AZB And Partners Vs PCIT (ITAT Mumbai)
The Tribunal held that mere inadequacy of enquiry by the AO cannot justify invoking Section 263. AZB & Partners’ assessment was upheld, reinforcing limits on revision powers under Explanation 2(a).
ITAT Mumbai Quashes 263 Against AZB & Partners – No Revision for Adequate Enquiry- Mere Inadequacy of Enquiry Cannot Justify 263 – Tribunal Rules for Law Firm- Explanation 2(a) to 263 Not Blanket Power – ITAT Reaffirms Limits on Revision
Assessee, a leading law firm, had filed return declaring income of Rs. 281.18 crore. The assessment was completed u/s 143(3) r.w.s. 144B, wherein AO disallowed education cess of Rs. 3.77 crore & assessed income at Rs. 284.96 crore. Later, PCIT noticed from Tax Audit Report that out of foreign remittances of Rs. 9.97 crore, TDS was deducted only on Rs. 5.91 crore, leaving Rs. 4.05 crore allegedly without TDS. Holding that AO had not verified this issue, PCIT invoked s.263 & set aside the assessment as erroneous & prejudicial to revenue.
Assessee challenged this order before Tribunal. First, delay of 45 days in filing appeal was condoned since appeal was initially filed before AO instead of ITAT by mistake. On merits, it was argued that AO had issued specific notice u/s 142(1) regarding foreign remittances, to which detailed reply was furnished with Form 15CA acknowledgements & reasons for non-deduction. These submissions were duly noted in assessment order. Thus, it was a case of enquiry & conscious application of mind by AO, not “no enquiry.” Reliance was placed on Gabriel India Ltd. (Bom HC), Sunbeam Auto Ltd. (Del HC), Narayan Tatu Rane (ITAT Mum) & Poonam Marwah (ITAT Amritsar) to argue that inadequate enquiry cannot justify 263 revision.
