ITAT Holds Audit Objection Cannot Alone Justify Reassessment Revision:

Topre India Private Limited is engaged in the manufacturing, import, sale and distribution of automatic presses and other high-quality pressed automobile parts. For Assessment Year 2020-21, the assessee filed its return of income declaring Rs 81,12,31,724. The case was selected for complete scrutiny, during which the AO raised several queries and sought explanations and supporting details from the assessee. The assessee furnished its responses, including explanations regarding its business operations, depreciation claim and other relevant matters. The AO ultimately made an addition only in respect of a transfer pricing adjustment.

Subsequently, the PCIT initiated revisionary proceedings under Section 263 of the Act on various issues, including deductions claimed under Schedule BP, high creditors and liabilities, depreciation, imports, and international related-party lending or borrowing transactions. The PCIT directed the AO to conduct further enquiries and verification, including in relation to finance costs and other expenses of Rs 39,22,16,261 and depreciation, including additional depreciation, of Rs 49,29,10,768. Aggrieved by the revisionary order dated 27 March 2026, the assessee appealed before the Tribunal.

The Tribunal observed that the revisionary order itself recorded that the proceedings had been initiated on the basis of objections raised by the audit. It also noted that the AO had raised queries and follow-up queries on the issues subsequently taken up for revision and had accepted the assessee’s explanations.

The Tribunal found that the PCIT had not established how the AO’s order was erroneous and prejudicial to the interests of the Revenue. As the assessment record demonstrated that the relevant issues had already been examined, the Tribunal held that the exercise of revisionary jurisdiction was legally unsustainable.

Accordingly, the Tribunal allowed the assessee’s appeal and quashed the PCIT’s order under Section 263 of the Income Tax Act, 1961.