ITR 407 has expressly negatived on identical contention on behalf of the Revenue. The Court held that once all the material was placed before the Assessing Officer and he chose not to refer to to the deduction/ claim which was being allowed in the assessment order, it could not be contended that the Assessing Officer had not applied his mind while passing the assessment order. Moreover in this case, it is evident from the letter Printed from counselvise.com :-17-: ITA. No.:1018/Chny/2025 dated 6 th August, 2007 addressed by the Assessing Officer to the Petitioner containing the reasons recorded for issuing the impugned notice also record the fact that during the regular assessment proceedings, the Petitioner has been asked to furnish details in support of the claim for exemption under Section 80IA/IB of the Act. The letter further records that the details sought for were furnished and it is now observed that there has been a disproportionate distribution of expenses between various units belonging to the Petitioner for claiming deduction under Section 80IA/IB of the Act. This is a further indication of the fact that the Assessing Officer had during the regular assessment proceedings for Assessment Year 200203 sought information in respect of the allocation of expenses and the explanation offered by the Petitioner was found to be satisfactory. This is evident from query dated 27 th December, 2004 and the Petitioner's response to the same on 25 th January, 2005 explaining the manner of distribution of common expenses for delaying the process of claiming deduction under Section 80IA/IB of the Act. All this would indicate that Assessing Officer had formed an opinion while passing the order dated 9 th March, 2005. This Court in Aroni Commercials Ltd. v/s. Assistant Commissioner of Income Tax 367 ITR 405 had occasion to consider somewhat similar submission made by the Revenue and negatived the same by holding that when a query has been raised with regard to a particular issue during the regular assessment proceedings, it must follow that the Assessing Officer had applied his mind and taken a view in the matter as is reflected in the Assessment Order. Besides, the manner in which an Assessing Officer would draft/frame his order is not within the control of an assessee. Moreover, if every contention raised by the assessee which even if accepted is to be reflected in the assessment order, then as observed by the Gujarat High Court in CIT v/s. Nirma Chemicals Ltd. 305 ITR 607, the order would result into an epic tome. Besides, it would be impossible for the Assessing Officer to complete all the assessments which have to under gone scrutiny at its hand. In the above view, it is clear that once a query has been raised during the assessment proceedings and the Petitioner has responded to the query to the satisfaction of the Assessing Officer as is evident from the fact that the Assessment Order dated 9 th March, 2005 accepts the Petitioner's claim for deduction under Section 80IA/IB of the Act. It must follow that there is due application of mind by the Assessing Officer to the issue raised. The above observations apply on all fours to this Petition, so far as the Revenue’s submission of no change of opinion is concerned. Printed from counselvise.com :-18-: ITA. No.:1018/Chny/2025 11. The further submission of Mr. Walve that in the absence of the Assessing Officer adjudicating upon the issue it cannot be said that the Assessing Officer had formed an opinion during the regular assessment proceedings leading to the order dated 30 January 2018. An adjudication would only be on such issue where the assessee’s submissions are not acceptable to the Revenue, then the occasion to decide a lis would arise i.e. adjudication. However, where the Revenue accepts the view propounded by the assessee in response to the Revenue’s query, the Assessing Officer has certainly to form an opinion whether or not the stand taken by the assessee is acceptable. Therefore, it must follow that where queries have been raised during the assessment proceedings and the assessee has responded to the same, then the non-discussion of the same or non-rejection of the response of the assessee, would necessarily mean that the Assessing Officer has formed an opinion accepting the view of the Assessee. Thus an opinion is formed during the regular Assessment proceedings, bars the Assessing Officer to reopen the same only on account of a different view.” Furthermore, the Hon’ble Madras High Court in the case of Commissioner of Income-tax v. Vellore Institute of Technology, reported in 175 taxmann.com 277, while examining the validity of the assumption of jurisdiction under Section 263 of the Act, had held as follows: “10. It is true that the assessment order dated 14.12.2011 does not discuss the queries raised or the answers given thereto. But the fact is, the Assessing Officer had issued a questionnaire dated 26.07.2011 under Section 142 (1) of the Act raising 34 questions on various issues and assessee had given an explanation and also submitted materials. In our view, once a notice is issued and assessee is called upon to show cause or give explanation or submit documents and assessee has complied, not giving a finding or discussing the same would mean that the Assessing Officer was satisfied with the explanation given by the assessee. 11. In Aroni Commercials Limited v. Dy.CIT [2014] 44 taxmann.com 304 / 224 Taxman 13 (Mag.)/ 362 ITR 403 (Bom.), a Division Bench of the Bombay High Court, while dealing with the provisions of Section 148 of the Act, held that once a query is raised during the assessment proceedings and assessee has replied to it, it follows that the query was subject matter of consideration of the Assessing Officer while completing the assessment and the same is deemed to have been accepted. The Court also held that it is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of each and every query raised. Therefore, Printed from counselvise.com :-19-: ITA. No.:1018/Chny/2025 as there is no discussion or finding on the 34 questions raised under Section 142(1) of the Act, vide the communication dated 26.07.2011, the Assessing Officer should be taken as having accepted assessee's explanation. Paragraph 14 of Aroni Commercials Limited (supra) reads as under: \" 14) We find that during the assessment proceedings the petitioner had by a letter dated 9 July 2010 pointed out that they were engaged in the business of financing trading and investment in shares and securities. Further, by a letter dated 8 September 2010 during the course of assessment proceedings on a specific query made by the Assessing Officer, the petitioner has disclosed in detail as to why its profit on sale of investments should not be taxed as business profits but charged to tax under the head capital gain. In support of its contention the petitioner had also relied upon CBDT Circular No.4/2007 dated 15 June 2007. (The reasons for reopening furnished by the Assessing Officer also places reliance upon CBDT Circular dated 15 June 2007). It would therefore, be noticed that the very ground on which the notice dated 28 March 2013 seeks to reopen the assessment for assessment year 2008-09 was considered by the Assessing Officer while originally passing assessment order dated 12 October 2010. This by itself demonstrates the fact that notice dated 28 March 2013 under Section 148 of the Act seeking to reopen assessment for A.Y. 2008-09 is based on mere change of opinion. However, according to Mr. Chhotaray, learned Counsel for the revenue the aforesaid issue now raised has not been considered earlier as the same is not referred to in the assessment order dated 12 October 2010 passed for A.Y. 200809. We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect o f the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) o f the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now Printed from counselvise.com :-20-: ITA. No.:1018/Chny/2025 raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. There can be no doubt in the present facts as evidenced by a letter dated 8 September 2012 the very issue of taxability of sale of shares under the head capital gain or the head profits and gains from business was a subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to an order dated 12 October 2010. It would therefore, follow that the reopening of the assessment by impugned notice dated 28 March 2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. 12. Therefore, we agree with the Tribunal that the Commissioner has exercised his power under Section 263 of the Act in an arbitrary manner and hence, the impugned order requires to be quashed. The substantial questions of law framed are answered accordingly.” 29. Respectfully following the above binding decision rendered by the Hon’ble Madras High Court, we hold that the first issue sought to be revised in terms of Section 263 of the Act by the ld.PCIT was very much examined by the Assessing Officer during the course of assessment proceedings by way of issuance of notice u/s.142(1) of the Act and the reply filed by the assessee thereon inasmuch the assumption of jurisdiction u/s.263 of the Act on the facts of the present case would result in scenario where the ld.PCIT is substituting his view by replacing the view of the Assessing Officer, which action is not permissible under the law. Moreover, the claim made by the assessee in the Profit & Loss account was not proved to be erroneous by the ld.PCIT in the impugned order for validly assuming jurisdiction u/s.263 of the Act in view of the erosion in Printed from counselvise.com :-21-: ITA. No.:1018/Chny/2025 value of the investment made which on the facts of the case to be reckoned as revenue loss inasmuch as such investment should be considered as part of the extension of the business operation at the said point in time. Therefore, we are not inclined to uphold the impugned action of Ld.PCIT on the facts and circumstances of the case with regard to the first issue. 30. With regard to the second issue, we find that the Assessing Officer had issued the Show Cause Notice dated 25.08.2022 in DIN & Order No.ITBA/AST/F/143(3)(SCN)/2022-23/1044926368(1) in proposing to disallow the disputed sum in terms of Section 36(1)(va) of the Act on account of the same being remitted belatedly beyond the time limit prescribed under the respective statute. The said Show Cause Notice was responded to by the Assessing Officer vide reply dated 30.08.2022. 30.1. The Assessing Officer after examining the reply filed by the assessee had proceeded to pass the scrutiny assessment order in not making an addition / disallowance in this regard. We find that the decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1, reported in 448 ITR 518 was passed subsequent to passing of the scrutiny assessment order in terms of Section 143(3) of the Act on the facts of the present case. To put it Printed from counselvise.com :-22-: ITA. No.:1018/Chny/2025 differently, the scrutiny assessment order was passed on 20.09.2022, wherein the decision of the Hon’ble Supreme Court was rendered on 12.10.2022. 31. We find that co-ordinate bench of the Tribunal, Chennai in the case of M/s.Heylands Exports Pvt Ltd v the PCIT in ITA No.1539/CHNY/2024 under identical circumstances had held as follows: “6. Likewise, in respect of the next issue i.e. AO’s action of allowing deduction regarding remittance of employee’s contribution towards PF/ESI. It is noted that the AO had called for details of employee’s remittances to PF/ESI which fact is discernable from the notice issued by the AO u/s.142(1) of the Act dated 10.02.2020 which is found placed at Page Nos.11-20 of the Paper Book. It is noted that the AO by asking query No.14 [found placed at Page No.19 of the Paper Book] had asked the assessee to give details about the employee’s contribution towards PF/ESI and also asked assessee as to whether the contribution has been remitted/paid within the due date prescribed in explanation to clause (va) of Sec.36(1) of the Act. Pursuant to such a query, the assessee replied to AO on 06.08.2020 [a copy of which is found placed at Page Nos.23-25 of the Paper Book at Page No.25], in tabular form giving the details of (i) sums separately regarding employee’s contribution towards PF/ESI received from employee’s (PF & ESI) (ii) due date of payment (iii) actual amount paid (iv) actual date of payment to the authorities (PF/ESI). It is noted that after such enquiry, the AO has allowed the claim of remittance of employee’s contribution towards PF/ESI to the tune of Rs.8,36,020/- on the strength of the binding decision of the Hon’ble Madras High Court order in the case of CIT v. Industrial Security & Intelligence India P. Ltd., [TCA Nos.585 & 586 of 2015 dated 24.07.2015]. According to the Ld.AR, the AO’s action was in line with the jurisdictional High Court’s decision, wherein, the Hon’ble High Court has held that if the assessee had remitted the employee’s contribution towards PF/ESI before the due date of filing of the return of income u/s.139(1) of the Act, no disallowance was warranted. According to the Ld.AR, the AO can’t be a clairvoyant (person who has power to know about the future) and predict about the decision of the Hon’ble Supreme Court decision in the case of Checkmate Services P. Ltd., which was only given afterwards i.e., in the year 2022 and was not available before the AO when he framed the assessment on 22.04.2021. And since the decision of AO after enquiry on the issue at hand was in line with that of the decision of Hon’ble Jurisdictional High Printed from counselvise.com :-23-: ITA. No.:1018/Chny/2025 Court (supra), the action of AO cannot be held to be erroneous as well as prejudicial to revenue by relying on the decision of the Hon’ble Supreme Court in the case of CIT v. GM Mittal Stainless Steel (P) Ltd., reported in [2003] 263 ITR 255 (SC) Para Nos.5-8 wherein it was held as under:- “5. In this particular case, the CIT has not recorded any reason whatsoever for coming to the conclusion that the AO was erroneous in deciding that the power subsidy was capital receipt. Given the fact that the decision of the jurisdictional High Court was operative at the material time, the AO could not be said to have erred in law. The fact that this Court had subsequently reversed the decision of the High Court would not justify the CIT in treating the AO's decision as erroneous. The power of the CIT under Section 263 of the IT Act must be exercised on the basis of the material that was available to him when he exercised the power. At that time, there was no dispute that the issue whether the power subsidy should be treated as capital receipt had been concluded against the Revenue. The satisfaction of the CIT, therefore, was based on no material either legal or factual which would have given him the jurisdiction to take action under Section 263 of the IT Act. 6. The decisions of the High Courts relied upon by learned counsel appearing for the appellant do not, in our view, assist the Revenue. The Madras High Court in CIT v. Seshasayee Paper Boards Ltd (supra) considered a situation where the AO had relied upon a particular decision in framing the assessment order. The decision relied upon was itself the subject-matter of an appeal before the Supreme Court. In those circumstances, the High Court was of the view, and correctly so that the CIT could have initiated proceeding under Section 263. It is nobody's case that the decision in Dusad Industries (supra) was the subject-matter of any appeal before this Court. As far as the Revenue authorities in Madhya Pradesh were concerned the issue could not be said to be alive. 7. The Calcutta High Court decision, has in fact held contrary to what is being submitted on behalf of the appellant. In that case the AO had initiated reassessment proceedings on the basis of a decision of the Rajasthan High Court. The decision of the Rajasthan High Court was subsequently reversed by this Court. The Calcutta High Court held that despite such reversal, it could not be said that reassessment proceedings were without jurisdiction on the basis of the law as it stood when the proceedings were initiated. Printed from counselvise.com :-24-: ITA. No.:1018/Chny/2025 8. Apart from the language of Section 263 of the IT Act, if we were to accept the submission of the appellant that the Revenue authorities within the State could refuse to follow the jurisdictional High Court's decision on the ground that the decision of some other High Court was pending disposal by this Court, it would lead to an anarchic situation within the State. If at the time when the power under Section 263 was exercised the decision of the jurisdictional High Court had not been set aside by this Court or at least had not been appealed from, it would not be open to the CIT to have proceeded on the basis that the High Court was erroneous and that the AO who had acted in terms of the High Court's decision had acted erroneously.” 7. It is not the case of the Ld.PCIT /DR that the decision of the Hon’ble Madras High Court order in the case of CIT v. Industrial Security & Intelligence India P. Ltd. (supra), had been challenged by the Revenue before the Hon'ble Supreme Court. Therefore, in the light of the aforesaid decision of the Hon’ble Supreme Court in the case of GM Mittal Stainless Steel (P) Ltd., (supra), the action of the AO while framing assessment order in 2021 following the jurisdictional High Court decision in the case of CIT v. Industrial Security & Intelligence India P. Ltd. (supra), on the issue of PF/ESI cannot be said to be erroneous, because it was the law as on the date when he passed the order in April, 2021; and since, the order of the Hon’ble Supreme Court in the case of Checkmate Services P. Ltd., was passed in the year 2022, the action of the AO in following the ratio laid down by the Hon’ble High Court in the case of Industrial Security & Intelligence India P. Ltd.,(supra) can’t held to be erroneous as well as prejudicial to the interest of the Revenue and therefore, on this ground also the action of the Ld.PCIT to exercise his revisional jurisdiction is found to be wholly without jurisdiction and therefore, can’t be countenanced and therefore, assessee succeeds on the legal issue it raised; and consequently, we quash the impugned order of Ld.PCIT.” 32. Therefore, we are not inclined to accept the impugned action of ld.PCIT on the facts and circumstances of the case with regard to the second issue also. 33. Thus, the action of Ld. PCIT in exercising the revisional jurisdiction u/s.263 of the Act is found to be wholly without jurisdiction and cannot be countenanced by us and accordingly we quash the impugned order of Ld. Printed from counselvise.com :-25-: ITA. No.:1018/Chny/2025 PCIT passed u/s.263 of the Act by allowing the grounds of appeal raised by the assessee. 34. In result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 15th October, 2025 at Chennai. Sd/- Sd/- (मनु क ुमार ग\u0019र) (MANU KUMAR GIRI) \u000eया\u001aयक सद य/Judicial Member (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखासद य/Accountant Member चे\u000eनई/Chennai, -दनांक/Dated, the 15th October, 2025 SP आदेश क) '\u001aत/ल0प अ1े0षत/Copy to: 1. अपीलाथ&/Appellant 2. '(यथ&/Respondent 3.आयकर आयु2त/CIT– Chennai/Coimbatore/Madurai/Salem 4. 0वभागीय '\u001aत\u001aन ध/DR 5. गाड$ फाईल/GF Printed from counselvise.com "