Clix Capital Services Pvt. Ltd Vs PCIT (ITAT Delhi)
The Delhi ITAT allowed the assessee’s appeal and examined, as a preliminary issue, whether the Principal Commissioner of Income Tax (PCIT) had validly exercised revisional jurisdiction under Section 263 of the Income-tax Act in respect of the assessment completed under Section 143(3) read with Section 144B for AY 2018-19. The assessee, a Non-Banking Finance Company (NBFC) engaged in commercial, consumer and MSME lending, had filed a revised return declaring a loss. The case was selected for complete scrutiny covering issues including deductions claimed in Schedule BP, depreciation, ICDS compliance, business loss, investments, refund claim, expenditure relating to exempt income and other income disclosures. The Assessing Officer (AO) completed the assessment after making only an addition relating to delayed payment of employees’ contribution towards PF and ESI. Subsequently, the PCIT invoked Section 263 on the ground that the assessment was erroneous and prejudicial to the interests of the Revenue and directed fresh examination of legal and professional expenses, loan origination cost, Direct Selling Agent (DSA) cost, other expenses including year-end provisions, cost allocation charges, finance cost, depreciation and employee benefit expenses.
The Tribunal observed that the assessee’s principal business was financing and that finance cost constituted a fundamental business expenditure. After examining the revision order, it found that the PCIT had not recorded that the AO had failed to make enquiries or identified any specific error in the assessment order. Instead, the PCIT merely directed the AO to undertake further verification based on disclosures already available in the financial statements, audit report and explanations furnished during assessment. The Tribunal reiterated that revision under Section 263 requires satisfaction of the twin conditions that the assessment order must be erroneous and prejudicial to the interests of the Revenue. It further observed that where enquiries had been conducted during assessment, the absence of detailed discussion in the assessment order did not establish lack of enquiry or non-application of mind.
