M/s. Appario Retail Pvt. Ltd. vs Principal Commissioner Of Income Tax, Delhi-I

1.

That on the facts and circumstances of the case and in law, the order dated 28.03.2025, passed by the Principal Commissioner of Income Tax, Delhi ['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 passed by the PCIT in undue haste without: (a) considering the submissions filed, and (b) first disposing off the legal objections by passing a separate speaking order, and (c) providing a 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 under section 263 setting aside the assessment order and directing the assessing officer to make de-novo assessment qua certain issues [referred to in paras 5 to 10 of the order] 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 PCIT 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 various items reported in Balance Sheet/Audit Report

8.

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 'items in the Balance Sheet/Audit Report'), is without jurisdiction and bad in law:

(i)

Revenue from contract with customers, basis of sales return and its valuation and the policy of discounts/incentives and to examine the applicability of sections 40(a)(i)/(ia) of the Act for deduction of tax at source on such discounts/incentives;

(ii)

Transaction of purchase of goods of Rs. 9178.18 crores recorded against total revenue declared by the assessee of Rs. 9929.48 crores, whether the same is at arm's length price;

(iii)

Related party transactions - to verify the business need, terms of contract, if there is any disproportionate increase in comparison to turnover, verify expenses paid by related party on behalf of the Company and examine applicability of sections 40(a)(i)/(ia) of the Act for deduction of tax at source on such transactions;

(iv)

Genuineness of trade payables and other current liabilities - to verify if there is any increase in liability as compared to last year and make appropriate addition if the claim is not found to be genuine;

(v)

Impairment of assets - to verify the basis of impairment and whether the same has any impact of income of the assessee.

8.1.

Without prejudice, the PCIT erred in issuing vague/ open ended directions to the assessing officer to examine the 'items in the Balance Sheet/Audit Report' [referred in ground no. 7 supra] and make addition(s)/disallowance(s), if the same found to have any bearing on computation of income of the appellant.

8.2.

That the PCIT erred in setting aside the assessment order on aforesaid issues, without even recording any prima facie findings on merits despite 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.

“As regards issues highlighted in para 7: The "RELATED PARTY TANSACTIONS" have been reported in the auditor's report AO is required to examine this issue, whether various expenses paid/made to persons specified in s.40A(2)(b) of the Act, the transactions have been done at arm's length? ie. excessive or unreasonable payment has not been made to these related parties. If not, necessary additions to the total income of the assessee is required to be made in accordance with the provisions of s.40A(2)(b) of the Act. For this purpose, the terms of contracts with these related parties and the business need of such transactions is required to be examined. The amount of expenses claimed in the preceding years, under these heads of expenses, is also required to be studied, whether there has been any Disproportionate increase during the A.Y. under consideration, as compared to preceding A.Y., in comparison to the turnover. Further, the assessee has also claimed Reimbursement of expenses to various related parties. All such Reimbursement of expenses, paid by the related parties on behalf of the company, is required to be deeply examined. If there is any abnormality is found, which indicates that the provisions of TDS has been violated under any circumstances, such as, if the same expenses would have been incurred by the assessee company directly, whether the TDS provisions would have been applicable in the hands of the company, which could not be applied since these expenses were in the nature or reimbursement, then AO has to make necessary additions in accordance with the provisions of s.40()(i) or 40(a)(ia), as the case may be.”