IN THE INCOME-TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORESHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER &

SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 2844/MUM/2024 (A.Y. 2019-20)

Indiabulls Commercial v/s. Pr.CIT (Central), Mumbai Credit Limited,5^th Floor, बनाम

3, Room No. 1901, 19^th Floor, Building No. 27, K G Marg, Air India Building, Nariman Connaught Place, New Delhi – Point, Mumbai 400 021, 110 001 Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AABCI5559G Appellant/अपीलार्थी .. Respondent/प्रतिवादी Appellant by : Shri K. Gopal & Shri Om Kandalkar,ARs Respondent by : Mr. R.A. Dhyani (CIT DR)

Date of Hearing 12.02.2025 Date of Pronouncement 24.03.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :-

The present appeal arising from the Revision order passed u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] 20.03.2024 by the Pr. Commissioner of Income-tax, (Central), Mumbai [hereinafter referred to ‘PCIT’] pertaining to assessment order passed u/s. 143(3) of the Act dated 27.09.2021 for the Assessment Year [A.Y.] 2019-20.

2. The grounds of appeal are as under:-

1. Whether Ld. PCIT (Central) Mumbai -3 erred on facts and in law in opining that the assessment order passed u/s 143(3) r.w.s 144B of the Act is erroneous in so far it is prejudicial to the interest of revenue.

2. Whether Ld. PCIT (Central) Mumbai -3 erred on facts and in law in setting aside the assessment order dated 27.09.2021 with the direction to the AO to frame the assessment de-novo.

3. The facts in brief are that the assessee company is engaged in the business of financing, investment and other allied activities. It filed its original return of income on 29.10.2019 declaring total income at Rs. 3,28,38,66,670/- which was later revised on 26.11.2020 declaring total income Rs. 3,28,38,66,670/-Subsequently, assessee's case was selected for ‘Complete scrutiny’ as per scrutiny guideline of CBDT and the assessment was completed u/s 143(3) of the Act on 27.09.2021 accepting the returned income.

3.1 The ld.PCIT, on subsequent examination of the assessment records noticed on perusal of Col. No. 33 of the Schedule of BP in the ITR that assessee company had claimed an amount of Rs. 238,92,33,023/- as ‘Any other amount as deduction’. However, during assessment proceedings, neither the AO asked any specific question/conduct inquiry about the said deduction nor did the assessee submit any detail pertaining to the same. It is stated that the assessment order being a scrutiny assessment u/s 143(3) of the Act initiated on the basis directions given by CBDT for verification of certain issues during assessment which are binding on the AO which were not adhered to by him violating the same.

3.2 Similarly, in the ITR as per Col.5(c) of the Schedule-BP and Schedule-E, the assessee had earned dividend income of Rs. 101,01,94,006/- and the same has been claimed as exempt from tax. As per the records, it was seen that balance of investments in mutual funds was Rs. 292.65 cr. against which dividend earned was Rs. 101.02 cr. Therefore, in his opinion the dividend payout ratio as seen was more than 33% (Higher than normal industry standards). Also it was noticed that there was sale of unquoted financial assets at Rs.92018,32,55,859/- and cost of acquisition was Rs.92108,91,36,438/ resulting in short term capital loss of Rs.90,58,80,579/-. Thus, the value of mutual funds/equity decreased in short span of time which is possible only in case where dividend is distributed. The said facts indicated dividend earned included dividend from mutual funds/equity purchased and sold in the same year. It was further noted that the AO did not examine the issue of Dividend Stripping as laid down u/s 94(7) of the Act. Thus, he found that the order of the AO was erroneous and prejudicial to the interest of the revenue in terms of section 263 of the Act.

3.3 After show causing the assessee in terms of deeming provisions of Explanation 2(a) and (b) of section 263 of the Act and obtainin