Sameer Ramesh Vashi v. PCIT

Case snapshot

Sections / provisions: 263

Questions before the Court / Tribunal

• Revision beyond limited-scrutiny scope: The reported ruling limits section 263 where the Assessing Officer had made inquiry within the authorised limited-scrutiny scope and adopted a possible view.

Material facts and background

Brief facts of the case are that assessee is an individual engaged

in the business of real estate as builder and developer in the name of his proprietary concern M/s. Samrock Developers. Assessee filed his return of income on 31.10.2018 along with tax audit report in Form 3CD and reported total income at Rs.1,15,93,120/- consisting of income from house property and from other sources after setting of current business loss of Rs.1,24,19,223/-. Case of the assessee was selected for limited scrutiny under CASS to verify i.

3.1. Ld. AO in the course of assessment proceedings issued notices u/s. 142(1) to which assessee furnished detailed replies, all of which are placed on record in the paper book before us. Having gone through

3 ITA No. 164/Mum/2025 Sameer Ramesh Vashi AY 2018-19

the submissions made by the assessee, assessment was concluded by accepting the returned income at Rs.1,15,97,120/-. Later the said assessment was subjected to revision u/s. 263 vide order dated 25.03.2023 by which it was set aside. The assessment was remitted back by the ld. PCIT to the Assessing Officer for fresh consideration. Assessee moved an appeal against the said order u/s. 263 before the Tribunal which was adjudicated upon vide order dated 10.08.2023. Tribunal had set aside the order passed u/s. 263 back to the file of ld. PCIT for fresh consideration. 3.2. Proceedings u/s.263 were re-initiated by issuing notice to the assessee. Necessary compliances were made and details were filed explaining the case of the case on the issues raised by the ld. PCIT for invoking

allowability of business loss was examined by the ld. AO during the assessment proceedings in detail, while issuing notice u/s. 142(1) for which all the details and submissions were made. According to the assessee, conditions mentioned in explanation 2 to section 263 are not satisfied. It was also pointed out by the assessee that specific enquiries were made by the ld. AO regarding allowability of business loss through notices u/s. 142(1) dated 30.10.2020 and 04.03.2021 which were duly replied by the assessee. It was also submitted that assessee is a builder and the expenditure debited to the profit and loss account resulting in business loss are merely administrative overhead expenses which are allowable for set off. 3.3. It was also submitted that method of recognition of revenue for the real estate projects undertaken by the assessee is by following project completion method which has been accepted by the Department

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Appellant / assessee submissions

since past several years. Claim of expenditure are in respect of administrative expenses for running the business and are not attributable to any specific project carried out by the assessee. Further, it was contended that the case of the assessee was selected for limited scrutiny to verify the business loss and agriculture income. On the applicability of provisions of accounting standard IND AS-115, assessee submitted that it applies only to the companies and not to the individual proprietary concerns and therefore, the consideration made by the ld. PCIT is on a totally wrong footing. 3.4. In respect of the issue relating to deemed rental income from a flat at Greater Noida whereby ld. PCIT contended that assessee has not offered the deemed rental income which was added in the immediately preceding assessment year AY 2017-18 and assessee had accepted the same, contention of the assessee is that the present year under consideration was subjected to limited scrutiny and the issue relating to deemed rental income was not part of the limited scrutiny assessment. Hence, no revisionary proceedings can be undertaken in respect of the issue not covered by the limited scrutiny assessment....

Revenue / respondent submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Court / Tribunal analysis and reasoning

The assessee is required to explain how these expenses are related to the business being carried out by the assessee. 3.2 The assessee has claimed depreciation of Rs. 10,66,080/- during the year. On perusal of ledger extracts for depreciation, it is seen that depreciation(@7.5%) on motor car amounts to Rs.9,90,980/- In this regard you are requested to explain as to how the motor cars are being used for business purpose and justify the claim for depreciation. 3.3 Further in the P&L Account the assessee has shown income from maintenance charges received of Rs. 17,40,000/-, property tax collection of Rs. 18,69,200/-. Assessee is required to explain how these incomes are related to assessee's business. 4. Further in your submissions it is seen that the assessee owns a 4BHK flat Greater Noida whose value amounts to Rs.1,30,69,302/-However you have not shown income from House property arising from this property. On verification of Fair market rent online for a similar flat, the annual rent is Rs.6,80,500/- during the F.Y 2017-18. Therefore you are requested to explain as to why the amount of Rs.6,80,500/- should not be treated as deemed annual lettable value of the said flat and add to...

in the paper book. Assessee also justified claim of various expenses which are administrative expenses and allowable as deduction since these did not pertain to specific projects and therefore, they were not capitalized. According to him, both the issues relating to claim of business loss and deemed rental income were specifically enquired into and thus, invocation of revisionary proceedings u/s. 263 are not in accordance with the provisions of law. Ld. AO had taken one of the possible views on the two issues and has accepted the income returned by the assessee. 5.2. He further contended that ld. PCIT applied IND AS-115 without understanding its applicability as it applies only to companies under the Companies Act, 2013, whereas assessee is a proprietary concern. He further pointed out that issue relating to deemed rental income in respect of flat at Greater Noida was not part of the limited scrutiny assessment and therefore, ld. PCIT could not have invoked revisionary proceeding in respect of the said issue as the provisions contained in section 263 gave the power to ld. PCIT only to examine the issues which were before the Assessing Officer during the course of scrutiny...

record. We have also given our thoughtful consideration to the submissions made before us as well as the orders of the authorities below. Admittedly, it is on record that ld. AO had issued notices u/s. 142(1) on the two specific issues for which the case of the assessee was selected for limited scrutiny assessment, namely verification of business loss and agriculture income. Issue relating to deemed rental income from the flat at Greater Noida was not part of the limited scrutiny assessment proceedings. Ld. AO had raised specific queries in respect of claim of business loss by enquiring into various expenditure incurred by the assessee for which all the relevant documentary evidences including bills and vouchers as well as ledger accounts were placed on record in the course of assessment proceedings. It is not a case of lack of enquiry on the issue which formed the basis for the impugned revisionary order passed by the ld. PCIT. In respect of issue raised by ld. PCIT for deemed rental income, we hold that it is not open for the ld. PCIT to while exercising powers u/s. 263 to find fault with assessment order on issue which is not covered by the limited scrutiny when assessing...

a case of lack of enquiry. We observe that Ld. CIT has not applied his mind to arrive at a consideration which is erroneous in so far as prejudicial to the interest of revenue for passing the impugned order u/s. 263 of the Act. We observe that in the course of proceeding u/s. 263 of the Act, assessee had furnished the relevant details and explained the issues raised through the show cause notice, supporting his contentions by corroborative documentary evidence. It is well settled law that for invoking the provisions of section 263 of the Act, both the conditions that the order must be erroneous and prejudicial to the interest of revenue needs to be satisfied. This ratio stands laid down by various Hon’ble Courts. 7.2. For this, let us take the guidance of judicial precedence laid down by the Hon’ble Apex Court in the case of Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordships have held that twin conditions need to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and in so far as prejudicial to the interest of the Revenue. In the following...

Operative decision and relief

Pr. CIT for exercising revisionary proceedings u/s. 263 of the Act are purely on facts which are verifiable from the records of the assessee. Moreover, the same have been examined by the Ld. AO in the course of assessment proceedings for which all the relevant details and explanations were placed on record which also forms part of the paper book before us. Further, ld. CIT, DR could not bring any material on record to controvert the factual position as submitted before us.

8.1. Accordingly, on the issues raised by the ld. Pr. CIT in the revisionary proceedings, no action u/s 263 of the Act is justifiable which in our considered view cannot be sustained under the facts and circumstances of the present case and judicial precedents dealt herein above. We, therefore, quash the impugned order u/s 263 of the Act and allow the grounds raised by the assessee. 9.

In the result, appeal of the assessee is allowed. Order pronounced in the open court on 30.10.2025.

Copy to: 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai

Authorities and precedents appearing in the judgment

• Mumbai - 400058 vs The Principal Commissioner
• Apex Court in the case of Malabar Industries Ltd. vs. CIT

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Revision beyond limited-scrutiny scope. The operative result is classified as Remanded / restored. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Revision beyond limited-scrutiny scope. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Use the judgment as a fact-specific precedent: match the statutory version, assessment period, procedural stage and evidentiary record before relying on the result.
• Check whether a later High Court/Supreme Court order has affirmed, reversed, distinguished or rendered the decision academic.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

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