ITAT Mumbai Quashes Section 263 Revision Order: When AO Conducts Inquiry and Reaches a Conclusion, PCIT Cannot Override It
Overview of the Dispute
The Mumbai Bench of the Income Tax Appellate Tribunal delivered a significant ruling in the matter of Boxcoworld Logistics India Private Limited Vs PCIT (ITAT Mumbai) for Assessment Year 2022-23, setting aside a revision order issued by the Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961. The core question before the Tribunal was deceptively straightforward: where an Assessing Officer has undertaken meaningful inquiry into disputed purchases, sought supporting documentation, issued statutory notices to third parties, and thereafter made a considered disallowance of 25% of questioned purchases, can the PCIT exercise revisionary jurisdiction simply because she believed the entire 100% ought to have been disallowed?
The Tribunal's answer was an unambiguous no. The Section 263 revision order was quashed, and Boxcoworld Logistics India Private Limited's appeal was allowed in its entirety.
Background: The Assessment and the Additions Made
Boxcoworld Logistics India Private Limited filed its return of income for AY 2022-23 on 03/11/2022, declaring total income of ₹1,06,22,900/-. The assessment was completed under Section 143(3) read with Section 144B of the Income Tax Act, 1961, determining total income at ₹13,48,06,619/-, reflecting several additions over the returned income.
Two purchase-related additions formed the crux of the subsequent revision proceedings:
Addition 1: Unaccounted Purchases Under Section 69C
The Assessing Officer, during the course of assessment, issued notices under Section 133(6) of the Act to the assessee's suppliers. Information obtained from two such suppliers revealed that their recorded sales to the assessee exceeded the corresponding purchase figures reflected in the assessee's books of account. The resultant discrepancy of ₹1,72,80,113/- was treated as unaccounted purchases and added to the assessee's income under Section 69C read with Section 115BBE of the Income Tax Act, 1961. Critically, however, the AO applied a tax rate of 30% on this addition rather than the 60% rate mandated under Section 115BBE.
Addition 2: Estimated Disallowance of Unverified Purchases
With respect to a separate set of suppliers from whom purchase confirmations could not be obtained, the AO examined purchases aggregating to ₹31,28,51,043/-. Given that confirmations were absent and the genuineness of these transactions remained partially unverified, the AO applied an estimated disallowance of 25%, resulting in an addition of ₹7,82,12,760/-.
The assessee challenged both these additions before the Commissioner of Income Tax (Appeals) by filing Form 35 on 22/4/2024.
Why the PCIT Initiated Revision Proceedings
Despite the matter being sub-judice before the CIT(A), the PCIT issued a revision notice on 11/4/2025 under Section 263 of the Income Tax Act, 1961. The notice identified two alleged errors in the assessment order dated 26.03.2024:
Error 1: Incorrect Tax Rate on Section 69C Addition
"On verification of the records, it is seen that the assessee has opted for Concessional Corporate Tax Regime (CCTR) u/s 115BAA. However, the AO taxed special income of Rs. 1,72,80,113 u/s 69C at the rate of 30% instead of the correct rate of 60% as mandated under the Act read with section 115BBE. This resulted in short levy of tax of Rs. 1,13,17,060 (including interest u/s 234B)."