Procter and Gamble Health Private Limited Vs PCIT (ITAT Mumbai)
Distinction between “lack of inquiry” and “inadequate inquiry”: Even inadequacy of enquiry would not confer the power of revision u/s 263- Revision quashed: ITAT Mumbai
Mumbai ITAT has set aside a revisionary order passed by PCIT u/s 263, holding that AO had conducted proper & adequate enquiries during the original scrutiny assessment & that the PCIT’s action was merely based on a difference of opinion.
Assesseefiled its return of income for AY 2018–19 declaring Rs 174.81 crore. The return was selected for CASS scrutiny on multiple flagged issues, including verification of duty drawback, large refund claims, mismatch in property sale consideration under sec 50C, personal expenses, lower disallowance u/s 40(a)(ia) than reported in audit, large deductions, & possible non-compliance with ICDS. AO completed the assessment u/s 143(3) r.w.s. 144B on 11.04.2022, determining total income at Rs 179.46 crore after certain additions.
Subsequently, PCIT issued a notice u/s 263 alleging that Rs 4.22 crore debited under “Other Comprehensive Income” (re-measurement of employee benefit obligations) was not added back in computation, allegedly causing underassessment. Rs 22.91 crore expenses provided on estimated basis (contractor payments, legal fees, sales promotion etc.) were only partly disallowed (Rs 6.87 crore u/s 40(a)(ia)) &, being mere provisions, should have been fully disallowed u/s 37. Sales Promotion: Rs 98.99 crore sales promotion expenses were allowed without verifying if they included “freebies” prohibited by the Medical Council regulations, hence inadmissible u/s 37(1). PCIT held that these issues were not examined by AO & the order was erroneous & prejudicial to the interest of the Revenue.
