The exercise of jurisdiction under section 263 requires the authority to ensure a proper inquiry is conducted; mere assumptions do not justify revision.

आदेश/ORDER

PER MAKARAND V.MAHADEOKAR, AM:

The present appeal has been preferred by the assessee against the order dated 26.03.2025 passed under section 263 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] by the Principal Commissioner of Income Tax (Central), Ahmedabad [hereinafter referred to as “the PCIT”] for the Assessment Year 2018-19. The impugned revisionary order arises from the reassessment order passed by the Assessing Officer on 30.03.2023 under section 147 read with sections 144 and 143(3) of the Act.

2. Facts of the Case

2.1 The assessee filed its return of income for the year under consideration on 28.09.2018 declaring total income at Rs. NIL, which was processed under section 143(1). Subsequently, on the basis of information disseminated on the Insight Portal, the Assessing Officer initiated reassessment proceedings and issued notice under section 148 on 30.03.2022. The order of reassessment records that no return was filed by the assessee in response to the notice under section 148.

2.2 The Assessing Officer proceeded to frame reassessment under section 147 read with section 144 on 30.03.2023. In the course of reassessment, the Assessing Officer issued a detailed show cause notice dated 11.03.2023. By the said notice, the assessee was called upon to (i) furnish contra confirmation in respect of transactions with M/s. Shreenath Traders (Prop. Pinal Dolatray) and explain as to why the sum of Rs. 3,81,15,116/- should not be disallowed; and (ii) furnish bills and invoices related to sales promotion expenses aggregating to Rs. 46,78,688/- and packing expenses amounting to Rs. 43,85,710/-. The Assessing Officer also observed that no evidence had been produced in respect of silver coins stated to have been distributed as part of sales promotion activities.

2.3 Upon examination of the assessment records, the PCIT formed a prima facie view that the assessment order dated 30.03.2023 was erroneous insofar as it was prejudicial to the interests of the Revenue. The Principal Commissioner observed that the Assessing Officer had failed to examine the evidentiary aspects relating to substantial expenditures claimed by the assessee under the heads of sales promotion (Rs. 46,78,688/-) and packing expenses (Rs.43,85,710/-). It was also noted that the Assessing Officer had merely issued a show cause notice but did not take the enquiry to its logical conclusion, thereby rendering the assessment order non-speaking, perfunctory and passed without requisite verification.

2.4 The PCIT accordingly issued a show cause notice dated 06.02.2025 initiating proceedings under section 263. The assessee was granted opportunity to file its reply and to attend hearing on or before 20.02.2025. The assessee submitted a written reply dated 20.02.2025 contending that a detailed submission had been filed earlier before the Assessing Officer on 14.03.2023 and that the Assessing Officer had examined all the materials produced before him spanning over 100 pages of documentary evidence including the ledger accounts, sales invoices, bank account statements and GST returns. It was also submitted that all the transactions were conducted through banking channels with proper GST compliance at the rate of 28% plus 160% cess.

2.5 The PCIT, however, rejected the contentions of the assessee and proceeded to revise the assessment order. It was held that the assessee had not produced any credible evidences, either during assessment or during revisionary proceedings, to substantiate the impugned expenditure and that the Assessing Officer had failed to discharge his duty of enquiry. The Principal Commissioner further held that reassessment under section 147 partakes the ch