February 06, 2026 : The Mumbai Bench of the Income Tax Appellate Tribunal has dismissed the appeal filed by Ambuja Cements Limited and upheld the revisionary order passed under Section 263 of the Income Tax Act for Assessment Year 2019–20. The Bench comprising Judicial Member Sandeep Gosain and Accountant Member Prabhash Shankar held that the original assessment order had been passed without adequate inquiry and verification on material issues and was therefore erroneous and prejudicial to the interests of the Revenue. The matter has now been restored to the Assessing Officer for fresh examination.
The assessment for AY 2019–20 had been completed under Section 143(3) read with Section 144B determining total income at ₹14,82,47,32,193. On examination of the records, the Principal Commissioner of Income Tax invoked Section 263 after forming the view that key aspects had not been properly scrutinised during assessment proceedings.
A central issue before the Tribunal concerned the disallowance under Section 14A read with Rule 8D. During the relevant year, the assessee earned exempt income of ₹274.21 crore but made a suo motu disallowance of only ₹1.82 crore. The record also showed that the company held strategic investments amounting to ₹11,813.76 crore. The revisional authority observed that the Assessing Officer had accepted the disallowance without properly applying Rule 8D or recording satisfaction as to the correctness of the claim. According to the Principal Commissioner, the correct disallowance should have been substantially higher, leading to a potential shortfall of ₹116.30 crore.
Before the Tribunal, the assessee argued that detailed submissions had been made during assessment proceedings and that the Assessing Officer had issued notices under Section 142(1), called for specific details regarding dividend income, and accepted the computation after considering an expert report. It was contended that this showed due application of mind and that the order could not be branded as erroneous merely because it was not elaborately written.
The Tribunal, however, noted that apart from issuing a query and receiving a reply, there was no material on record to show meaningful verification or independent analysis by the Assessing Officer. The Bench observed that the merits of the Section 14A computation, especially in the context of substantial exempt income and large strategic investments, had not been examined. It held that mere acceptance of the assessee’s working without proper inquiry constituted lack of inquiry. Invoking Explanation 2(a) to Section 263, the Tribunal reiterated that an order passed without making inquiries or verification which should have been made is deemed to be erroneous and prejudicial to the interests of the Revenue.
The second issue related to information available on the Department’s Insight Portal indicating that the assessee was a beneficiary of alleged accommodation entries from Shri Dilip Chotalal Patel, linked to Shri Robin Goenka of the Sankalp Group, following a search action conducted on 30 October 2018. The Tribunal recorded that this information was available during the assessment proceedings, yet no inquiry was undertaken by the Assessing Officer.
The assessee submitted that no supporting material had been provided during revision proceedings and argued that Section 263 cannot be invoked for initiating fishing inquiries. The Tribunal rejected this contention, observing that the revisional authority had merely set aside the assessment for proper verification. It clarified that the Assessing Officer had been directed to examine the issue afresh, conduct necessary inquiries, and make additions, if required, after granting the assessee an opportunity of being heard. The failure to even examine available investigation inputs, the Bench held, amounted to a clear case of no inquiry falling within the ambit of Explanation 2(a).
Referring to established jurisprudence on Section 263, including the principles laid down in Malabar Industrial Co. Ltd., the Tribunal reiterated that an order is erroneous if it is contrary to law or passed without proper inquiry, and it is prejudicial if it results in loss of lawful revenue. It distinguished the case laws relied upon by the assessee, noting that many pertained to the pre-amendment position prior to the insertion of Explanation 2.
Concluding that the Assessing Officer had accepted the return of income without conducting adequate examination of the Section 14A disallowance and the alleged accommodation entries, the Tribunal upheld the exercise of revisionary jurisdiction. The appeal was dismissed and the assessment stands set aside for fresh consideration in accordance with law.
Case Title: Ambuja Cements Limited v. Principal Commissioner of Income Tax, Mumbai
Case Number: ITA No. 3474/MUM/2025
