ITAT Mumbai Upholds Fresh Examination of Ambuja Cements' AY 2019–20 Assessment For Lack Of Inquiry

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed Ambuja Cements Limited's appeal against a revision order that had set aside its completed tax assessment for fresh verification, holding that the original assessment was passed “without due examination and verification.”

The company had challenged the Principal Commissioner of Income Tax's order under Section 263 revising and setting aside its Assessment Year 2019–20 assessment on the ground that the Assessing Officer had failed to verify material issues. The Tribunal has now upheld that revision, meaning the assessment remains set aside and will be examined afresh.

A Bench of Judicial Member Sandeep Gosain and Accountant Member Prabhash Shankar observed that, in respect of the disallowance under Section 14A, the matter reflected a “clear case of lack of any inquiry worth the name.”

During the year, the company earned exempt income of Rs.274.21 crore but made a suo motu disallowance of Rs. 1.82 crore. It also held strategic investments of Rs. 11,813.76 crore.

The Principal Commissioner found that the Assessing Officer had not applied the statutory formula under Rule 8D and had not undertaken proper verification. According to the revision order, the correct disallowance under Rule 8D ought to have been Rs.118.13 crore, resulting in a short disallowance of Rs. 116.30 crore.

The Tribunal noted that although the Assessing Officer issued a notice and received a reply along with an expert report, “no further query or clarification has been sought.”

The merits of the Ambuja's submission under Section 14A were “not examined.” The Bench held that this attracted Explanation 2(a) to Section 263, which applies where an order is passed without making inquiries or verification that should have been made.

Referring to the Supreme Court's ruling in Maxopp Investment Ltd., the Tribunal observed that the issue of strategic investments required proper verification under Section 14A read with Rule 8D, which was not carried out.

The second issue concerned information available on the Department's Insight Portal arising from a search action conducted on 30 October 2018 in the Sankalp Group, linked to Shri Robin Goenka. The information reflected the company as a beneficiary of alleged accommodation entries. The Tribunal recorded that the Assessing Officer “did not examine the issue at all” and had failed to take note of a “vital piece of information.”

Clarifying the scope of the order, the Tribunal noted that the assessment has only been set aside for fresh examination. The Assessing Officer has been directed to examine both issues afresh and make additions, “if required,” after granting the assessee an opportunity of being heard.

“In this situation, we have no hesitation to hold that the order of the AO was not passed after due examination and verification and therefore, there was an error on the part of AO which led to a correct conclusion of the ld. PCIT that the assessment order was not only erroneous but also prejudicial to the interest of Revenue,” the bench observed.

The appeal was dismissed.

For Appellant: Sourabh Soparkar, AR (virtually appear)

For Respondent: Rajesh Kumar Yadav, (CIT-DR)