Mondelez India Foods Private Limited Vs PCIT (ITAT Mumbai)
In this case, the ITAT Mumbai quashed the revision order passed under Section 263, holding that once an assessment is completed pursuant to directions issued by the Dispute Resolution Panel (DRP) under Section 144C, such an order cannot be revised by the PCIT.
The Tribunal emphasized that the DRP is a collegium of three Commissioners and functions as a high-level corrective mechanism within the assessment process. When the Assessing Officer passes the final order strictly in conformity with DRP directions, there is no scope to treat such an order as “erroneous and prejudicial to the interests of revenue” under Section 263.
It was further held that the Act specifically allows revision in cases of directions under Section 144A but does not extend the same to DRP directions under Section 144C(13), indicating clear legislative intent. Allowing revision in such cases would amount to indirectly overriding DRP directions, which is impermissible.
Accordingly, the Tribunal set aside the PCIT’s order on jurisdictional grounds itself, without examining the merits, reinforcing that Section 263 cannot be invoked to disturb assessments finalized under the DRP framework.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal has been filed by the assessee challenging the impugned order dated 20.03.2025 passed u/s 263 of the Income Tax Act, 1961 (`the Act’), by the Principal Commissioner of Income Tax – PCIT, Mumbai-8 (`the Ld. PCIT’) for the assessment year 2018-19. The following grounds are reproduced below:
“Based on the facts and in the circumstances of the case and in law, the learned PCIT has:
Validity of order passed under section 263 of the Act
1. erred in initiating the revision proceedings under section 263 of the Act, when the Assessment order sought to be revised was passed beyond the period of limitation and was therefore non est in law.
2. erred in initiating the revision proceedings under section 263 of the Act merely based en audit objections.
3. erred in passing an order under section 263 of the Act without appreciating that the assessment order sought to be revised was passed pursuant to directions issued by the Hon’ble Dispute Resolution Panel (‘DRP’) under section 144C of the Act, which is a collegiate body comprising of three Commissioners of Income-tax, being officers of coordinate rank with the revisional authority, and hence outside the scope of revision under section 263 of the Act.
4. erred in not appreciating that the assessment order passed by jurisdictional Assessing Officer (‘learned AO’) under section 143(3) read with section 144C(13) of the Act was neither erroneous nor prejudicial to the interest of the revenue.
5. erred in initiating revision proceedings under section 263 of the Act despite the fact that the learned AO had conducted an enquiry on the relevant issues, and it is settled law that the power under section 263 of the Act cannot be exercised in cases of inadequate enquiry, but only in cases of complete lack of enquiry.
6. erred in not appreciating that assessment order passed by the learned AO is not erroneous as there is no material to show that there was non-application of mind on part of the learned AO or that the learned AO has committed any mistake/ error of fact or law.
7. erred in initiating revision proceedings under section 263 of the Act without appreciating the fact that the absence of mention in the assessment order of the aspects examined cannot serve as a valid ground for initiating revisionary proceedings.
8. 8. erred in passing an order under section 263 of the Act without demonstrating that assessment order is erroneous which has caused prejudice to revenue, thereby initiating proceedings under section 263 of the Act for making roving inquiries.
9. erred in passing an order under section 263 of the Act invoking explanation 2 of section 263 of the Act without invoking the said explanation in the show cause notice issued under section 263 of the Act.
10. erred in invoking explanation 2 of section 263 of the Act holding that the assessment order was passed without making inquiries or verification without appreciating that Appellant furnished details upon inquiry made by the learned AO during assessment proceedings which was duly verified, and no adverse inference was drawn.
11. erred in passing order under section 263 of the Act without taking cognizance of submissions made by Appellant and providing no reason for deeming such submissions as unacceptable.
12. erred in remanding the issues for verification by the learned AO without dealing with the submissions of the Appellant and without pointing out an error in the claim made by the Appellant.
No under assessment of income
13. Erred in alleging underassessment of income of Rs 73,85,49,436 pertaining to exception items termination cost, without pointing an error and based on mere conjunctures and surmises ignoring the factual matrix of the case as well as the nature of the transaction undertaken by Appellant.
14. Erred in alleging underassessment of income of Rs 23,77,25,251 pertaining to voluntary retirement scheme expenses, without pointing an error and based on mere conjunctures and surmises ignoring the factual matrix of the case as well as the nature of the transaction undertaken by Appellant
15. Erred in alleging underassessment of income of Rs 11,59,66,731 pertaining to employee stock option expenses, without pointing an error and based on mere conjunctures and surmises ignoring the factual matrix of the case as well as the nature of the transaction undertaken by Appellant.
16. Erred in alleging underassessment of income of Rs 5,61,54,212 pertaining to cocoa grant received from Mondelez Europe GmbH, without pointing an error and based on mere conjunctures and surmises ignoring the factual matrix of the case as well as the nature of the transaction undertaken by Appellant
17. Erred in alleging underassessment of income of Rs 27,19,35,938 pertaining to unrealized gains on forward contracts accrued during the captioned AY, without pointing an error and based on mere conjunctures and surmises ignoring the factual matrix of the case as well as the nature of the transaction undertaken by Appellant.
18. Erred in alleging underassessment of income of Rs 45,40,10,518 pertaining to unrealized losses on forward contracts disallowed in the preceding AY and claimed in the captioned AY, without pointing an error and based on mere conjunctures and surmises ignoring the factual matrix of the case as well as the nature of the transaction undertaken by Appellant.
The above grounds are independent and without prejudice to one another.”
2. First of all, we take up Ground No. 3, which involves a legal issue going to the very root of the case. This ground raised by the assessee relates to challenging the order passed under Section 263 of the Act.
