JMJ Ganpatiji Maharaja Hospitality Pvt. Ltd. Vs DCIT (ITAT Mumbai)
PCIT-263 Upheld for Inadequate Inquiry in Search Assessment: ITAT Mumbai Sustains Revision Despite Abhisar Buildwell Plea
The Mumbai ITAT (“F” Bench) dismissed the assessee’s appeals for AYs 2012-13 and 2015-16 and upheld the revisionary orders passed by the PCIT under section 263, holding that the assessments framed under section 143(3) read with section 153A were erroneous and prejudicial to the interests of the Revenue due to lack of proper and effective inquiry.
The case arose from a search conducted on the JMJ Group, pursuant to which assessments under section 153A were completed accepting the returned losses. On examination of records, the PCIT found a substantial mismatch between revenue from operations shown in the profit and loss account and the increase in trade receivables reflected in the balance sheet. According to the PCIT, although the Assessing Officer had called for party-wise details of sundry debtors, he failed to examine, reconcile, or correlate the sharp divergence with revenue recognition, nor did he verify whether revenue was accounted inclusive or exclusive of indirect taxes. This, according to the PCIT, amounted to “lack of inquiry” squarely attracting Explanation 2 to section 263.
Before the Tribunal, the assessee argued that it was a completed/unabated assessment year and, relying on PCIT v. Abhisar Buildwell (P) Ltd. (SC), contended that no addition or inquiry was permissible in the absence of incriminating material. The ITAT rejected this plea, holding that Abhisar Buildwell does not bar revision under section 263 where the Assessing Officer has failed to conduct basic inquiries in a search assessment. The Tribunal emphasized that mere calling for information does not constitute inquiry; the AO must apply his mind and take the inquiry to its logical conclusion.
The ITAT further noted that during the search, substantial material was seized and the AO had issued a general query to explain seized documents, but the assessee did not place any explanation on record before the AO for the relevant assessment years. Accepting the returned income without examining seized material or reconciling glaring inconsistencies in revenue and receivables amounted to failure to exercise jurisdiction under section 153A.
Since the PCIT had only set aside the assessments for fresh examination without making any addition on merits, the Tribunal held that the revisionary action was within the scope of section 263. Accordingly, the PCIT’s orders were upheld and both appeals of the assessee were dismissed.
