Topre India Private Limited Vs PCIT (ITAT Ahmedabad)
Audit Objection Cannot Replace Independent Satisfaction: ITAT Quashes Section 263 Revision in Topre India’s Case
The Income Tax Appellate Tribunal, Ahmedabad “D” Bench, in Topre India Private Limited v. Principal CIT, ITA No. 2031/Ahd/2026, quashed a revision order under Section 263 of the Income-tax Act, 1961. The Tribunal noted that the Assessing Officer had raised specific queries and follow-up questions, examined the company’s explanations and accepted its position on the issues subsequently selected for revision.
The order, pronounced on 23 October 2026, concerned Assessment Year 2020–21. The Bench comprised Dr. B. R. R. Kumar, Vice-President, and Shri Sanjay Kumar, Judicial Member. It followed the coordinate Bench decision in Neetu Hurkat v. PCIT, concerning revision influenced by audit objections where the assessment already reflected adequate inquiry.
Background of the Company and Assessment
The assessee manufactured, imported, sold and distributed automatic presses for ultra-high-tensile steel plates and pressed automobile parts.
Established in 2017, the company completed installation work during the relevant year.
Its case was selected for complete scrutiny, and a notice under Section 143(2) was issued on 29 June 2021.
During assessment, the officer raised several queries, which the company answered. The resulting assessment made an adjustment concerning international transactions following the Transfer Pricing Officer’s findings, but no other additions.
The company maintained that the remaining claims were accepted after examination, rather than allowed without inquiry.
Principal Commissioner Initiates Revision
The Principal CIT, Ahmedabad-3, issued a Section 263 notice dated 22 August 2025 and ultimately passed the revision order on 27 March 2026.
The matters identified included deductions in Schedule BP, creditors and liabilities, depreciation, imports, and international related-party lending or borrowing transactions.
The company’s appeal specifically challenged directions concerning Rs. 39,22,16,261 in finance costs and other expenses, after excluding expenditure already capitalised.
It also challenged further verification of depreciation, including additional depreciation, amounting to Rs. 49,29,10,768.
The assessee argued that the completed assessment was neither erroneous nor prejudicial to the Revenue.
Assessee Produces Record of Repeated Inquiries
The company relied on the assessment correspondence to demonstrate that the disputed matters had already been examined.
A Section 142(1) notice dated 9 November 2021 was answered on 3 December 2021.
Another notice dated 25 July 2023 received a response on 28 July 2023, including a chronology covering the company’s setup and commencement.
A further query dated 25 August 2023, concerning additional depreciation, was answered on 31 August 2023.
The assessee also pointed to the assessment order’s acknowledgment of the inquiries and its conclusion that the explanations were satisfactory, apart from the transfer pricing issue.
Audit Objection Formed Basis of Proceedings
The assessee contended that revision had been initiated on borrowed satisfaction arising from a revenue audit objection.
It submitted that the Principal Commissioner had not independently established why the officer’s examined conclusions were incorrect.
The Revenue supported the revision order.
The Tribunal noted that paragraph 6.1 of the impugned order itself recorded the audit-based origin of the proceedings. It also found it undisputed that the Assessing Officer had raised queries and follow-up queries on the matters under revision before accepting the explanations.
Those findings were central to its application of the earlier Tribunal ruling.
Neetu Hurkat Decision Followed
The Tribunal held that the issue was covered by Neetu Hurkat v. PCIT, ITA No. 957/Ahd/2024, decided on 4 November 2025.
That decision distinguished a valid revision from a situation where the Commissioner merely preferred another opinion after the officer had conducted due inquiries.
It also emphasised that an audit objection did not itself establish revisional jurisdiction.
The present Bench reproduced that reasoning and followed it in quashing the revision.
Its conclusion therefore rested on the combined circumstances of prior examination, acceptance of a plausible position and audit-influenced revision, rather than the existence of an audit objection alone.
Twin Conditions Under Section 263
The reproduced precedent relied on Malabar Industrial Co. Ltd. v. CIT and CIT v. Max India Ltd.
The governing principle was that the assessment must be both erroneous and prejudicial to the interests of the Revenue.
Where the officer had conducted inquiries and adopted a permissible view, a different preference by the Commissioner did not automatically satisfy those conditions.
The reasoning also referred to Gabriel India Ltd. v. CIT, recognising that a conscious assessment decision does not become erroneous merely because its explanation is not elaborate.
Revision Could Not Substitute a Different Opinion
The material distinction was between absence of inquiry and disagreement with an assessment conclusion reached after inquiry.
The Tribunal found that the company’s claims had been subjected to questions and further clarification.
Following Neetu Hurkat, it rejected revision that effectively sought another examination without establishing the required error and prejudice.
The order did not independently recompute depreciation or determine a fresh expense allowance. It addressed the validity of invoking Section 263 against the completed assessment.
Final Decision
The Tribunal allowed the company’s appeal and quashed the Principal Commissioner’s revision order.
The ruling reinforces that documented inquiries and a plausible assessment view cannot be displaced through revision merely because audit objections prompt a different opinion on the same issues.
Cases Discussed
- Neetu Hurkat Vs. PCIT, Ahmedabad (ITA No. 957/Ahd/2024; 04.11.2025)
- Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC)
- CIT v. Max India Ltd. (2007) 295 ITR 282 (SC)
- Gabriel India Ltd. v. CIT (1993) 203 ITR 108 (Bom)
- CIT vs. Seshasayee Paper & Boards Ltd. [2000] 242 ITR 490 (Mad.)
- Indian & Eastern Newspaper Society v. CIT (1979) 119 ITR 996 (SC)
- CIT v. Reliance Communication Ltd. (2016) 69 taxmann.com 138 (Bom)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Assessee against the order dated 27.03.2026 passed by the Ld. Principle Commissioner of Income Tax, Ahmedabad-3 (hereinafter referred to as ‘Ld. PCIT’ in short), under Section 263 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2020-21.
2. The Assessee has raised following grounds of Appeal:-
“On the facts and in the circumstances of the case and in law, the learned Principal Commissioner of Income Tax, Ahmedabad-3 [‘Ld. PCIT’] erred in assuming jurisdiction and invoking the provisions of section 263 of the Income-tax Act, 1961 (‘the Act’) and revising the assessment order dated 31 October 2023 passed by the National Faceless Assessment Centre (‘Ld. AO’) under section 143(3) of the Act without appreciating that the said assessment order is neither erroneous nor prejudicial to the interests of revenue.
1.1. In doing so, PCIT failed to appreciate that: a)
(a) The show-cause notice under section 263 of the Act issued by the PCIT did not refer to Explanation 2 to section 263 of the Act and thus, the invocation of the same in order is not tenable in law;
b) Revision proceedings are triggered only on the basis of borrowed satisfaction ie. at the instance of audit party in its revenue audit;
c) the Ld. AO had conducted requisite enquiries before passing the order of assessment under section 143(3) read with section 144C(3) of the Act;
d) twin conditions are to be satisfied viz. i.e. order is erroneous and prejudicial to the interest of revenue; e) where two views are possible and Ld. AO has taken one of the plausible view, the order passed by the Ld. AO cannot be termed as erroneous and prejudicial to the interest of revenue;
(e)PCIT itself has not conducted any independent minimal inquiry into the issues before concluding on merits.
(f) The Appellant prays that order passed by the Ld. PCIT under section 263 of the Act is devoid of merits and thus, liable to be quashed or set-aside.
2. On the facts and in circumstances of the case and in law, the Ld. PCIT erred in setting aside the order of Ld. AO and thereby, directing the Ld. AO to make necessary enquiries/verification with respect to Appellant’s claim of finance cost and other expenses amounting to INR. 39,22,16,261/-(Rs. 49,49,95,183/-less Rs. 10,27,78,922/- already capitalized).
The Appellant prays that the action of the Ld. AO be restored and the claim of the Appellant be allowed.
3. On the facts and in circumstances of the case and in-law, the Ld. PCTT erred in setting aside the onder of Ld. AO and thereby, directing the Ld. AO to make necessary enquiries/verification with respect to the Appellant’s claim of depreciation (including additional depreciation) amounting to INR 49,29,10,768/-.
The Appellant prays that the action of the Ld. AO be restored and the claim of the Appellant be allowed.
The Appellant craves leave to add, alter, amend, substitute or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary at either at ar before the appeal hearing so as to enable the Hon’ble Tribunal members to decide these according to the law.”
3. Brief facts of the case are that the Assessee is engaged in the business of manufacturing, import, sale, and distribution of various kinds of automatic presses for ultra-high-tensile steel plates and other high-quality pressed auto parts. The company was established in the year 2017, and during Assessment Year 2020-21, its installation work was completed. The Assessee filed its return declaring an amount of Rs. 81,12,31,724/-. The Assessee’s case was selected for complete scrutiny, and notice u/s 143(2) was issued on 29.06.2021. The AO made several queries, which were duly answered by the Assessee. In the Assessment Order, the AO ultimately made an addition on account of variation of TP adjustment only, and no other additions were made by the AO. The case was taken for revision u/s 263 of the Act by the Ld. PCIT on the following points:
i. Claim of Any Other Amount Allowable as Deduction in Schedule BP
ii. High Creditors/liabilities
iii. Depreciation Claim
iv. Imports
v. International Related Party Transactions in Respect of Lending or Borrowing of Money
3.1 Notice u/s 263 of the Act dated 22.08.2025 was issued to the Assessee. In response thereto, the Assessee submitted its reply.
3.2. Shri Dhaval Bafna, Ld. AR, submitted that the revisionary proceedings were based on an audit objection. The Assessee also submitted that the issues were duly examined during the assessment proceedings, as several queries were raised and the answers thereto were provided by the Assessee. The Assessee also contended that the AO has taken one of the plausible views on the issues and, therefore, invocation of revisionary powers u/s 263 of the Act would suffer from the vice of change of opinion. 3.3 Now, the Assessee is in appeal before us against the impugned order passed by the Ld. PCIT.
4. The Ld. AR has made the following submissions accordingly:
(A) It was submitted that assumption of jurisdiction u/s 263 of the Act in the present case is vitiated for the reason that revisionary proceedings have been initiated only on the basis of audit objections and not upon any independent satisfaction of the Ld. PCIT. For this purpose, he has relied upon the judgment dated 04.11.2025 passed by this Tribunal in ITA No. 957/Ahd/2024.
(B) The AO in the original assessment proceedings has made specific and repeated inquiries. In this regard, he referred to notice u/s 142(1) of the Act dated 09.11.2021, which was replied to by the Assessee vide submission dated 03.12.2021. Thereafter, a second notice u/s 142(1) of the Act was issued on 25.07.2023, which was replied to vide submission dated 28.07.2023. The Assessee had also provided a detailed chronology of events that happened from setup to commencement vide its submission dated 28.07.2023. Vide notice dated 25.08.2023, a further query was raised by the AO regarding additional depreciation claimed, which too was answered vide submission dated 31.08.2023. It was submitted that the factum of queries being raised has also been acknowledged by the Ld. AO in the Assessment Order itself at para 4.1, and in para 4.2 it was concluded that the replies of the Assessee were found to be satisfactory and no adverse inference prejudicial to the Assessee was drawn, except for the international transaction which was suggested by the TPO.
4.1 In view of the above, he submitted that the impugned order may be set aside.
5. Per contra, Shri R.V. Aroon Prasad, Ld. CIT-DR, supported the order of the Ld. PCIT.
6. We have given our thoughtful consideration to the matter. The impugned order at para 6.1 itself records that the revisionary proceedings are based on objections raised by the audit. However, it has been claimed that there is no legal bar to initiation on the basis of audit. It is also not in dispute that the AO in the assessment proceedings had raised queries as well as follow-up queries on the issue under revision and had accepted the explanation of the Assessee. The issue of whether revisionary proceedings can be initiated on the basis of an audit objection has been decided in favour of the Assessee in the case of Neetu Hurkat Vs. PCIT, Ahmedabad in ITA No. 957/Ahd/2024. In our opinion, the issue raised in the present appeal is squarely covered by the aforesaid judgment in the case of Neetu Hurkat (supra), wherein it is held as under:
“10. On going through the reasons recorded by the Assessing Officer, the show-cause notice issued by the Ld. PCIT and the relevant order of the Ld. PCIT, we find that the order u/s 263 has been invoked for the firmness that the Assessing Officer has not made the addition of the amounts mentioned in the reasons recorded and there was a consequential audit objection. The Ld. PCIT has not brought on record as to how the order of the Assessing Officer is erroneous so far as it is prejudicial to the interest of the revenue. The Assessing Officer has conducted due enquiries and has taken a reasonably plausible view after due diligence and enquiries.
11. It is well-settled that when the Assessing Officer makes due enquiries and takes a plausible view, the order cannot be held to be “erroneous” merely because the Ld. PCIT holds a different opinion. Where the Assessing Officer has made inquiries and taken one of the possible views, the assessment order cannot be treated as “erroneous” merely because the Ld. PCIT holds a different opinion. For this proposition, reliance is being placed on the judgment of Hon’ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC), wherein it was held that for valid invocation of section 263, the order must be both “erroneous” and “prejudicial to the interests of the Revenue”; if the Assessing Officer adopts one of the permissible views, the order cannot be revised. The same view was reiterated by the Hon’ble Supreme Court in CIT v. Max India Ltd. (2007) 295 ITR 282 (SC), holding that where two views are possible and the Assessing Officer has taken one, the order cannot be termed erroneous merely because the Ld. PCIT prefers another view. Similarly, the Hon’ble Bombay High Court in Gabriel India Ltd. v. CIT (1993) 203 ITR 108 (Bom) held that once the Assessing Officer has made due enquiries and taken a conscious decision, the order cannot be branded as erroneous merely because it is not elaborate or detailed in its reasoning. In the present case, the record clearly demonstrates that the Assessing Officer conducted adequate enquiry, examined all relevant aspects, and took a plausible view based on evidence; therefore, the assumption of jurisdiction under section 263 is legally untenable.
12. The reliance placed by the Ld. PCIT on the decision of the Hon’ble Madras High Court in CIT vs. Seshasayee Paper & Boards Ltd. [2000] 242 ITR 490 (Mad.) is misplaced and not applicable to the present case. In that case, the CIT had conducted independent enquiries, gathered fresh material, and established that the Assessing Officer’s order was erroneous. In contrast, in the present case, the Ld. PCIT has neither conducted any fresh enquiry nor Asst. Year: 2016-17 brought any new material on record to show that the Assessing Officer’s view was incorrect. The issues were already examined during assessment, and the Ld. PCIT has merely formed a different opinion on the same facts. Hence, the cited decision is clearly distinguishable on facts and does not justify revision under section 263 of the Act.
13. It is also observed that the Ld. PCIT’s decision to invoke section 263 was largely influenced by the existence of an audit objection. However, an audit objection, being only an expression of opinion by the audit wing, cannot confer jurisdiction for revision. The Hon’ble Supreme Court in Indian & Eastern Newspaper Society v. CIT (1979) 119 ITR 996 (SC) held that an audit objection constitutes mere opinion and cannot form the basis either for reopening an assessment or for revision under section 263. The same view has been reiterated by the Hon’ble Bombay High Court in CIT v. Reliance Communication Ltd. (2016) 69 taxmann.com 138 (Bom), holding that audit objections do not empower the PCIT to revise a completed assessment. Accordingly, the reliance placed by the Ld. PCIT on audit objection as a ground for revision is legally impermissible.
14. In view of the above, we hold that the revisional order passed by the Ld. PCIT under section 263 of the Act is unsustainable and is hereby quashed.”
7. Respectfully following the aforesaid judgment of the Co-ordinate Bench of this Tribunal, we allow the grounds taken by the Assessee, and the impugned revisionary order passed by the Ld. PCIT u/s 263 of the Act is quashed.
8. In the result, the appeal filed by the Assessee is allowed.
The order pronounced on 23.10.2026.
