Case Law Details
Fortis Hospitals Ltd. Vs PCIT (ITAT Delhi)
ITAT Slams ‘Sweeping’ 263 Revision – PCIT Cannot Order Fishing Enquiries After Detailed Scrutiny by AO
The Delhi ITAT quashed the revision order passed u/s 263 against Fortis Hospitals Ltd., holding that the Principal CIT wrongly assumed that the Assessing Officer had conducted “no enquiry” on various issues, whereas the assessment records clearly showed extensive scrutiny, repeated questionnaires and detailed replies running into hundreds of pages. The Tribunal observed that the AO had specifically examined issues relating to bad debts written off, doubtful receivables, liabilities, administrative expenses, depreciation on intangible assets, related party transactions, TDS compliance, finance costs and various other heads of expenditure before accepting the returned loss. Therefore, the case did not fall within Explanation-2 to section 263.
The Tribunal strongly criticised the PCIT for making broad and vague allegations that enquiries were not conducted, without specifically identifying any actual lapse in the assessment proceedings. It held that revisionary jurisdiction cannot be invoked merely to order roving and fishing enquiries or because the PCIT desires deeper verification. The ITAT further remarked that such “sweeping statements” and “irresponsible conclusions” ought not to have been drawn by a senior officer without proper factual foundation. Since the AO had in fact applied his mind and conducted enquiries on all major issues, the twin conditions of an order being “erroneous” and “prejudicial to the interests of the Revenue” were absent. Accordingly, the entire section 263 order was quashed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of Ld. Pr. Commissioner of Income Tax, Delhi-1, New Delhi [hereinafter referred to as ‘ld. PCIT] dated 30.03.2025.2025 arising out of assessment order dated 08.03.2023 passed under section 143(3) of the Income Tax Act, 1961, for the Assessment Year 2021-22. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
2. The assessee has raised following grounds of appeal :-
“1. That on the facts and circumstances of the case and in law, the order dated 30.03.2025. passed by the Principal Commissioner of Income Tax, Delhi – 1 [PCIT], under section 263 of the Income Tax Act, 1961 (the Act), is without jurisdiction, illegal, bad in law, void ab initio and liable to be quashed.
2. That the PCIT erred in invoking revisionary jurisdiction under section 263 of the Act qua assessment completed by National Faceless Assessment Centre (NFAC/assessing officer’) under section 143(3) read with sections 144C(3) and 144B of the Act, which is a complete code in itself.
3. That on the facts and circumstances of the case, the impugned order having been passe v the PCIT in undue haste without: (a) considering the submissions tiled, and (b) first disposing off the legal objections by passing a separate speaking order, and (c) without providing reasonable opportunity of being heard, is illegal, bad in law and liable to be quashed set aside.
4. That the PCIT erred on facts and in law in exercising revisionary powers under section 263 of the Act on various issues in the impugned order, Without satisfying the twin jurisdictional conditions of the assessment order being: (a) erroneous; and (b) prejudicial to the interests of the Revenue and consequently, the impugned order is illegal, bad in law and liable to be quashed.
5. That the order passed by the PCIT setting aside the assessment order under section 263 and directing the assessing officer to make de-novo assessment qua certain issues [referred to in paras 5 to 15] and also other issues on which show-cause notice was issued (ground no. … infra), after making fresh enquiries is, in the absence of any finding on merits demonstrating how and why the assessment order was erroneous, invalid and bad in law.
6. That the PCT failed to appreciate that revisionary proceedings under section 263 of the Act could not be initiated merely to: (a) conduct vague/ roving enquiries; or (b) authorize the assessing officer to again conduct roving/ fishing enquiries, by merely setting aside the assessment.
7. That the PCIT erred in holding that the AO failed to make necessary enquiries, which could be subjected to revisionary jurisdiction in terms of Explanation 2 to section 263 of the Act.
Qua claim of deduction of doubtful debts written off
8. That on the facts and circumstances of the case and in law, the exercise of revisionary jurisdiction by the PCIT under section 263 in respect of deduction of Rs.20,45,97,000 claimed by the appellant under section 36(1)(vii) r.w.s 36(2) of the Act on account of doubtful receivables written off which were duly offered to tax in earlier years, is without jurisdiction and bad in law.
8.1. Without prejudice, the PCIT failed to appreciate that claim of doubtful receivables written off was duly examined and accepted in the original assessment order after due application of mind and after undertaking adequate inquiries/ investigation, wherever and to the extent deemed fit and appropriate by the assessing officer.
Qua Doubtful receivables/advances written-off against provisions
9. That on the facts and circumstances of the case and in law. the exercise of revisionary jurisdiction by the PCIT under section 263 in respect of deduction of Rs.115,52,98,000/-allegedly claimed on account of doubtful receivables written off, is without jurisdiction and bad in law.
9.1. That the PCIT failed to appreciate that the appellant had only claimed deduction of Rs.20,45,97,000 and not of Rs.115.52,98.000/- under section 36(1)(vii) r.w.s 36(2) of the Act, which is referred in ground no. 8 above.
Qua Unverified liabilities
10. That on the facts and circumstances of the case and in law, the exercise of revisionary jurisdiction by the PCIT under section 263 in respect of following liabilities, is without jurisdiction and bad in law:
(i) liabilities aggregating to Rs.3.115.31 lacs qua advances from MSMEs and;
(ii) advances aggregating to of Rs.3496.07 lacs received from various customers.
10.1. Without prejudice, the PCIT erred in issuing vague/ open ended directions to the assessing officer to examine the aforesaid liabilities [refer ground No.10 supra].
10.2. That the PCIT erred in not appreciating that the (i) addition was made in earlier year only on the ground that there was increase in trade payables whereas in the relevant year, trade payables has only decreased; and (ii) advances from customers was nothing but advance received from patients at the time of admission which was to be adjusted against the final bills raised by the assessee.
Qua claim of deduction of administrative expenses
11. That on the facts and circumstances of the case and in law, the exercise of revisionary jurisdiction by the PCIT under section 263 on the issue of administrative expenses, is without jurisdiction and bad in law.
11.1. Without prejudice, the PCIT failed to appreciate that claim of administrative expenses included under the head other expenses’, was duly examined and accepted in the original assessment order after due application of mind and after undertaking adequate inquiries/ investigation, wherever and to the extent deemed fit and appropriate by the assessing officer.
Qua depreciation on additions made to intangible assets during the year
12. That on the facts and circumstances of the case and in law. the exercise of revisionary jurisdiction by the PCIT under section 263 on the issue of nature of additions made to intangible assets during the year and verify the depreciation claimed thereon, is without jurisdiction and bad in law.
12.1. Without prejudice, the PCIT erred in issuing vague/ open ended directions to the assessing officer to examine the addition to intangible assets and depreciation claimed thereon.
12.2. That the PCIT failed to appreciate that the details of additions made to intangible assets were duly certified in Tax Audit Report and valuation methodology (accepted in earlier years) was also disclosed in books of accounts, thereby not warranting exercise of jurisdiction under section 263 of the Act.
Qua claim of expenses under various heads
13. That on the facts and circumstances of the case and in law, the exercise of revisionary jurisdiction by the PCIT under section 263 on the issue of allowability of following expenses specifically genuineness of expenses, applicability of provisions of section 40A(2) and provisions for deduction of tax on aforesaid expenses, is without jurisdiction and bad in law:
(i) expenses on medical consumables and drugs.
(ii) amortization expense,
(iii) depreciation.
(iv) interest paid to Fortis Healthcare and Fortis Hospital
13.1. Without prejudice, the PCIT failed to appreciate that claim of doubtful receivables written off was duly examined and accepted in the original assessment order after due application of mind and after undertaking adequate inquiries/ investigation, wherever and to the extent deemed fit and appropriate by the assessing officer.
Qua Residuary Issues
14. That on the facts and circumstances of the case and in law, the exercise of revisionary jurisdiction by the PCIT under section 263 qua each of the following issues (collectively referred to as ‘adjustments in total income and items in the Profit and loss account/Balance Sheet’), is without jurisdiction and bad in law:
A. Issues qua which additions were made in earlier years but not in the relevant year
(i) Disallowance under section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 without appreciating that no exempt income was received and issue was specifically examined in assessment proceedings:
(ii) Unexplained cash deposits without appreciating that in earlier year cash was deposited during demonetization period whereas in relevant year cash was deposited on account of normal business transactions;
(iii) Addition on account of fraudulent ICDs of Rs.445.02,62,000 without appreciating that addition of said amount was already made in AY 2019-20 and no new advances were given in the relevant year;
B. Adjustments made in computation of income
(iv)ICDS Adjustments mandated by section 145(2) without appreciating that same resulted in upward adjustment to the taxable income and full disclosure was made in the ITR, computation of income, Tax Audit Report duly considered by AO;
(v) Claim of depreciation on tangible and intangibles assets stood disclosed in the ITR. computation of income, Tax Audit Report and was duly considered by AO:
C. Items in Balance Sheet and Profit and loss account
(vi) Contingent liability created on account of claim on brands and liability post supreme Court judgment without appreciating that same does not have any impact on taxable income:
(vii) Related party transactions & applicability of section 40A(2) of the Act without appreciating that transaction were on account of loans given to related parties which as not claimed as deduction, thus, provisions of section 40A(2) per se do not apply. Further loans were impaired and interest income to the extent received was recognized.
(viii) Stocks not verified without appreciating that same stood verified by Cost Auditor and Tax Auditor and reports were furnished during assessment proceedings;
(ix) Decrease in Assets without appreciating the same was on account of claim of depreciation apparent from audited financials and complete details of additions. deletions, depreciation disclosed and certified in the Tax Audit Report furnished during assessment proceedings:
(x) Investment/Loans without appreciating that reduction in value of investment on account of creation of impairment loss was suo motu disallowed by the appellant.
(xi) Increase in Equity without appreciating that receipt of share capital is capital receipt and not income. Further, shares were issued to the holding company and complete details were duly disclosed in financials furnished during assessment proceedings, thus, genuineness cannot be doubted.
(xii) Liability without appreciating that same was duly examined during assessment proceedings and lease liability being notional in nature, has no impact on the taxable income.
(xiii) Trade Payable without appreciating that same was duly examined during assessment proceedings.
(xiv) No interest charged on Trade receivables without appreciating that no income was actually received by the appellant and thus, no error in assessment order as notional income cannot be brought to tax.
(xv) Interest accrued and not due without appreciating that same liability continues to exist in the books and interest is in fact being paid by the assessee.
(xvi) Corporate Guarantee on behalf on AEs without appreciating that no income actually received qua corporate guarantee given to banks, notional guarantee commission income recognized as per Ind AS disallowed and no error in assessment order as notional income cannot be brought to tax.
(xvii) Provision against Loan Recovery without appreciating that no new provision was made against loan payable during the relevant year and provision against loan receivable made in earlier years stood disallowed in those years. Issue examined during assessment proceedings and no disallowance made after due application of mind.
(xviii) Fair Value Adjustments without appreciating that there is no impact on taxability as fair value is the same as the carrying value, as apparent from the audited financial statements
(xix) Exceptional item without appreciating that issue was examined during assessment proceedings and no disallowance was made after due application of mind. Further, majority of exceptional items stood suo motu disallowed by the appellant.
(xx) Net loss not investigated by the AO without appreciating that issue stood examined in original assessment proceedings and no disallowance was made after due application of mind.
(xxi) Decrease in sales/gross receipts without appreciating that the same is justified on account of adverse impact on account of Covid 19 pandemic and financial performance has improved in subsequent years.
14.1. Without prejudice, the PCIT erred in issuing vague/ open ended directions to the assessing officer to examine the adjustments in total income and items in the Profit and loss account/Balance Sheet’ [referred in ground no. supra] and make addition(s)/ disallowance(s) if the same found to have any bearing on computation of income of the appellant.
14.2. That the PCIT erred in setting aside the assessment order on aforesaid issues, without even recording any prima facie findings on merits much less considering the detailed submission furnished by appellant, thereby, not demonstrating how and why the final assessment order was erroneous and prejudicial to the interests of the Revenue, qua such issues.
3. The only issue raised by the assessee in the present appeal is regarding the invocation of revisionary authority by the Ld. PCIT, Delhi-1 through his order u/s 263 dated 30.03.2025. It is the case of the assessee that the Ld. PCIT has exercise his revisionary authority on the premise of non-conduct of enquiry and investigation in its affairs by the ld. AO. Brief factual matrix of the case is that the assessee company running a group of hospitals by the name of Fortis Hospitals had filed its Return of Income on 14.03.2022 declaring loss of Rs.147,32,94,505/-. The ld. AO completed the assessment accepting the returned loss. Subsequently, the Ld. PCIT , Delhi-1, exercising his revisionary authority u/s 263 passed order dated 30.03.2025 holding that the ld. AO had not conducted requisite enquiries into affairs of the assessee and therefore the order dated 14.03.2022 assume the character of an order being erroneous in so far as it is prejudicial to the interest of the Revenue. Directions were issued to the ld. AO to conduct the enquiries on a large number of issues and determined fresh taxable income.
4. The ld. Counsel for the assessee vehemently argued that the conclusions of non-conduct of enquiry drawn by the Ld. PCIT are based upon a misplaced understanding of the facts of the case. It was contended that upon all the issues deliberated by the ld. PCIT, the assessee had provided necessary details to the ld. AO who had after due consideration and exercising due diligence and accepted the returned income. It was submitted that it is not a case falling within the meanings of Explanation -2 of Section 263, where no enquiries made by the Ld. AO. The ld. Counsel invited our attention to the show-cause notice issued by the ld. PCIT-1, Delhi during the revisionary proceedings and in particular contents of para-15.1 to 15.12 of his impugned order, whereby he held the conclusion of no enquiry done by the Ld. AO. The ld. Counsel further invited our attention to the following conclusions drawn by the ld. PCIT in his impugned order as at para-15.15 to 17 extracted hereinbelow:-
“..15.15. AO is directed to conduct comprehensive enquiries on the various heads of expenses spelt out in para 15.1 and 15.12 above. These expenses must be investigated, as the case may be, from the perspective of their genuineness, whether all these expenses were wholly incurred for the purposes of business or profession carried on by the assessee, whether any expenses were incurred in relation to persons specified in s.40A(2)(b) of the Act, and whether the TDS provisions, wherever applicable, were duly complied with or not. Besides, wherever the assessee claims that the due TDS has been deducted on any of the expenses, the AO is directed to verify the said claim by calling the quarterly e-TDS returns in Form 26Q filed by the assessee and carry out the verification of the claims of the assessee. If there are any such expenses/payment detected by AO, where provisions of TDS were applicable but the due TDS has not been deducted, but otherwise such expenses are genuine and not unreasonable or excessive ie. entered into at arm’s length, in that case the necessary disallowances u/s 40a(ia) are required to be made (on account of non deduction of TDS or short deduction of TDS) and added to the total income of the assessee.
16. In the SCN u/s 263 issued to the assessee, the contents of which have been reproduced in para 6.1 of this order above, there are several other issues, apart from those which have been highlighted in para 5 to 15 above. On most of these issues, the AO has either not conducted absolutely any enquiries or at best AO has conducted inadequate enquiries. This observation has been made after carefully going through all the written submissions filed before AO from time to time, by the assessee during the course of assessment proceedings, as available on online ITBA portal. AO should examine all these remaining issues also on merit, and wherever AO finds that any addition to total income is warranted, such additions should appropriately be made to the total income of the assessee.
17. In view of above discussion, it is found that the assessment order passed by the A.O. u/s 143(3) read with section 144B of the Income tax Act dated 28.12.2022, for A.Y. 2021-22, is erroneous and prejudicial to the interest of the revenue on the issues highlighted in PARA 5 to PARA 15 of the order above.
In light of the provisions of Section 263 of the I T Act, the said assessment order is set aside and the Assessing Officer is directed to pass a fresh assessment order de novo, after making all necessary enquiries as directed above in concluding paragraphs of PARA 5 to PARA 15 of the order above. The assessee will be at liberty to adduce the relevant evidence/material before the Assessing Officer at the time of de novo assessment in consequence to this order and the Assessing Officer shall allow the assessee adequate opportunity of being heard and to make relevant submissions….”
5. The ld. Counsel argued that all the issues raised by ld. PCIT in paras 15.1 to 15.12 of his order were fully enquired and investigated by the ld. AO. The ld. Counsel invited extensive reference to its paper books running in 100s of pages to strengthen his arguments. The appellant assessee has placed on records copies of every show-cause notice issued by the assessee by the ld. AO and replies given by the assessee. A tabular representation of information solicited by the AO on issues, allegedly investigated by the ld. PCIT and replies submitted by the assessee qua references in the voluminous paper book, is as under:-
| Issue | PCIT’s directions / observation in impugned order passed u/s 263 | Disclosure by assessee and enquiries made by AO during original assessment |
| Bad Debts written off amounting to Rs.20,45, 97,000. | The PCIT, in paras 10 to 10.10 (pages 75–84), has directed the assessing officer (‘AO’) to examine the correctness of claim of bad debt of Rs.20,45,97,000. While directing enquiry, the Pr. CIT has made following observations/ allegations:
– While replies dated 21.12.2022 and 22.12.2022 were filed by the appellant, the AO has allowed deduction without appellant establishing mandatory condition under section 36(1)(vii) r.w.s. 36(2) of the Act; -During assessment, relevant ledger accounts, details of billing from each patient and how amount was not recovered were not filed by the appellant; -Reply filed in response to notice under section 263 is devoid of merits; and -Assessee claim of bad debts was disallowed in completed assessment for AY 2019-20. |
-Notice dated 21.12.2022 (@ pages 502-504 of PB), specifically calling upon the appellant to furnish details and explanations in respect of
“provision for doubtful debts / doubtful receivables written off” as reflected in the computation of income. -Notice dated 22.12.2022 (@ pages 1005-1007 of PB), the AO further sought clarification regarding the applicability of section 36(1)(vii) read with section 36(2) of the Act. -The appellant, vide replies dated 21.12.2022 and 22.12.2022, (@ pages 505-1004 and 1008-1165 of PB), submitted that the bad debts written off represents amounts irrecoverable from the patients/ insurance companies, corresponding income from which were offered to tax in earlier year. The appellant also furnished exhaustive details running into approximately 500 pages, including: √ ledger extracts and transaction-wise break-up of doubtful receivables written off; and √ year-wise details evidencing that the corresponding revenues had already been offered to tax in earlier assessment years. |
| Doubtful receivable /advances written off against provisions |
The PCIT, in paras 11.1 to 11.5 (pages 84-86), has observed that the appellant has, in the computation of income, written off Rs.115,52,98,000 under the head “doubtful receivables / advances written off against provision” and that the assessing officer accepted the said reduction without examining the allowability thereof.
While directing the enquiry, the Pr.CIT has made following observations/allegations -The assessment order does not record any verification by the AO qua satisfaction of conditions prescribed u/s 36(1)(vii) and 36(2); -It is a case of “NO ENQUIRY” holding that AO has not raised a single query to assessee. -No submissions on the said issue have been filed by the appellant in response to notice under section 263 of the Act. -Explanation 2 to section 263 of the Act has been invoked to justify assumption of revisionary jurisdiction. |
-Notice dated 21.12.2022 (Pages 502-504@ page 504 of PB), raised a specific query calling upon the appellant to furnish details in respect of provision for doubtful debts / doubtful receivables written off.
-Notice dated 22.12.2022 (Pages 1005-1007 @ page 1007 of PB), sought year-wise break-up of income in respect of which the doubtful receivables had arisen. -The appellant, vide replies dated 21.12.2022 and 22.12.2022, (Pages 505-1004 and 1008-1165 of the paperbook respectively), submitted that the bad debts written off represents amounts irrecoverable from the patients/ insurance companies, corresponding income from which were offered to tax in earlier year. The appellant also furnished exhaustive details running into approximately 500 pages, including: √ ledger extracts and transaction-wise break-up of doubtful receivables written off; and √ year-wise details evidencing that the corresponding revenues had already been offered to tax in earlier assessment years. |
| Liabilities not verified by AO [Trade payable (MSME Vendor) and liability towards various Advance from customers] | The PCIT, in paras 12 to 12.10 (pages 87–91), has directed the AO to examine the genuineness of the high standing liabilities including trade payable (MSME Vendor) and liability towards various customers in form of advance. While directing enquiry, the Pr. CIT has made following observations/ allegations:
-Addition of liabilities was made in AY 2019–20, and similar liabilities are present in the year under consideration. -That the assessing officer did not raise even a single query on this issue after receiving details of financial liabilities from the assessee during assessment and alleged the present issue to be a case of “NO ENQUIRY” by the assessing officer. -No submissions have been filed by the appellant in response to notice under section 263 on the said issue. -Explanation 2 to section 263 of the Act has been invoked to justify assumption of revisionary jurisdiction |
-Vide notice dated 06.12.2022 [refer query 7 to 9] (Pages 155-159 @ 157 of PB), AO raised specific query regarding loans & advances, loan term borrowing and other long-term liabilities.
-Vide reply dated 12.12.2022 [refer point 5 to 7] (Pages 161-163 of PB), the appellant furnished the details in the aforesaid liabilities. -Vide notice 13.12.2022 (Pages 165-167 @ 167
-Lease liabilities Rs.18,343.31 lacs -Other financial liabilities Rs.27,408.48 lacs -Vide reply dated 15.12.2022 [refer point 4 & 7] (Pages 169-171 & 173 of PB), assessee submitted complete explanation of lease liabilities amounting to Rs.184,343.31 lacs along with details of “other financial liabilities” of Rs. 27,408.48 lacs. |
| Claim of deduction of admin-istrative expenses | The PCIT, in paras 13 to 13.5 (pages 91–94) has directed verification of genuineness of administrative expense as well as its reasonableness; AO is required to be examine from perspective of applicability of TDS and reasonableness u/s 40A(2)(b). The Pr. CIT has made following observations/ allegations:-In scrutiny assessment for AY 2018-19, the assessing officer had made disallowance on account of increase in administrative expenses.-No expenses have not been shown under the head ‘administrative expenses’ in the ITR Form but is clubbed with other expenses.-During assessment proceedings the assessing officer did not raise any specific query to examine the claim of administrative expenses, thus, the case is alleged to be a case of “NO ENQUIRY”.-Explanation 2 to section 263 of the Act has been invoked to justify assumption of revisionary jurisdiction. |
-Vide, Query no. 6 of the notice dated 06.12.2022 (@ page 157 of PB), AO raised a specific query qua the claim of other expenses of Rs 569.54 crores and asked the appellant to furnish details of the expenses along with relevant evidences and reasons for increase as compared to the earlier year further; the assessing officer also directed the appellant to furnish the ledgers copies of various expenses including the ones included in “other expenses” (query no 11).
-Vide reply dated 12.12.2022 (refer point no. 4) @ Page 161 of PB, appellant furnished details/ nature of the other expenses and clarified that there was per se no increase in the said expenses; the increase is only on account of depreciation on/ amortization of Right to Use Asset, which was a notional entry made on account of Ind AS [Refer, Note 5(xxviii) of audited accounts on depreciation and amortization expenses @ Page 53 of PB, which was, in any case, suo motu disallowed by the appellant and offered to tax in the return of income filed for the relevant assessment year. -Vide reply dated 15.12.2022 (refer point 5 @ page 171 of PB), the appellant had submitted nature and details of various expenses. -On 19.12.2022, ledger accounts of various |
| Depreciation on Intangible Assets | -The PCIT, in paras 14 to 14.4 (pages 96–99), has directed the AO to make enquiries on value of addition made to intangible assets, how such assets were created and whether such assets are eligible for depreciation.-The PCIT has observed that the assessing officer did not investigate how goodwill and intangible assets were created and valued, and on that basis has treated the issue as a case of “NO ENQUIRY” by the assessing officer. |
-There was complete disclosure in the books of account regarding the valuation and accounting treatment of intangible assets, as evident from the audited financial statements:ü Note No. 2(e)(ii) of the audited financial statement (Page 26 of PB) clearly deals with the method of valuation of intangible assets.ü Note No. 5(ii) of the audited financial statement (Page 39 of PB) deals with the method of valuation of goodwill acquired from business combinations.√ Note no. 5 (iii) of the audited financial statements (Page 40 of PB) disclosed how the other intangible assets were valued in books of accounts. |
| Issues pertaining to various expenses debited to P&L A/c | The PCIT, in paras 15 to 15.15 (pages 99–124), directed the AO to conduct enquiries on various heads of expenses debited to P&L A/c from perspective of genuineness, business purpose, 40A(2)(b) and TDS applicability. While directing the enquiry, the Pr. CIT has made following observations/ allegations:
-The assessing officer failed to make enquiries to ascertain the genuineness of various heads of expenses debited to the Profit & Loss Account, as well as the reasonableness of such expenses under section 40A(2) of the Act and the applicability and -Expenses such as medical consumable and drugs, depreciation and amortization, Interest paid to Fortis Healthcare, which require verification regarding their genuineness were not at all examined by assessing officer. -Based on aforesaid -Explanation 2 to section 263 of the Act has been invoked to justify assumption of revisionary jurisdiction. |
-Disclosure of all items of expenditure forms part of audited financial statements and the ITR on records.
-Vide notice dated 06.12.2022 (Pages 155-159 @ 157 of PB), sought details of ‘other expenses’. [Query no. 6], professional fee, interest paid [Query No. 11] -Vide reply dated 12.12.2022 (refer point no. 4) (Page 161 of PB), the appellant furnished the details/ nature of the other expenses. -Vide reply dated 15.12.2022 [refer point no. 5] (Page 171 of PB), the appellant had furnished details of professional expense and interest paid. –Vide reply dated 20.12.2022 (Pages 497-501 of PB), the appellant had furnished complete details of finance cost of Rs. 390.60 crores, including (i) interest of Rs. 43.29 crores paid on term loan/bank loan and (ii) interest of Rs.116.45 crores paid on loans borrowed from subsidiary/ holding company viz., Fortis |
| General directions of enquiry on residuary issues raised in SCN | The PCIT, in paras 16 and 17.1 (page 124), blanketly directed the assessing officer to examine remaining issues forming part of SCN dated 30.11.2023 issued by the PCIT u/s 263 of the Act. | -From the records of before the assessing officer including audited financial statements, tax audit report, queries raised and replies filed, it is evident that the AO has conducted detailed verification and examination during original scrutiny assessment. |
6. The ld. Counsel for the assessee further assailed the order of the Ld. PCIT in the light of conclusions drawn in para-16 of the impugned order. It was submitted that the Ld. PCIT has made a sweeping statement of enquiries not being done on several issues without specifically identifying as to what were the issues upon which the AOs had not done any enquiries and how. The ld. Counsel thus requested for quashing the order under section 263 of the Act.
7. The ld. CIT-DR, Shri Pravin Rawal, placed reliance upon the order of ld. PCIT, Delhi-1.
8. We have heard rival submissions in the light of material placed on record. Clause-(ii) of Explanation-2 of Section 263 postulates a situation of no enquiries being done by an AO before concluding assessment proceedings and consequently empowering a Commissioner of Income Tax to exercise his revisionary authority. The principal argument taken by the ld. PCIT in his assailed order is that the ld. AO has not done any enquiry on certain issues indicated by him in his impugned order. We have noted from the submissions made by the ld. Counsel placed in para-5 above that the same was not the case.
On all the issues highlighted by him, the ld. AO had indeed asked the assessee for his submissions and post consideration and exercise of due diligence the Ld. AO proceeded to accept the Returned Income. It is not a case where no enquiries were not done by the ld. AO. We have further noted that there is no merit whatsoever in the conclusions drawn by the ld. PCIT in para-16 of his impugned order, where, he without pointing out any specific issues as a sweeping statement stated that there are several other issues upon which the AO has not conducted any enquiries. Such irresponsible conclusions ought not to have been drawn by an senior officer like PCIT, Delhi-1. Law has given an authority to the Revenue Officers, but the same has to be exercised with due care, sincerity and responsibility. The judicial precedents relied upon by the ld. PCIT do not come to his rescue as the case of the Revenue primarily fails on the factual matrix itself. Accordingly, we are of the considered view that no case of exercise any valid revisionary authority is made out in this case. The order under section 263 dated 30.03.2025 of Ld. PCIT, Delhi-1 is therefore set-aside and quashed and the appeal of the assessee is allowed.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 15th May, 2026.
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