Ambuja Cements Limited Vs PCIT (ITAT Mumbai)
Conclusion: PCIT’s revision under section 263 against assessee was upheld holding that AO did not properly verify the very low Section 14A disallowance despite huge exempt income and also ignored INSIGHT portal inputs about alleged accommodation entries.
Held: Assessee-company had challenged the PCIT order passed under Section 263. The original assessment was completed under Section 143(3) r/w 144B, and total income was assessed at Rs. 14,82,47,32,193. PCIT found that assessee earned exempt income of Rs. 274.21 crore but disallowed only Rs. 1.82 crore under Section 14A. PCIT also saw that assessee had strategic investments of Rs. 11,813.76 crore and felt Rule 8D was not properly applied. The PCIT said the correct disallowance should be about Rs. 118.13 crore and there was short disallowance of around Rs. 116.30 crore. PCIT also relied on INSIGHT portal information, saying Ambuja was shown as beneficiary of accommodation entries from Shri Dilip Chotalal Patel, linked with Sankalp Group, based on search. PCIT said the AO did no enquiry on this issue. Assessee argued that AO had already asked questions on Section 14A through notice under Section 142(1) and Ambuja gave reply with an expert report, so it was not a case of no enquiry. On accommodation entry issue, assessee argued that PCIT relied only on INSIGHT portal and did not give any supporting material like bank trail, statements or documents. Department argued that AO never recorded satisfaction or checked Rule 8D properly, and the difference between exempt income and disallowance shows non-application of mind. It was held that section 263 could be used when AO passes order without proper enquiry. Tribunal observed that AO accepted the disallowance without verifying Rule 8D and strategic investments. Tribunal observed that AO did not examine the INSIGHT portal information at all. Tribunal observed that Ambuja’s argument about non-supply of material did not change the fact that the AO overlooked the information available with him. PCIT only directed the AO to re-examine the issues and provide full opportunity to the assessee during fresh proceedings.
