Surbhit Impex Private Limited Vs PCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) Mumbai addressed an appeal by Surbhit Impex Private Limited against the Principal Commissioner of Income Tax (PCIT), Mumbai, challenging the revision order under Section 263 dated 18 March 2025. The revision order questioned the reassessment under Section 147 of the Income-tax Act, 1961 for Assessment Year (AY) 2018-19, relating to trading liabilities of Rs. 3,13,65,060/-.
The assessee contended that the reassessment was neither erroneous nor prejudicial to the interest of revenue. The reassessment had specifically addressed cessation of liability of creditors, which had been examined and accepted by the Assessing Officer (AO) through a speaking order. The assessee argued that Section 263 could not be invoked when the AO had taken a possible view after due inquiry. They emphasized that certain amounts were subsequently offered as income in AY 2020-21 or paid back, and others written off in later years, demonstrating that there was no loss of revenue.
The facts reveal that the assessee had trading liabilities with two Chinese suppliers totaling Rs. 3,13,65,060/- arising from purchases made in June 2012 and subsequent sales to M/s Act Gen Pharma in July 2012. Goods supplied were of inferior quality, and payments were not made. Creditors filed winding-up petitions, which were dismissed by the Bombay High Court on 29 January 2018. The assessee argued that the liability had not ceased in AY 2018-19 because the matter was sub judice until the appellate decision on 30 July 2018. The AO accepted this position, making no addition in the reassessment order. Additional liabilities of Rs. 73,26,643/- were also addressed, showing that part had been paid, and the remainder was recorded as outstanding in the books of account.
