Pr. Commissioner Of Income Tax v. M/S Vimla Infrastructure (India) Pvt. Ltd., 1[St] Floor,Mohsin Market, Gurunanak Chowk, M.g. Road, Raipur,District Raipur, Chhattisgarh

(Tax Case No.47/2022) Digitallysigned bySISTASISTASOMAYAJULUSOMAYAJULUDate:2025.06.2511:37:48+0530HIGH COURT OF CHHATTISGARH AT BILASPUR 2025:CGHC:26796-DB NAFR TAXC No. 47 of 2022 {Arising out of order dated 29-9-2021 passed by theIncome Tax Appellate Tribunal, Raipur Bench, Raipurin ITA No.18/RPR/2021} Pr. Commissioner Of Income Tax-1, Central RevenueBuilding, Civil Lines, Raipur, District Raipur,Chhattisgarh ... Appellant versus M/s Vimla Infrastructure (India) Pvt. Ltd., 1[st] Floor,Mohsin Market, Gurunanak Chowk, M.G. Road, Raipur,District Raipur, Chhattisgarh ... Respondent For Appellant : Mr. Amit Chaudhari, Standing Counsel forthe Income Tax Department and Mr. AjayKumrani, Advocate.For Respondent : Mr. Neelabh Dubey, Advocate throughVideo Conferencing and Mr. JitendraSahu, Advocate. Division Bench: - Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Deepak Kumar Tiwari, JJ. Judgment on Board(23/06/2025) Sanjay K. Agrawal, J. 1.This tax appeal preferred under Section 260A of the Income Tax Act, 1961 (for short, ‘the IT (Tax Case No.47/2022) Act’) was admitted for hearing on 19-12-2022 byformulating the following substantial question oflaw: - “Whether the learned Tribunal was correct inholding in the attending facts andcircumstances of the case that there was notangible material before the revisionalauthority for issuing a direction toAssessing Officer to make enquiries withregard to amount of Rs.15,90,24,621/- towardsdeduction under Section 80IA of the Act 1961,deduction of amount of Rs.58,29,019/- underSection 80 G of the Act 1961, deduction ofexpenses of Rs.58,20,219/- under Section37(1) and Freight charges of Rs.18,10,250/-under Section 80 IA of the Act 1961.” 2.The aforesaid substantial question of law has to be answered in the following factual backdrop: - 3.The respondent herein/assessee namely M/s. Vimla Infrastructure (India) Pvt. Ltd. is a companyengaged in the business of development, operationand maintenance of infrastructure facilities,specifically private railway sidings/logisticparks/integrated rail systems, under contractualarrangements with the Indian Railways. Theassessee filed its return of income for theassessment year 2015-16 claiming deduction underSection 80IA(4) of the IT Act to the tune of ₹15.90 crores as an “infrastructure facility” (Tax Case No.47/2022) developer and deduction under Section 80G of theIT Act for donation to the Prime Minister’sNational Relief Fund. As pleaded, returnincluded all the necessary documents, however,the assessment was selected for scrutiny underCASS and during the assessment, the AssessingOfficer issued detailed notices under Section142(1) of the IT Act on various datesspecifically seeking justification for Section80IA deduction which the assessee/ respondentherein replied by filing relevant document andwhich the Assessing Officer ultimately accepted.After considering the material, the AssessingOfficer passed order under Section 143(3) of theIT Act on 29-12-2017 allowing both deductionsmade under Section 80IA and 80G of the IT Act,however, the Principal Commissioner of Income Tax(PCIT) has taken proceeding under Section 263 ofthe IT Act alleging that the AO has failed toproperly examine the allowability of deductionunder Section 80IA(4) of the IT Act; the donationclaimed under Section 80G to the tune of 58.29₹lakhs; and certain freight and railway-related (Tax Case No.47/2022) (Tax Case No.47/2022) expenses to the tune of 18.10 lakhs. The PCIT₹vide order dated 22-3-2021 concluded that theAO’s order was erroneous and prejudicial to theinterest of revenue and set aside the assessmentorder directing the AO to re-examine theaforesaid issues. The assessee challenged thejurisdiction of the PCIT under Section 263 of theIT Act by filing appeal before the ITATcontending that the AO had conducted adequate andspecific enquiries during the assessmentproceedings; Section 80IA(4) deductions hadalready been allowed in previous years and no newmaterial or change in circumstances was broughtto light; the PCIT had issued vague directionsand had not conducted any independent enquiry orpointed out any definitive error; and onceeligibility was determined and deduction allowedin initial years, the deduction for subsequentyears could not be denied unless initial yearswere reopened or disturbed. However, the ITAT bythe impugned order allowed the appeal holdingthat the PCIT did not carry out any independentenquiry or pinpoint any specific error in the (Tax Case No.47/2022) assessment order, the AO had conducted duediligence and applied his mind; the PCIT merelyasked the AO to verify facts again, which hadalready been verified and this is not a validground under Section 263; and finally held thattwo conditions necessary for invocation ofSection 263 i.e. the order must be erroneous andit must be prejudicial to the interest ofrevenue, are not satisfied. 4. Being aggrieved against the order of the ITATsetting aside the order of the PCIT and restoringthe order of the AO, the Revenue has preferredthis appeal in which substantial question of lawhas been formulated and set-out in the openingparagraph of this judgment. 5. Mr. Amit Chaudhary, learned Standing Counsel forthe Income Tax Department appearing for theappellant herein/Revenue, would submit that thelearned ITAT is absolutely unjustified in settingaside the order passed under Section 263 of theIT Act without verifying the facts whether theorder was erroneous and prejudicial to theinterest of revenue. He would rely upon the (Tax Case No.47/2022) decision of the Supreme Court in the matter ofMalabar Industrial Co. Ltd. v. Commissioner ofIncome Tax, Kerala State1to buttress hissubmission. 6. Mr. Neelabh Dubey, learned counsel appearing forthe assessee Company/respondent herein throughvidoe conferencing, would oppose the appeal andsupport the impugned order passed by the ITAT andsubmit that the order of the ITAT is absolutelyin accordance with law, as the learned ITAT hasclearly recorded that neither the order of the AOwas erroneous nor it was prejudicial to theinterest of revenue, therefore, the PCIT couldnot have invoked Section 263 of the IT Act. Inthat view of the matter, the appeal deserves tobe dismissed and the substantial question of lawbe answered in favour of the assessee and againstthe Revenue. the assessee Company/respondent herein throughvidoe conferencing, would oppose the appeal andsupport the impugned order passed by the ITAT andsubmit that the order of the ITAT is absolutelyin accordance with law, as the learned ITAT hasclearly recorded that neither the order of the AOwas erroneous nor it was prejudicial to theinterest of revenue, therefore, the PCIT couldnot have invoked Section 263 of the IT Act. Inthat view of the matter, the appeal deserves tobe dismissed and the substantial question of lawbe answered in favour of the assessee and againstthe Revenue. 7. We have heard learned counsel for the parties andconsidered their rival submissions made herein-above and also went through the record withutmost circumspection.considered their rival submissions made herein-above and also went through the record withutmost circumspection. (Tax Case No.47/2022) 8. In order to consider the plea raised at the Bar,it would be appropriate to notice Section 263(1) 7. We have heard learned counsel for the parties andconsidered their rival submissions made herein-above and also went through the record withutmost circumspection.considered their rival submissions made herein-above and also went through the record withutmost circumspection. (Tax Case No.47/2022) 8. In order to consider the plea raised at the Bar,it would be appropriate to notice Section 263(1) of the IT Act, which states as under: - “263. Revision of orders prejudicial torevenue.—(1) The Principal Chief CommissionerorChiefCommissionerorPrincipalCommissioner or Commissioner may call for andexamine the record of any proceeding underthis Act, and if he considers that any orderpassed therein by the Assessing Officer orthe Transfer Pricing Officer, as the case maybe, is erroneous in so far as it isprejudicial to the interests of the revenue,he may, after giving the assessee anopportunity of being heard and after makingor causing to be made such inquiry as hedeems necessary, pass such order thereon asthe circumstances of the case justify,including,— (i) an order enhancing or modifying theassessment or cancelling the assessmentand directing a fresh assessment; or (ii) an order modifying the order undersection 92CA; or (iii) an order cancelling the order undersection 92CA and directing a fresh orderunder the said section. Explanation 1.—For the removal of doubts, itis hereby declared that, for the purposes ofthis sub-section,— (a) an order passed on or before or afterthe 1[st] day of June, 1988, by the AssessingOfficer or the Transfer Pricing Officer,as the case may be, shall include— (i) an order of assessment made by theAssistantCommissionerorDeputy (Tax Case No.47/2022) Commissioner or the Income-tax Officeron the basis of the directions issued bythe Joint Commissioner under section144A; (ii) an order made by the JointCommissioner in exercise of the powersor in the performance of the functionsof an Assessing Officer or the TransferPricing Officer, as the case may be,conferred on, or assigned to, him underthe orders or directions issued by theBoard or by the Principal ChiefCommissioner or Chief Commissioner orPrincipal Director General or DirectorGeneral or Principal Commissioner orCommissioner authorised by the Board inthis behalf under section 120; (iii) an order under section 92CA by theTransfer Pricing Officer; (b) "record" shall include and shall bedeemed always to have included all recordsrelating to any proceeding under this Actavailable at the time of examination bythe Principal Chief Commissioner or ChiefCommissioner or Principal Commissioner orCommissioner; (c) where any order referred to in thissub-section and passed by the AssessingOfficer or the Transfer Pricing Officer,as the case may be, had been the subject-matter of any appeal filed on or before orafter the 1[st] day of June, 1988, the powersof Principal Commissioner or Commissionerunder this sub-section shall extend andshall be deemed always to have extended tosuch matters as had not been consideredand decided in such appeal. Explanation 2.—For the purposes of thissection, it is hereby declared that an orderpassed by the Assessing Officer or the (Tax Case No.47/2022) Transfer Pricing Officer, as the case may be,shall be deemed to be erroneous in so far asit is prejudicial to the interests of therevenue, if, in the opinion of the PrincipalChief Commissioner or Chief Commissioner orPrincipal Commissioner or Commissioner,— (a) the order is passed without makinginquiries or verification which shouldhave been made; (b) the order is passed allowing anyrelief without inquiring into the claim; (c) the order has not been made inaccordance with any order, direction orinstruction issued by the Board undersection 119; or Explanation 2.—For the purposes of thissection, it is hereby declared that an orderpassed by the Assessing Officer or the (Tax Case No.47/2022) Transfer Pricing Officer, as the case may be,shall be deemed to be erroneous in so far asit is prejudicial to the interests of therevenue, if, in the opinion of the PrincipalChief Commissioner or Chief Commissioner orPrincipal Commissioner or Commissioner,— (a) the order is passed without makinginquiries or verification which shouldhave been made; (b) the order is passed allowing anyrelief without inquiring into the claim; (c) the order has not been made inaccordance with any order, direction orinstruction issued by the Board undersection 119; or (d) the order has not been passed inaccordance with any decision which isprejudicial to the assessee, rendered bythe jurisdictional High Court or Supreme Court in the case of the assessee or anyother person. Explanation 3.—For the purposes of thissection, “Transfer Pricing Officer” shallhave the same meaning as assigned to it inthe Explanation to section 92CA.” 9. A careful perusal of Section 263(1) of the IT Act would show that it is the essential condition to invoke Section 263 that the Commissioner mustfind that the order of assessment is erroneousfirstly and secondly, that the order of theassessing authority is prejudicial to theinterests of the revenue. The Commissioner ofIncome Tax has power to take into consideration Page 10 of 14 (Tax Case No.47/2022) all records available at the time of examinationby him. ‘Record’ would mean all records relatingto proceeding available at the time ofexamination with the Commissioner. (See Commissioner of Income Tax, Bangalore v. ShreeManjunatheaware Packing Products & Camphore Works2.) 10.The Supreme Court in Malabar Industrial Co. Ltd.(supra) has held that two conditions precedentfor exercise of the revisional power underSection 263(1) of the IT Act namely, (i) theorder of the Assessing Officer sought to berevised is erroneous; and (ii) it is prejudicialto the interests of the Revenue, have to besatisfied. It is further held that if one ofthem is absent, recourse cannot be had to Section263(1), and observed as under: - “6.A bare reading of this provision makesit clear that the prerequisite to exercise ofjurisdiction by the Commissioner suo motuunder it, is that the order of the Income TaxOfficer is erroneous insofar as it isprejudicial to the interests of the Revenue.The Commissioner has to be satisfied of twinconditions, namely, (i) the order of theAssessing Officer sought to be revised iserroneous; and (ii) it is prejudicial to the AIR 1998 SC 1478 : (1998) 1 SCC 598 (Tax Case No.47/2022) interests of the Revenue. If one of them isabsent — if the order of the Income TaxOfficer is erroneous but is not prejudicialto the Revenue or if it is not erroneous butis prejudicial to the Revenue — recoursecannot be had to Section 263(1) of the Act. 7.There can be no doubt that the provisioncannot be invoked to correct each and everytype of mistake or error committed by theAssessing Officer; it is only when an orderis erroneous that the section will beattracted. An incorrect assumption of factsor an incorrect application of law willsatisfy the requirement of the order beingerroneous. In the same category fall orderspassed without applying the principles ofnatural justice or without application ofmind. (Tax Case No.47/2022) interests of the Revenue. If one of them isabsent — if the order of the Income TaxOfficer is erroneous but is not prejudicialto the Revenue or if it is not erroneous butis prejudicial to the Revenue — recoursecannot be had to Section 263(1) of the Act. 7.There can be no doubt that the provisioncannot be invoked to correct each and everytype of mistake or error committed by theAssessing Officer; it is only when an orderis erroneous that the section will beattracted. An incorrect assumption of factsor an incorrect application of law willsatisfy the requirement of the order beingerroneous. In the same category fall orderspassed without applying the principles ofnatural justice or without application ofmind. 8.The phrase “prejudicial to the interestsof the Revenue” is not an expression of artand is not defined in the Act. Understood inits ordinary meaning it is of wide import andis not confined to loss of tax. The HighCourt of Calcutta in Dawjee Dadabhoy & Co. v.S.P. Jain[3], the High Court of Karnataka inCIT v. T. Narayana Pai[4], the High Court ofBombay in CIT v. Gabriel India Ltd.[5] and theHigh Court of Gujarat in CIT v. Minalben S.Parikh[6] treated loss of tax as prejudicial tothe interests of the Revenue. 10.The phrase “prejudicial to the interestsof the Revenue” has to be read in conjunctionwith an erroneous order passed by theAssessing Officer. Every loss of revenue asa consequence of an order of the AssessingOfficer cannot be treated as prejudicial tothe interests of the Revenue, for example,when an Income Tax Officer adopted one of the 3(1957) 31 ITR 872 (Cal) 4(1975) 98 ITR 422 (Kant) 5(1993) 203 ITR 108 (Bom) 6(1995) 215 ITR 81 (Guj) (Tax Case No.47/2022) courses permissible in law and it hasresulted in loss of revenue; or where twoviews are possible and the Income Tax Officerhas taken one view with which theCommissioner does not agree, it cannot betreated as an erroneous order prejudicial tothe interests of the Revenue unless the viewtaken by the Income Tax Officer isunsustainable in law. It has been held bythis Court that where a sum not earned by aperson is assessed as income in his hands onhis so offering, the order passed by theAssessing Officer accepting the same as suchwill be erroneous and prejudicial to theinterests of the Revenue. (See Rampyari DeviSaraogi v. CIT[7] and in Tara Devi Aggarwal v.CIT[8].)” 11. The principle of law laid down in Malabar Industrial Co. Ltd.(supra) has recently beenfollowed by their Lordships of the Supreme Courtwith approval in the matter of Commissioner of9Income-tax v. Paville Projects Pvt. Ltd.. 12. Coming to the facts of the case in light of theaforesaid decisions, it is quite vivid that the ITAT has clearly observed that the PCIT did notcarry out any independent enquiry or pinpoint anyspecific error in the assessment order and further held that the AO had conducted duediligence and applied his mind before passing the 7(1968) 67 ITR 84 (SC) 8(1973) 3 SCC 482 : 1973 SCC (Tax) 318 : (1973) 88 ITR 323 9(2023) 453 ITR 447 (Tax Case No.47/2022) order of assessment. The ITAT has further 11. The principle of law laid down in Malabar Industrial Co. Ltd.(supra) has recently beenfollowed by their Lordships of the Supreme Courtwith approval in the matter of Commissioner of9Income-tax v. Paville Projects Pvt. Ltd.. 12. Coming to the facts of the case in light of theaforesaid decisions, it is quite vivid that the ITAT has clearly observed that the PCIT did notcarry out any independent enquiry or pinpoint anyspecific error in the assessment order and further held that the AO had conducted duediligence and applied his mind before passing the 7(1968) 67 ITR 84 (SC) 8(1973) 3 SCC 482 : 1973 SCC (Tax) 318 : (1973) 88 ITR 323 9(2023) 453 ITR 447 (Tax Case No.47/2022) order of assessment. The ITAT has further observed that the PCIT has merely asked the AO toverify those facts again which were alreadyverified and which is not the valid ground underSection 263 of the IT Act and furthermore, inorder to invoke Section 263, it is well settledthat both the conditions that the order must beerroneous and it must be prejudicial to theinterest of revenue must be satisfied. Theassessee had made donation to the PrimeMinister’s National Relief Fund and he has alsobeen allowed deduction for last assessment yearand documents have also been filed showing thatdeduction has been allowed in previous year. Assuch, the finding recorded by the ITAT that thereis no apparent error in the assessment order andit is neither erroneous nor prejudicial to theinterest of revenue is the correct finding offact based on the evidence available on record,it is neither perverse nor contrary to the recordand therefore we do not find any ground tointerfere with the order of the ITAT. Soma (Tax Case No.47/2022) 13. In that view of the matter, we are of the considered opinion that boththe twin conditions, namely, the order of the Assessing Officersought to be revised is erroneous and it is prejudicial to the interestsof the Revenue, are not satisfied at all to invoke the jurisdictionunder Section 263 of the IT Act. As such, the learned PCIT isabsolutely unjustified in invoking the jurisdiction under Section 263of the IT Act which has rightly been set-aside by the ITAT. the twin conditions, namely, the order of the Assessing Officersought to be revised is erroneous and it is prejudicial to the interestsof the Revenue, are not satisfied at all to invoke the jurisdictionunder Section 263 of the IT Act. As such, the learned PCIT isabsolutely unjustified in invoking the jurisdiction under Section 263of the IT Act which has rightly been set-aside by the ITAT. 14.In that view of the matter, we answer the substantial question of lawin favour of the assessee and against the Revenue. in favour of the assessee and against the Revenue. 15. Consequently, the tax appeal deserves to be and is accordinglydismissed leaving the parties to bear their own cost(s). dismissed leaving the parties to bear their own cost(s). Sd/- Sd/-(Sanjay K. Agrawal)(Deepak Kumar Tiwari)JudgeJudge