February 13, 2026 : The Delhi Bench of the Income Tax Appellate Tribunal has set aside a revision order passed under Section 263 of the Income Tax Act against Studds Accessories Limited for Assessment Year 2020–21, holding that the Principal Commissioner of Income Tax failed to establish how the original assessment order was both erroneous and prejudicial to the interests of the Revenue.
The order was delivered by a Bench comprising Judicial Member Raj Kumar Chauhan and Accountant Member S. Rifaur Rahman in Studds Accessories Limited v. PCIT, Faridabad (ITA No. 3570/Del/2025).
Studds Accessories Limited, engaged in manufacturing two-wheeler helmets and accessories, was originally assessed under Section 143(3) read with Section 144B. The assessment order dated September 6, 2022 determined total income at ₹93.87 crore after making a disallowance of ₹85.87 lakh on account of cess expenditure.
Subsequently, the Principal Commissioner invoked revisional jurisdiction under Section 263 on the ground that the assessment order was erroneous and prejudicial to the interests of the Revenue.
The revision proceedings were triggered based on alleged discrepancies in:
- Legal and professional expenses
- Salary payments
- Deduction under Section 80JJAA (additional employee cost)
- Corporate Social Responsibility (CSR) expenditure
The Principal Commissioner noted a difference of ₹2.17 crore between professional fees reported in Form 3CD and the amount claimed in the return of income. Similarly, a difference of ₹9.38 crore was observed between salary payments reflected in tax audit records and the amount claimed in the return.
It was alleged that the Assessing Officer had not conducted adequate enquiry into these issues and had passed the order in a casual manner. The assessment was therefore set aside with directions to conduct a fresh examination.
Assessee’s Submissions
Before the Tribunal, the assessee contended that:
- Detailed explanations and reconciliations had been submitted during both the assessment and revision proceedings.
- Form 10DA and supporting documents for Section 80JJAA deduction had been furnished.
- The salary difference arose because tax was deducted only in cases where TDS liability existed.
- CSR expenditure had already been disallowed suo motu in the computation of income.
It was argued that the Assessing Officer had undertaken complete scrutiny and adopted a plausible view after examination of material on record.
After examining the record, the Tribunal observed that the assessee had furnished detailed submissions on all issues raised in the show cause notice under Section 263. However, the Principal Commissioner had not pointed out any specific defect in those explanations.
The Bench noted that the revisional authority merely remitted the matter back to the Assessing Officer without recording clear findings demonstrating how the assessment order was erroneous and prejudicial to the Revenue.
Significantly, the Tribunal recorded: “Ld. PCIT has not even whispered the mistake on the detailed submission made by the assessee.”
The Tribunal held that for valid invocation of Section 263, the Commissioner must independently establish the existence of both error and prejudice. Mere suspicion or perception of inadequate enquiry is insufficient. It further observed that simply setting aside an assessment for fresh enquiry, without substantiating the alleged errors, does not satisfy the statutory requirements.
Accordingly, the Tribunal concluded that the twin conditions for exercising revisional powers under Section 263 were not met and set aside the revision order. The appeal of Studds Accessories Limited was allowed.
Case Title: Studds Accessories Limited v. PCIT, Faridabad
Case Number: ITA No. 3570/Del/2025
Assessment Year: 2020–21
Coram: Raj Kumar Chauhan (Judicial Member) and S. Rifaur Rahman (Accountant Member)
