Income Tax Appellate Tribunal - Pune
Westin Infra,Sangli vs Pcit (Central) Pune, Pune on 30 March, 2026
आयकर अपीलीय अधिकरण "बी" न्यायपीठ पु णे में ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, PUNE
BEFORE SHRI R.K. PANDA, VICE PRESIDENT
AND
MS. ASTHA CHANDRA, JUDICIAL MEMBER
आयकर अपील सं. / ITA No.834/PUN/2025
धििाारण वर्ा / Assessment Year : 2020-21
Westin Infra, PCIT (Central), Pune
672, GS House,
Ganapati Peth, Sangli-416416 Vs.
PAN : AABFW5677J
अपीलार्थी / Appellant प्रत्यर्थी / Respondent
Assessee by : NONE
Department by : Shri Amit Bobde
Date of hearing : 24-03-2026
Date of 30-03-2026
Pronouncement :
आदे श / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 06.03.2025 of the Ld. Principal Commissioner of Income Tax (Central), Pune ("PCIT)" passed u/s 263 of the Income Tax Act, 1961 (the "Act") pertaining to Assessment Year ("AY") 2020-21.
2. None appeared for/on behalf of the assessee when the case was called for hearing on 24.03.2026. The assessee failed to appear even on the earlier dates fixed for hearing on 14.05.2025, 07.10.2025, 01.12.2025 & 12.02.2026. However, the Ld. DR was present on all the above dates of hearing. Under these circumstances, we deem it fit to adjudicate the appeal with the assistance of Ld. DR and the material available on record.
3. Briefly stated, the facts of the case are that the assessee is a partnership firm and engaged in the business of real estate construction, builders and developers. For AY 2020-21, the assessee filed its return of income on 06.02.2021 declaring loss of Rs.3,24,22,618/-. A survey action 2 ITA No. 834/PUN/2025, AY 2020-21 u/s 133A of the Act was carried out in Westin Infra & Prasad Jagtap Group of cases of Kolhapur on 19.11.2019. During the course of survey action, various incriminating documents were found and impounded in respect of the project „The Empire‟ undertaken by the assessee firm. The case of the assessee was selected for scrutiny and accordingly notices u/s 143(2) and 142(1) along with the questionnaire were issued and served upon the assessee, in response to which the assessee submitted the requisite details/information. The assessment was completed on 30.09.2022 by the Ld. Assessing Officer ("AO") vide an order passed u/s 143(3) of the Act assessing the total income at Rs.1,73,18,337/- thereby making additions :-(i) Rs.11,50,93,424/- as undisclosed income for AY 2020-21 on account of unrecorded cash receipts received over and above the agreement value of the concerned flats/shops in the project „The Empire‟; (ii) Rs.75,19,672/- being the cash expenses incurred in violation of the provisions of section 40A(3) of the Act and (iii) Rs.1,89,887/- u/s 69A of the Act.
4. On perusal of the case records, the Ld. PCIT invoked the provisions of section 263 of the Act and accordingly a show cause notice was issued to the assessee which is reproduced as under :
"02. In the above mentioned case, on verification of case records for A.Y. 2020-21 it is seen that a survey action u/s 133A of the Income Tax Act, 1961 (hereinafter referred as the Act') was carried out in Westin Infra & Prasad Jagtap Group of cases of Kolhapur on 19.11.2019. Subsequently, you had filed return of loss for Rs. 324,22,618/- on 06.02.2021 and assessment proceeding in your case was completed by passing an order u/s 143(3) of the Act on 30.09.2022 by assessing total income at Rs. 1,73, 18,337/-.
03. On perusal of the assessment records and partner's capital account(Schedule-1 of Balance sheet), it is seen that the interest of Rs.1,48,36,758/- was credited in the partner Shri Milind Mahesh Shah's capital account, who had the balance of capital at Rs. 10,48,76,792/- on 01.04.2019 and Rs 9,33,57,916/- on 31.03.2020. Further, it is also seen that the remaining partner's capital balances are negative as on 01.04.2019 and 31.03.2020 and no interest had been charged by the assessee firm. Further, it is seen that no details/submissions had been called for by the AD or submitted by the assessee. The charging of interest on partner's negative capital was not verified by the AO. In any case, it is indispensable that when the interest is credited on the positive capital balance of the partner, necessary interest is required to be charged on the negative capital balance of the partners. The aggregate negative balances of the partners is of Rs.455,76,588/-, The interest @ 12% on opening current capital works out to Rs.54,69, 191/-. Therefore, the sald interest of 54,69,191/- was required to be added to the total income of the assessee for the period under consideration. The AO was required to disallow the due interest on the negative balances of partner's capital.3 ITA No. 834/PUN/2025, AY 2020-21
3.1 Furthermore, on perusal of the assessment records, it is also seen that one of the partners Shri Prasad Kisanrao Jagtap having partnership ratio of 25% had not introduced any fixed capital. The same should have been verified by the AO during the course of assessment proceedings for the year under consideration. However, the AO failed to do so.
04. In view of the above, it is found that no verification on the aforesaid issues had been done in the assessment proceedings by the AO. As per provisions of section 263 of the Act, an order without making inquiries or verification which should have been made is deemed to be erroneous in so far as it is prejudicial to the interest of revenue.
05 Considering the above facts of the case it is seen that the AO has not examined and verified the above issues and therefore, income has been under assessed. Therefore, assessment order u/s 143(3) of the Act dated 30.09.2022 passed by the AO for A.Y. 2020-21 appears to be erroneous in so far as it is prejudicial to the interest of revenue.
06. In view of the facts and circumstances mentioned above, the assessment order passed u/s 143(3) of the Act in the case of Westin Infra for A.Y. 2020- 21 prima facie appears to be erroneous in so far as it is prejudicial to the interest of revenue in terms of the provisions of Explanation-(2)(a) to Section 263(1) of the Income Tax Act. I, therefore, intend to set aside/ modify the assessment order within the meaning of section 263 of the I.T. Act, 1961. An opportunity of being heard is therefore, given to you. You are requested to attend in person or through your authorized representative on 11.02.2025 at 12:30 PM in my office.
07. If you have authorized any representative to attend on your behalf, please ensure that the Power of Attorney with proper court fee stamp is filed on or before the date of hearing. If you do not wish to attend in person or through your authorized representative, you may file written submission along with necessary evidence in support of your contention before the due date of hearing. Further, it may be noted that no adjournment will be provided and in case on non appearance/non submission of reply, order will be passed on merits."
5. After considering the submissions of the assessee which is reproduced in para 4 of the impugned order of the Ld. PCIT, the Ld. PCIT held that the order u/s 143(3) of the Act dated 30.09.2022 for the AY 2020-21 has been passed by the Ld. AO without making necessary examination/verification/enquiries on the impugned issue stated in the above show cause notice and accordingly the assessment was held to be erroneous in so far as it is prejudicial to the interest of the Revenue. The assessment order was set aside by the Ld. PCIT to the file of the Ld. AO for examining the impugned issue in detail and frame the assessment afresh after giving opportunity of being heard to the assessee. The relevant observation and findings of the Ld. PCIT is reproduced below :
"5.1 On perusal of case record and submission of the assessee, details of fixed capital and current capital as on 01.04.2019 are as under:4 ITA No. 834/PUN/2025, AY 2020-21
Since, interest of Rs.48,36,758/- was credited in the partner Shri Milind Mahesh Shah's positive capital account, thus, interest should be charged on the remaining partner's negative current capital balances as on 01.04.2019 of Rs 2,27,03,573/-
5.2 The assessee has stated that clauseno.6 of the partnership deed dated 26.12.2012 was amended by an addendum, dated 5th September, 2014 wherein it is mentioned that if there is any debit balance in the account of any of the partners including the party of the first part, no interest shall be payable by him if the debit balance is on account of losses. On perusal of thesaid alleged amended deed, it is seen that this has been made only on 100 Rs. Stamp paper & is not notarized. Genuineness & veracity of this document needs verification.
5.2.1 Further, the assessee has stated that the same debit balance is there right from the first year but it is not on account of any drawings. The loss for AY 2013-14 is on account of payment of interest to partners on capital account. During AY 2014-15 also, there is a loss and the debit balance is to the account of Mr. Prasad Jagtap For this year, on the debit balance of Mr. Jagtap, interest is charged) Even in AY 2015-16 & AY 2016-17 also, interest is charged on the debit balance of Mr. Prasad Jagtap. Thus, it is seen that on the one hand, the assessee has contended that clause no. 6 of the Partnership Deed dated 26.12.2012 was amended for not charging interest on debit balances vide addendum, dated 5th September. On the other hand, it has been stated that interest was charged on debit balance of partner's capital account during the A.Ys 2015-16 & 2016-17. In view of this contradictory statements, contention of the assessee is not acceptable.
6. On perusal of the assessment records and facts of the case and assessee's reply, it is clear that interest of Rs.48,36.758/- was credited in the partner Shri Milind Mahesh Shah's capital account, who had the balance of capital at Rs. 10,48,76,792/-on 01.04.2019 and Rs.9,33,57,916/- on 31.03.2020. Fürther, the remaining partner's capital balances are negative as on 01.04.2019 and 31.03.2020 and no interest had been charged by the assessee firm. Further, it is seen that no details / submissions had been called for by the AO or submitted by the assessee. The charging of interest 5 ITA No. 834/PUN/2025, AY 2020-21 on partner's negative capital was not verified by the AQ, In any case, it is indispensable that when the interest is credited on the positive capital balance of the partner, necessary interest is required to be charged on the negative capital balance of the partners. The aggregate negative balances of the partners is of Rs.455,76,588/-. The interest @ 12% on opening current capital works out to Rs.54,69,191/-. Therefore, the said interest of 54,69,191/- was required to be added to the total income of the assessee for the period under consideration. The AO was required to disallow the due interest on the negative balances of partner's capital. The assessee has also failed to substantiate its claim during the current proceeding
7. In view of the above facts, it is clear that the above issue has not been properly examined/verified/enquired upon by the Assessing Officer during the course of the assessment proceedings. It has been held by various Courts that lack of enquiry on the germane issue renders the assessment order being erroneous and prejudicial to the interest of revenue. In this connection the following judicial pronouncements are relied upon:
Hon'ble Supreme Court in Rampyari Devi Saraogi v CIT 67 ITR 84 while taking note of the fact that the AO had concluded the assessment in "undue hurry" by passing a short, stereotyped assessment order, without making any inquiries, upheld the revision done by the CIT.
In the case of Deniel Merchants Pvt. Ltd. vs ITO dated 29.11.2017, the Hon'ble Supreme Court upheld the law as laid down by the High Courts in SubhlakshmiVanijya Pvt. Ltd vs. CIT 155 ITD 171 (Kol), Rajmandir Estates 386 ITR 162 (Cal) etc. and held that the CIT is entitled to revise the assessment order u/s 263 on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned.
In the case of Malabar Industrial Co. Ltd. Vs CIT [2000] 109 Taxman 66 (SC)/[2000] 243 ITR 83 (SC)/[2000] 159 CTR 1 (SC), Hon'ble Supreme Court held that where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263 was justified.
In the case of Vedanta Ltd. Vs CIT[2021]124 taxmann.com 435(Bombay)/[2021] 279 Taxman 358 (Bom), it has been held that where assessment was completed without proper inquiries, Commissioner was competent to invoke revisional jurisdiction and direct Assessing Officer for fresh assessment.
In the case of Nagal Garment Industries Pvt Ltd Vs CIT [2020]113taxmann.com 4 (Madhya Pradesh) [03-04-2017], it has been held that where Assessing Officer issued detailed questionnaire, in reply to which records were filed, but Assessing Officer did not apply his mind nor did he conduct an enquiry while accepting claim of assessee although he recorded in note-sheet that reply filed by appellant was not satisfactory and did not explain all facts, assessment order was to be revised The Hon'ble Delhi High Court in the case of CIT Vs Shri Braham Dev Gupta in ITA no 907/2017 and 1162/2017 has clearly decided that Pr. Commissioner of Income tax can invoke the provision of section 263 of Income Tax Act where AO has not made adequate enquiry and verification. In this matter, SLP of the assessee has also been dismissed by Hon'ble Apex Court.
The Hon'ble ITAT Delhi in the case of Ankush Garg v CIT, Rohtak in ITA No 2287 & 2288/Del/2015 dated 21.05.2019, upheld the Pr. CITs action u/s 6 ITA No. 834/PUN/2025, AY 2020-21 263 by holding that the order of the AO was cryptic, and was not passed after due examination and verification of certain issues and therefore, there was an error on the part of AO which led to a correct conclusion of the CIT that the order of the AO was not only erroneous but also prejudicial to the interest of Revenue.
In the case of Pooja Gupta in ITA No 4057/Del/ 2018 dated 31.01.2019, the ITAT Delhi has discussed the validity of action under section 263 in respect of penny stock matters. The Tribunal has referred to the detailed SOP issued by the CBDT, CBDT Instruction dated 16.03.2016 on penny stock/LTCG. and other specified parameters in this order, and held that the order u/s 263 was justified since there was complete lack of inquiry with regard to the perspective for which the case was selected for scrutiny, and that the AO had merely relied on the assessee's submissions.
The decision of the ITAT Delhi Bench in the case of Bhushan Steel Ltd., New Delhi vs ACIT dated 30 March, 2015 is relevant to note as it relates to the aspect of lack of inquiry at the end of the AO for valid initiation of proceedings under Section 263 of the Act.
Hon'ble High Court OF Karnataka in the case of CIT vs. Infosys Technologies Ltd. 341 ITR 293 dated 04.01.2012 has held that section 263 is a section which enables the Commissioner to have a look at the orders or proceedings of the lower authorities and to effect a correction, if so needed, particularly if the order or proceeding is erroneous and prejudicial to the interest of the revenue. It is also held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, ITO should have made further inquiries before accepting the statements made by the assessee in his return.
Hon'ble ITAT Delhi Bench in the case of Ramesh Kumar, ITA No. 1982/Del/2018 for A.Y. 2014-15 order dated 25.01.2019 has observed as under-
On going through the facts, it can be observed that the Assessing Officer has not conducted any enquiry and this is a clear case of lack of enquiry not a case of inadequate enquiry. Further non application of mind by the Assessing Officer can be easily gauzed from the fact that the information available with the Assessing Officer has not been utilised during the assessment proceedings which makes the case fit for applying the provisions of explanation 2 (a) of section 263.
Hon'ble Delhi High Court in the case of Gee Vee Enterprises vs Addl. CIT, 99 ITR 375 has clearly held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, ITO should have made further inquiries before accepting the statements made by the assessee in his return.
8. Provisions of Explanation 2 of Section 263 (1), are reproduced here under:
Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,-
(a) the order is passed without making inquiries or verification which should have been made;
(b) the order is passed allowing any relief without inquiring into theclaim;7 ITA No. 834/PUN/2025, AY 2020-21
(c.) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119 or
(d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by COND thejurisdictional High Court or Supreme Court in the case of theassessee or any other person.
9. In view of the above facts and circumstances of the case and keeping in view the judicial pronouncements as discussed above, it is held that the assessment order u/s 143(3) of the Act dated 30.09.2022 for A.Y. 2020-21 has been passed by AO without making necessary examination/ verification/ enquiries on the above issue and accordingly, the same is held to be erroneous in so far as it is prejudicial to the interest of Revenue.
10. Accordingly, the said assessment order dated 30.09.2022 is hereby set aside to the file of the Assessing Officer for examining the above issue in detail while framing the fresh assessment order. The Assessing Officer shall make necessary examination, verification and enquiries in respect of the above issue after giving adequate and reasonable opportunity of being heard to the assessee."
6. Aggrieved the assessee is in appeal before the Tribunal raising the following grounds of appeal :
"1. On the facts and the circumstances of the case and in law, the Learned PCIT erred in setting aside the assessment order without pointing out the prejudice caused to the Department for reexamining the issue of interest on the debit balance of the partners when the assessment order was finalized only with the approval of the Addl. Commissioner of Income Tax.
2. The learned PCIT further erred in rejecting the addendum to the partnership deed dated 5th September 2014 with quite a frivolous reason that the same was not notarized and, therefore, genuineness and veracity of the document needed verification.
3. The learned PCIT further erred in establishing how charging of interest was just and legal when the said debit balances had incurred only on account of the share in loss of the respective partners.
Your appellant craves for leave to add, alter, amend, modify, delete all above or any grounds of appeal before or during the course of hearing in the interest of natural justice."
7. We have perused the case records. Perusal of the order sheet entries shows that this appeal was fixed for hearing several times, however, none appeared for and/or on behalf of the assessee nor any adjournment application has been filed. Even when the matter was called for hearing on 24.03.2026 no one appeared to represent the assessee‟s case and therefore the findings of the Ld. PCIT remains uncontroverted by the assessee. Nothing is available before us so as to enable us to take a view contrary to the view taken by the Ld. PCIT in his impugned order. We therefore do not 8 ITA No. 834/PUN/2025, AY 2020-21 find any reason to interfere with the order of the Ld. PCIT and accordingly the appeal filed by the assessee is dismissed.
8. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 30th March, 2026.
Sd/- Sd/-
(R.K. Panda) (Astha Chandra)
VICE PRESIDENT JUDICIAL MEMBER
पुणे / Pune; दिन ां क / Dated : 30th March, 2026.
रदि
आदे श की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to :
1. अपील र्थी / The Appellant.
2. प्रत्यर्थी / The Respondent.
3. The Pr. CIT concerned.
4. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, "बी" बेंच, पुणे / DR, ITAT, "B" Bench, Pune.
5. ग र्ड फ़ इल / Guard File.
//सत्य दपि प्रदि// True Copy// आिे श नुस र / BY ORDER, सहायक पं जीकार/ Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune