Mridul Shashikant Khandelwal Vs PCIT (ITAT Mumbai)
U/s 263 Cannot Be Invoked Merely Because AO Made No Addition After Enquiry
In a significant ruling, the Mumbai ITAT quashed a revision order passed under section 263, holding that the Principal CIT cannot revise an assessment merely because the Assessing Officer, after conducting enquiries, chose not to make any addition. The case arose from a search on the Alankit Group, pursuant to which proceedings under section 153C were initiated against the assessee based on alleged accommodation entry transactions reflected in seized material. The Assessing Officer conducted enquiries, issued multiple notices under sections 143(2) and 142(1), called for explanations and supporting documents, and ultimately accepted the returned income without making any addition.
The Principal CIT subsequently invoked section 263 on the ground that the Assessing Officer had not properly examined the alleged accommodation entry transactions and that the assessment order was therefore erroneous and prejudicial to the interests of the Revenue. However, the Tribunal found that the assessment records clearly demonstrated extensive enquiries by the Assessing Officer, including examination of seized material, ledger accounts, alleged transactions with entities connected to the Alankit Group, and detailed replies furnished by the assessee.
Relying on the Delhi High Court decision in Sunbeam Auto Ltd., the Tribunal reiterated the well-settled distinction between “lack of enquiry” and “inadequate enquiry.” It held that where the Assessing Officer has made enquiries and applied his mind to the issues, revision under section 263 cannot be justified merely because the Commissioner believes that deeper or more exhaustive enquiries should have been carried out or because he holds a different opinion on the outcome.
The Tribunal concluded that the assessment order was neither passed without enquiry nor in violation of any statutory direction or binding precedent. Since the conditions prescribed under Explanation 2 to section 263 were not satisfied, the revisionary order was held to be unsustainable. Accordingly, the section 263 order was quashed and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been preferred by the Assessee against the order dated 11.12.2025, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2014-15.
