Professional Artist Cosmetics LLP Vs PCIT (ITAT Mumbai)
High Interest Paid to Lenders a Commercial Decision, Not Ground for Section 263 Action- Once AO Inquired Applied Mind, Revision u/s 263 Not Permissible- PCIT Cannot Revise Just for Different Opinion
The appeal by Professional Artist Cosmetics LLP challenged revisionary order u/s 263 passed by PCIT, whereby assessment u/s 143(3) dated 02.12.2022 was set aside for re-verification of unsecured loans & interest payments.
Assessee, engaged in manufacture & trading of cosmetics, had filed ROI declaring ₹89.90 lakh. AO conducted detailed scrutiny, issuing multiple notices u/s 142(1) regarding unsecured loans, variation in number of lenders & higher interest paid to two parties. In response, Assessee furnished exhaustive details including confirmations, party-wise ledgers, reconciliations, bank statements & explanations. AO, after considering the replies, accepted the returned income & passed a speaking order.
PCIT, however, noted alleged mismatch between unsecured loans of ₹5.69 crore vs ₹7.41 crore, inconsistent list of 31 vs 46 parties, & interest @18% to two lenders. Holding that AO’s inquiry was inadequate, he invoked s.263 & directed fresh examination.
Before Tribunal, Assessee argued that AO had already examined all these issues in depth. The difference in loan figures was explained as opening balances & repayments; the variation in number of parties was only classification difference; higher interest was a commercial decision for urgent borrowings. It was contended that once AO has applied his mind & taken a view, PCIT cannot substitute it with his own opinion under s.263. Reliance was placed on SC in Malabar Industrial Co. Ltd., Bom HC in Gabriel India Ltd., Delhi HC in Sunbeam Auto Ltd. & DG Housing Projects Ltd..
