Ucal Limited Vs PCIT (ITAT Chennai)
Scrutiny Done, Queries Raised, Replies Given – PCIT Cannot Rewrite AO’s View-
Assessee filed its return declaring NIL income. Assessment was completed u/s 143(3) after detailed scrutiny. Later, PCIT invoked revision u/s 263 on two issues:
- Allowability of ₹105.09 Cr impairment loss of investment in subsidiary claimed as business loss
- Late remittance of employees’ PF/ESI contribution of ₹1.67 Cr
PCIT held that AO failed to conduct proper enquiry & set aside the assessment as “erroneous & prejudicial to Revenue”.
Before ITAT, Assessee demonstrated that:
- Both issues were specifically selected for scrutiny.
- AO issued notices u/s 142(1) & 143(2), raised queries, & Assessee filed detailed replies.
- In the first issue (impairment loss), AO accepted the claim as business loss after enquiry.
- In the second issue (PF/ESI), AO relied on binding Madras High Court judgment (CIT v. Industrial Security & Intelligence India P. Ltd.), which allowed deduction if payment made before return filing due date u/s 139(1).
- The Supreme Court ruling in Checkmate Services (against Assessee) came after the assessment order. AO cannot be faulted for following the jurisdictional High Court at that time (supported by SC ruling in GM Mittal Stainless Steel).
ITAT Findings:
- AO made proper enquiry on both issues; it’s not a case of “no enquiry” but at best “inadequate enquiry,” which does not justify 263.
- PCIT cannot substitute his view for the AO’s view when AO has taken a possible view supported by law.
- Explanation 2(a) to Section 263 cannot be misused to reopen concluded scrutiny where enquiry was already made.
- Following binding High Court precedent cannot be considered “erroneous”.
- PCIT’s 263 order was based on incorrect assertion that AO made no verification.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
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