ORDER
Anikesh Banerjee, Judicial Member.- The instant appeal of the assessee filed against the order of Ld. Principal Commissioner of Income Tax, Mumbai-3 [for brevity “Ld. PCIT”], order passed under Section 263 of the Income Tax Act, 1961 (for brevity ‘the Act’), for Assessment Year 2018-19, date of order 26.09.2025. The impugned order emanated from the order of the Assessment Unit Income Tax Department (for brevity ‘Ld. AO’), order passed under Section 147 r.w.s. 144B of the Act, date of order 29.02.2024.
2. The brief facts of the case are that the assessee is an innovation led Transitional Pharmaceutical Company producing, developing and marketing a wide range of branded and generic formations biotechnology products and active pharmaceutical ingredients globally. In the impugned assessment proceeding the assessee filed the return u/sec. 139(1) of the Act of 28.11.2018 by declaring total income of Rs.1093,44,26,340/- under the normal provision of the Act and Rs.1737,48,46,739/- as book profit under provision of section 115JB of the Act. The assessee’s case was selected for scrutiny assessment and the Ld. AO had dealt with the following issues which are considered in impugned assessment order passed under Section 143(3) r.w.s. 144C(3) r.w.s. 144B of, date of order 18.11.2021. The reasons for complete scrutiny noted in assessment order are reproduced as below:
“1. The case was selected for Complete Scrutiny assessment under the E-assessment Scheme, 2019 on the following issues:-
| S. No. |
Issues |
| i. |
Claim of Any Other Amount Allowable as Deduction in Schedule BP |
| ii. |
Stock Valuation |
| iii. |
Double Taxation Relief u/s 90/91 |
| iv. |
International Related Party Transactions in Services |
| v. |
Duty Drawback |
| vi. |
Refund Claim |
| vii. |
ICDS Compliance and Adjustment |
| viii |
Foreign Financial InterestS. No. |
| viii. |
Deduction Claimed for Industrial Undertaking u/s 801A/801AB/80IAC/IB/IC/IBA/80ID/80IE/10A/10AA |
| x. |
Specified Domestic Transactions |
| xi. |
Investment in Intangible Assets |
| xii. |
Expenses Incurred for Earning Exempt Income |
| xiii. |
Deduction on Account of Donation for Scientific Research |
| xiv. |
Foreign Bank Account |
| xv. |
International Transactions |
| xvi. |
Deduction from Total Income under Chapter VI-A” |
3. A notice under Section 148 of the Act was issued to the assessee on 20.04.2022 on the allegation that it had availed bogus purchase bills. In response, the assessee filed its return of income on 18.05.2022 pursuant to the said notice, declaring a total income of Rs. 1,268.4 crore. In the return filed pursuant to Section 148, the assessee had suo motu disallowed the expenditure incurred on gifts to doctors, being expenditure allegedly incurred in violation of the Medical Council of India (MCI) Guidelines. The Ld. AO accepted the returned income and completed the reassessment under Section 147 of the Act vide order dated 29.02.2024 without making any further addition or variation to the returned income.
4. Thereafter, the Ld. PCIT invoked the revisional jurisdiction under Section 263 of the Act and issued a show-cause notice, holding that the reassessment order passed by the Ld. AO was erroneous insofar as it was prejudicial to the interests of the revenue. The Ld. PCIT observed in the revisional order that the notice under Section 263 had been issued on the basis of the “Audit Objections.” The relevant observations of the Ld. PCIT regarding the issuance of the notice under Section 263, as recorded in the revisional order, are reproduced below:
“In this case, the assessee has filed its Return of income for the AY 2018-19 on 28.11.2018 declaring total income of Rs. 1093,44,26,340/- under normal provisions of the Act and Rs.1737,48,46,739/- under section 115JB of the Act. The Scrutiny assessment was completed on 18.11.2021 u/s. 143(3) of the Act determining the assessed income at Rs. 1095,31,67,387/- under normal provisions of the Act and Rs.1739,35,87,786/- under section 115JB of the Act. Notice u/s.148 was issued to the assessee on 20.04.2022 on the issue of availing bogus bills. Subsequently assessee filed return of income on 18.05.2022 declaring income of Rs.1268.4 Crores. On 12.05.2022, Revenue Audit Party (RAP) raised audit objections on these issues, namely,
(a) Gifts to doctors in violation of MCI guidelines.
(b) Short disallowance u/s.14A and
(c) Wrong claim of CSR u/s. 80G.
FAO was intimated by this office on 20.02.2023 to take necessary action on these issues. However, these issues were not examined at all by the FAO.
However, Order u/s.147 r.w.s. 144B was passed on 29.02.2024 on the returned income of Rs. 1268,40,12,110/- without taking remedial action against the audit objections as pointed out by this office.
2. In view of the above, notice for hearing u/s. 263 was issued on 20.02.2025 requesting the assessee to show cause as to why the order u/s. 143(3) r.w.s. 144 of the Income Tax Act, 1961 should not be revised as it was erroneous and prejudicial to the interest of revenue. Further, on change of incumbent, fresh notice of hearing was given to assessee on 18.08.2025 In this regard, assessee has submitted reply vide submission dated 25.08.2025. The submission of the assessee and finding and directions are discussed in the following paras.”
5. In compliance with the notice issued under Section 263 of the Act, the assessee furnished the requisite explanations and supporting evidence. However, the Ld. PCIT, by exercising the revisional jurisdiction under Section 263, set aside the reassessment order passed under Section 147 of the Act dated 29.02.2024. Aggrieved by the revisional order dated 26.09.2025, the assessee has preferred the present appeal before us.
6. The Ld. AR filed a paper book comprising pages 1 to 340, which has been taken on record. The Ld. AR contended that the issues sought to be revised under Section 263 had already been examined during the original assessment proceedings completed under Section 143(3) of the Act vide order dated 18.11.2021. It was, therefore, argued that the revisional order passed by the Ld. PCIT on 26.09.2025 is barred by limitation, as the period prescribed under Section 263 is to be reckoned from the date of the original assessment order. In support of this contention, the Ld. AR placed on record a chronological statement of the relevant dates and events in tabular form, which is reproduced below:
“16. Sequence of events are given under for the sake of your Honour’s ease of reference:
| Sr. No. |
Particulars |
Date |
Remarks |
| 1 |
Filing of original return of income u/s 139(1) of the Act |
28th November 2018 |
– |
| 2 |
Issue of notice u/sec. 143(2) of the Act (Refer to Page No. 121 to 124 of the FPB) |
23rd September 2019 |
|
| 3 |
Issue of notice u/sec. 142(1) of the Act (Refer Page No.125 to 128 of the FPB) |
07th December 2020 |
|
| 4 |
Detailed reply filed in response to notice dated 7th December 2020 |
21st December 2020 (Refer Page No. 129 to 140 of the FPB) |
No.27 of Annexure XXIV of tax audit report on CSR Donation (Refer Page No.115 to 116 of the FPB) |
| 16th September 2021 (Refer to Page No. 141 to 161 of the FPB) |
Detailed submission for disallowance made u/sec. 14A of the Act along with its working Refer Page No.154 to 157 of the FPB) |
| 5 |
Final Assessment order u/s 143(3) |
18 Nov 2021 |
Addition on account of ALP adjustment (corporate guarantee) |
| 6 |
Filing of appeal before CIT(A) |
29 Nov 2021 |
Pending disposal as on date |
| Show-cause notice u/s148A(b) |
9 Mar 2022, 23 Mar 2022 |
Alleging of accepting bogus purchase bills for purchase from Shree Rams Enterprises |
| 7 |
Notice u/s148 of the Act (Refer to page No. 162 to 168 of the FPB) |
20 Apr 2022 |
|
| 8 |
Return of income u/sl48 of the Act |
18 May 2022 |
Suo-moto disallowed sales promotion expenses Rs.124.21 crores in view of Hon’ble SC Judgment in the case of (Apex Laboratories[(2022) 442 ITR 1 SC)] |
| 9 |
Submission in response to notice u/sl48 of the Act (Refer to page No.180 to 305 of the FPB) |
24 May 2022 |
– |
| 10 |
Audit objections raised by Revenue Audit Party (RAP) on the Assessment order dated 18th November 2021 |
12 May 2022 |
Issues
• Gift to doctors in violation to MCI guidelines
• Short computation of disallowance u/14A;
• Wrong claim of CSR claim u/s80G of the Act
|
| 11 |
Intimation to FAO by the office of PCIT to take necessary action basis the audit report |
20 Feb 2023 |
|
| 12 |
Reassessment order passed u/sl47 of the Act (Refer to page no.21 to 31 of the Appeal set) |
29 February 2024 |
No variation proposed as the issue raised in the reassessment notice with respect to alleged bogus purchase issue already disallowed in return of income filed u/sec. 148 of the Act (as part of Sales Promotion Expenses) |
| 13 |
Date of receipt of show-cause u/s 263 of the Act for revision of reassessment order passed u/s 147 of the Act (Refer Page Nos.309 to 313 of the FPB) |
20 February 2025 |
– |
| 14 |
Response filed in response to show-cause notice dated 20 February 2025 (Refer Page Nos. 314 to 340 of the FPB) |
25 August 2025 |
– |
| 15 |
Order passed u/s 263 of the Act (Refer Page Nos. 7 to 20 of the Appeal Set) |
26 September 2025 |
– |
| 16 |
Appeal filed before Hon’ble Mumbai Tribunal against the order passed under section 263 of the Act dated 26 September 2025 |
31 October 2025 |
– |
7. The Ld. AR further contended that, during the original assessment proceedings, the Ld. AO had referred the matter to the Ld. TPO for determination of the arm’s length price of the international transactions entered into by the assessee. Pursuant thereto, the Ld. TPO, vide order dated 28.07.2021 passed under Section 92CA(3) of the Act, made a transfer pricing adjustment of Rs. 1,87,41,047/- in respect of the corporate guarantee provided by the assessee. The Ld. AR submitted that the very issue forming the subject matter of the revisional proceedings under Section 263 had already been examined during the original assessment proceedings, including the transfer pricing proceedings before the Ld. TPO, and was duly considered by the Ld. AO while passing the assessment order. It was further contended that the reassessment order did not give rise to any fresh issue on this aspect, as the matter had already attained finality in the original assessment. Accordingly, the Ld. AR argued that the revisional proceedings initiated under Section 263 were barred by limitation considering the issues related to assessment order. In support of the aforesaid contention, the Ld. AR filed a detailed written submission. The relevant extract of the written submission, challenging the validity of the proceedings under Section 263 on the ground of limitation, is reproduced below:
“PART I-LEGAL SUBMISSIONS:
A. Ground No 1 & 2: Validity of proceedings u/s 263 of the Act – Revisionary proceedings are barred by limitation
Revisionary proceeding has been initiated without proper application of mind by the Ld. PCIT
18. As mentioned above, the Ld. PCIT has initiated revisionary proceedings u/s 263 of the Act merely on the basis of audit objections which were raised by the Revenue Audit Party (RAP) on 12 May 2022 on the following issues arising out of original assessment completed vide order dated 18 November 2021 (Refer Page Nos. 7 of the Appeal set)
• Gift to doctors in violation to MCI guidelines
• Short disallowance u/s 14A
• Wrong claim of CSR u/s 80G of the Act
19. The Id. PCIT has initiated the revisionary proceedings u/s 263 of the Act in respect of the reassessment order passed under section 143(3) r.w.s 147 of the Act dated 29 February 2024. The reassessment proceedings were initiated vide notice u/s 148 dated 20 April 2022 in relation to allegation of accepting bogus bills for purchases from Shree Ram Enterprises. However, as the Appellant in the return of income filed in response to notice u/s 148 dated 18 May 2022, suo-moto disallowed sales promotion expenses amounting to Rs. 124.21 crores following Hon’ble SC judgement in the case of Apex Laboratories (
(2022) 442 ITR 1(SC) ] which subsumed alleged bogus purchase from Shree Ram Enterprises, no separate addition was made in course of reassessment proceedings on the bogus purchase issue.
20. Accordingly, it is submitted that the Id PCIT has initiated the revisionary proceedings under section 263 of the Act against the reassessment order passed under section 143(3) r.w.s 147 of the Act dated 29 February 2024, without applying his mind and not understanding the fact that the audit objections raised by the Revenue Audit Party dated 12 May 2022, pertained to the issues arising out original assessment order dated 18 November 2021 and accordingly, revision is any to be done based on the audit objections should have been done only against the original assessment order from which the issues arose.
21. In order to deal with the audit objections raised against the original assessment order under section 143(3), the department had remedy to reopen the original assessment u/s 148 based on the information available on account of audit objections raised Revenue audit party, which is also considered as a valid information for purpose of initiating reassessment proceedings whereas same is not considered to be valid ground to consider the order passed by assessing officer as “erroneous” or “prejudicial” to the interest of revenue as per Explanation 2 to Section 263 of the Act.
22. Thus, the revisionary action has been initiated and concluded without proper appreciation of issues under consideration based on the material already without demonstrating any error in the assessment order on record and time-lines available for under-taking the revision proceedings, clearly indicates non-application of mind and in such a case the action of the learned PCIT in terming the reassessment order dated 29 February 2024 (Refer Page Nos. 21 to 31 of the Appeal set) as ‘erroneous’ is incorrect as issue under consideration in revision proceedings are not subject matter of the reassessment proceedings. Hence, the revisionary proceedings initiated us 263 of the Act is invalid and the consequent order passed is bad-in-law and liable to be quashed.
23. In this regard, the Appellant would like to place reliance on the following cases wherein it is held that the provisions under Section 263 cannot be invoked when there is no application/independent application of mind by the Commissioner:
• Shreeji Prints (P.) Ltd. (SC) ] dated 3 February 2020 (Refer Page Nos. 479 to 483 of the legal paperbook)
• D.G. Housing Projects Ltd (Delhi HC) ) (Refer Page Nos. 484 to 490 of the legal paper book)
• Britannia Industries Ltd. (Kolkata Tribunal) ) (Refer Page Nos. 491 to 509 of the legal paperbook) affirmed by Hon’ble Calcutta High Court (Calcutta HC) ] (Refer Page Nos. 510 to 515 of the legal paperbook)
• Rajesh Kumar Jalan (2024) (208 ITD 349 ) (Kol. Trib.)
• AhlconParenterals (India) Ltd. (ITA No. 769/Del/2021) dated 21 May 2024 (Refer Page Nos. 516 to 519 of the legal paperbook)
• Refex Industries Ltd. (ITA No. 972/Mds/2014) dated 9 September 2014 (Refer Page Nos. 520 to 532 of the legal paperbook)
The proceedings initiated under section 263 of the Act are barred by limitation as the period of limitation for initiation of 263 proceedings on issues unrelated with the reassessment proceedings has to be seen from the date of original assessment order
24. Further, the Appellant wishes to draw your Honour’s attention to provisions of Section 263(2) of the Act, which states that no order of revision can be passed by the Hon’ble Commissioner after expiry of two years from the end of financial year in which the order sought to be revised was passed. The relevant extracts of the said section is reproduced below for your Honours reference:
263.(1) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer for the Transfer Pricing Officer, as the case may be, is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the Appellant an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, 81b [including-
(i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment, or
(ii) an order modifying the order under section 92CA: or
(iii) an order cancelling the order under section 92CA and directing a fresh order under the said section.]
(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.
25. In the present case, the Ld. PCIT, has passed an order u/s 263 of the Act revising the reassessment order dated 29 February 2024 under Section 263 of the Act on the following three issues:
• Initiation of penalty proceedings for under-reporting of income with respect to the disallowance made by the Appellant u/s 37(1) of the Act on account of corporate gifts given to doctors and medical practitioners amounting to Rs. 124.21 crores;
• Short Computation of Disallowance of expense under Section 14A r.w.r 8D amounting to Rs. 11.78 Crores:
• Disallowance of 80G deduction claimed on CSR expenditure of Rs. 11.32 Crores
26. As stated above, the reassessment proceedings under Section 147 of the Act, were initiated only on the issue of alleged bogus purchases from party “Shree Ram Enterprises and the issues on which your Honours propose to revise the reassessment order, were not even subject matter of the reassessment proceedings and arise only from the original assessment proceedings. The said fact is clearly evident from the notices under Section 148A(b) (Refer Page Nos 162 to 168 of the Factual Paperbook), order under Section 148A(d) (Refer Page Nos. 170 to 179 of the Factual Paperbook) and order passed under section 147 r.w.s 144B of the Act (Refer Page Nos 21 to 31 of the Appeal Set) Further, even in the various submissions made during the reassessment proceedings only the said issue pertaining to purchases from “Shree Ram enterprises were discussed.
27. Accordingly, it is humbly submitted that since, the reassessment proceedings were on the sole issue of alleged bogus purchases from “Shree Ram Enterprises and the issues being agitated in the present 263 proceedings pertaining to sales promotion expenses or 14A disallowance or deduction claimed under section 80G of the Act on CSR Expenses (which were part of and were not issue in dispute during the reassessment proceedings), hence, the period of questions and enquiries made during original assessment proceedings u/s 143(3) r.w.s 144C limitation for initiation of proceedings under section 263 of the Act should be determined from the date of original order under Section 143(3) of the Act and not from the date of reassessment order under Section 147 of the Act.
28. In the present case, the time period available for initiating revision proceedings under section 263 of the Act i.e. 2 years from the end of the year in which original assessment order u/s 143(3) of the Act (dated 18 November 2021), expired on 31 March 2024.
29. It is pertinent to note that the learned PCIT initiated revisionary proceedings under Section 263 of the Act on 20 February 2025 (Refer Page Nos. 309 to 313 of the factual paperbook). i.e. during the period when the time limit to initiate another reassessment proceedings the captioned AY, was still available to the Ld. AO. The Ld. PCIT held that the reassessment order dated 29 February 2024, passed under Section 147 read with Section 144B of the Act (Refer Page Nos. 21 to 31 of the appeal set), was erroneous and prejudicial to the interest of the Revenue on the ground that the learned AO had allegedly failed to verify issues relating to sales promotion expenses, disallowance under Section 14A of the Act, and deduction claimed under Section 80G of the Act in respect of CSR expenditure. However, it is pertinent to note that, these issues were not subject matter of reassessment proceedings under Section 147 of the Act. Moreover, these very matters had already been raised, examined, and addressed during the original assessment proceedings completed under Section 143(3) read with Section 144C dated 18 November 2021 (Refer Page Nos. 32 to 36 of the appeal set), after due application of mind by the learned AO.
30. Thus, in view of the above, it is submitted that the revision proceedings initiated under section 263 of the Act by Ld. PCIT on the issues which were not part of Reassessment proceedings vide notice dated 20 February 2025 is barred by limitation, as same could only be done by the Ld. PCIT until 31 March 2024 against the original assessment proceedings completed vide order dated 18 November 2021 and consequently the order passed by the Ld. PCIT dated 26 September 2025 is also invalid, bad-in-law and liable to be quashed.
31. In this connection, the Appellant wishes to place reliance on following decisions of Hon’ble Supreme Court/Hon’ble High Courts/ Hon’ble Tribunal wherein it has been held that where Commissioner has invoked revisionary proceedings with respect to an issue which were not covered in the reassessment proceedings under section 147 of the Act, issue before the Commissioner while exercising powers under section 263 of the Act would relate back to the original assessment order (i.e. order issued in proceedings under section 143(3) of the Act) and thus, the relevant date for the purpose of determination of period of limitation of exercising powers under section 263 of the Act would be the date of original assessment order issued under section 143(3) of the Act Decision of Hon’ble Supreme Court in case of Alagendran Finance Ltd.
[2007] 211 CTR 69 (SC) ] dated 27 July 2007(Copy enclosed at page 341 to 347 of the legal paper-book) has held as under:
“6. We have carefully gone through the record and considered the rival submissions. In our view, the contentions of the Appellant deserve to succeed. The facts of the case clearly show the claim of lease equalisation fund, if at all accepted, is an error committed by the Assessing Officer in his order passed under section 143(3) of the Act for the assessment year 1994-95 on 27-2-1997, for the assessment year 1995-96 on 125-1997 and for the assessment year on 30-3-1998. The Appellant, no doubt, took up these assessments in appeal before the CIT (Appeals) and thereafter the assessment itself was subject to proceedings under section 148 and ultimately, the orders of reassessment were framed on 28-3-2002. All the subsequent events are in respect of matters other than the allowance of lease equalization fund. In other words, the error, if any, has been committed, it was done in the order of the Assessing Officer passed in the assessment year 1997-98. Therefore, these orders very much subsist despite the subsequent proceedings under section 148 of the Act.”
“8. In the light of the above decisions and authorities, we are of the opinion that the impugned order passed under section 263 on 29-3-2004 are clearly barred by limitation with reference to the orders passed under section 143(3) by the Assessing Officer for the above assessment years on 27-2-1997, 25-12-1997 and 30-3-1998 respectively. Accordingly, the orders of the CIT under section 263 are vacated and the ground taken by the Appellant is allowed.”
• Decision of Hon’ble Supreme Court in case of Industrial Development Bank of India Ltd.
[2023] 454 ITR 811 (SC) dated 26 April 2023 (Copy enclosed at page no. 348 to 349 of the legal paper-book) has held as under:
“3. At the outset, it is required to be noted, and it is not in dispute that. as such, the commissioner exercised powers under section 263 of the Act with respect to the issues which were not covered in the re-assessment proceedings. Therefore, the issue before the Commissioner while exercising the powers under Section 263 of the Act relate back to the original Assessment Order and, therefore, the limitation would start from the original Assessment Order and not from the Re-assessment Order. We are fortified with our view by the decision of this Court in the case of CIT v. Alagendran Finance Ltd. 293 ITR 1/[2007] 7 SCC 215 . As observed and held by this Court in the aforesaid decision, once an Order of Assessment is re-opened, the previous order of assessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of re-assessment is distinct and different, the entire proceedings of assessment would be deemed to have been re-opened. Meaning thereby, only in a case where the issues before the Commissioner at the time of exercising powers under section 263 of the Act relate to the subject matter of re-assessment, the limitation would start from the date of Reassessment Order. However, if the subject matter of the re-assessment is distinct and different, in that case the relevant date for the purpose of determination of period of limitation for exercising powers under section 263 of the Act would be the date of the original Assessment Order.”
8. The Ld. DR argued and contended that the Ld. PCIT validly passed the order u/sec. 263. The Ld. PCIT has set aside the reassessment order which was passed on dated 29.02.2024 and not the assessment order. So, the impugned order cannot be stated as invalid in point of limitation. The Ld. DR respectfully relied on the order of Coordinate Bench of ITAT Kolkata in the case of Bhargab Engineering Works v. Pr. CIT (Kolkata – Trib.) the relevant paragraph no.7 is reproduced as below:
“7. We have considered the submissions by both the sides and also gone through the facts of the case. Ground No. 1 is relating to the order passed by the ld. PCIT, Central Circle-2, Kolkata dated 25.03.2025 being barred by limitation of time prescribed under the Income Tax Act inasmuch as the period of limitation is applicable from the date of original assessment order dated 21.04.2021 and not the date of reassessment order dated 30.03.2023. This ground of appeal is dismissed as it is evident from the order under section 263 that the ld. PCIT had revised the reassessment order dated 30.03.2023, the limitation for revising which expired on 31.03.2025 as per the provisions of sub-section (2) of section 263 of the Act. The Id. PCIT is competent to revise any order if he is of the view that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue and the limitation of powers under sub-section (2) of section 263 are not limited only to the original assessment order dated 21.04.2021 but any order, including the assessment order as well as the reassessment order, both of which can be revised as both are separate orders for the purpose of the Act and separately applicable as well before the appellate authorities. Thus, Ground No. 1 of the appeal is rejected.”
9. We have heard the rival submissions and perused the material available on record. The undisputed facts reveal that the original assessment under Section 143(3) read with Sections 144C(3) and 144B of the Act was completed on 18.11.2021 after examining various issues, including the assessee’s claim under Section 14A, CSR deduction under Section 80G, and other matters forming part of the scrutiny assessment. Thereafter, the assessment was reopened by issuance of notice under Section 148 dated 20.04.2022 solely on the allegation that the assessee had availed bogus purchase bills from “Shree Ram Enterprises”. In response, the assessee filed its return under Section 148 on 18.05.2022 and, on its own, disallowed sales promotion expenditure incurred on gifts to doctors amounting to Rs.124.21 crore in view of the judgment of the Hon’ble Supreme Court in Apex Laboratories. Consequently, the Ld. AO accepted the returned income and completed the reassessment under Section 147 on 29.02.2024 without making any further addition. These facts are evident from the assessment records as well as the chronology placed before us.
10. It is further evident from the revisional order itself that the “Revenue Audit Party” had raised audit objections on 12.05.2022 in respect of
| (i) |
|
gifts to doctors in violation of the MCI Guidelines, |
| (ii) |
|
short disallowance under Section 14A, and |
| (iii) |
|
alleged incorrect deduction under Section 80G in respect of CSR expenditure. |
The office of the Ld. PCIT had also intimated the Field Assessing Officer (FAO) on 20.02.2023 to take appropriate remedial action on these audit objections. Thus, the audit objections admittedly existed much prior to the completion of the reassessment proceedings dated 29.02.2024. Despite the availability of such audit objections, the reassessment proceedings were neither expanded to examine these issues nor was any addition made by the Ld. AO on those counts. More importantly, these issues admittedly arose from the original assessment proceedings completed on 18.11.2021 and were never the subject matter of the reassessment initiated only on the issue of alleged bogus purchases.
11. The settled position of law is that where reassessment is confined to a distinct issue, the limitation prescribed under Section 263(2) for revising issues unrelated to the reassessment has to be reckoned from the date of the original assessment order and not from the reassessment order. The Hon’ble Supreme Court in CIT v. Alagendran Finance Ltd. 293 ITR 1 (SC) and again in CIT v. Industrial Development Bank of India Ltd. 454 ITR 811 (SC) has categorically held that only where the subject matter of revision is the very subject matter of reassessment would limitation commence from the reassessment order; otherwise, it relates back to the original assessment order. The issues sought to be revised in the present case, namely disallowance under Section 14A, deduction under Section 80G on CSR expenditure, and gifts to doctors, were admittedly not the issues for which reassessment was initiated. Therefore, the limitation has necessarily to be computed with reference to the original assessment order dated 18.11.2021.
12. We also find considerable force in the contention of the assessee that the revisional proceedings have been initiated primarily on the basis of the “Revenue Audit Party’s” objections. The revisional order itself records that the notice under Section 263 was issued on account of such audit objections. It is also an admitted fact that these audit objections were available to the Department during the pendency of the reassessment proceedings. If the revenue was of the view that the audit objections required examination, nothing prevented the Ld. AO from considering the same while completing the reassessment proceedings. Having failed to do so, the Department cannot indirectly extend the period of limitation by seeking to revise the reassessment order on issues which were admittedly part of the original assessment. Such a course would defeat the legislative mandate contained in Section 263(2) of the Act.
13. The reliance placed by the Ld. DR on the decision of the Coordinate Bench in Bhargab Engineering Works (supra) is misplaced. In the present case, the issues sought to be revised were never the subject matter of the reassessment proceedings and, therefore, the ratio laid down by the Hon’ble Supreme Court in Alagendran Finance Ltd. (supra) and reaffirmed in Industrial Development Bank of India Ltd. (supra) squarely governs the controversy. The law declared by the Hon’ble Supreme Court is binding upon this Tribunal under Article 141 of the Constitution and, therefore, prevails over the contrary view expressed in any Tribunal decision.
14. In view of the foregoing discussion and respectfully following the binding decisions of the Hon’ble Supreme Court, we hold that the revisional proceedings initiated under Section 263 on issues pertaining to gifts to doctors, disallowance under Section 14A, and deduction under Section 80G are barred by limitation, since those issues emanated from the original assessment order dated 18.11.2021 and not from the reassessment proceedings concluded on 29.02.2024. Accordingly, the impugned order passed by the Ld. PCIT under Section 263 dated 26.09.2025 is unsustainable in law and is hereby quashed. Since we have allowed the appeal on the preliminary legal issue of limitation, the other grounds raised by the assessee on merits are rendered academic and do not call for separate adjudication. Accordingly, the appeal of the assessee stands allowed.
15. In the result, the appeal for the assessee bearing ITA No.7025/Mum/2025 is allowed.
