Calcutta High Court
Principal Commissioner Of Income Tax vs M/S Britannia Industries Ltd on 7 August, 2025
Author: T.S. Sivagnanam
Bench: T.S Sivagnanam
2025:CHC-OS:115-DB
OD-2
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION [INCOME TAX]
ORIGINAL SIDE
ITAT/70/2025
PRINCIPAL COMMISSIONER OF INCOME TAX 1, KOLKATA
VS
M/S BRITANNIA INDUSTRIES LTD.
BEFORE :
THE HON'BLE THE CHIEF JUSTICE T.S SIVAGNANAM
-A N D-
HON'BLE JUSTICE CHAITALI CHATTERJEE (DAS)
DATE : 7th August, 2025.
Appearance :
Mr. Amit Sharma, Adv. ...for appellant.
Mr. Pratyush Jhunjhunwalla, Adv.
Ms. Sruti Datta, Adv.
Ms. Sakshi Singhi, Adv. ...for respondent.
The Court :- Matter has been listed under the caption ‘To Be Mentioned’.
It is pointed out by the learned advocate appearing for the respondent/assessee
that there are several typographical mistakes crept in the order dated 9th July, 2025
which needs to be corrected. Since the corrections are made in several paragraphs and
in several places, the order dated 9th July, 2025 is replaced by the following order with
corrections incorporated.
“This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961
(the Act) is directed against the order dated March 6, 2024 passed by the Income Tax
Appellate Tribunal, A – Bench, Kolkata (the Tribunal) in ITA/462/Kol/2023 for the
assessment year 2018-19.
The revenue has raised the following substantial questions of law for
consideration :
“(i) Whether on the facts and in the circumstances of the case, the Learned Tribunal was
justified in law to quash the order under Section 263 of the Income Tax Act, 1961 when it is
apparent from the records that the assessment order is erroneous and prejudicial to the interest of
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the Revenue inasmuch as the same has been passed by the assessing officer without making due
and proper enquiry and without verification of the issues raised by the PCIT-1, Kolkata?
ii) Whether on the facts and in the circumstances of case, the Learned Tribunal was justified in
law to quash the order passed under section 263 of the Income Tax Act, 1961 by holding that the
jurisdiction has been invoked by the PCIT-1, Kolkata at the instance of the Assessing Officer,
when it is clearly discernable form the records that the PCIT-1, Kolkata has passed the order after
calling for and examining the assessment record of the assessee?
iii) Whether on the facts and in the circumstances of the case, the Learned Tribunal was
justified in law to decide the issue relating to application of Section 56(2)(x) of the said Act on
acquisition of leasehold property by, not considering that Section 56(2)(x) of the Act (introduced
in Finance Act, 2017) was applicable from A.Y. 2018-19 wherein it has been specifically stated
that any immovable property acquired by an assessee shall be chargeable to tax under the head
“Income from Other Sources” where Stamp Duty value exceeds Rs.50,000/ to the value of
consideration, and as such provisions of Section 56(2)(x) of the Act is clearly applicable in the
instant case as there is a difference of Rs.89,30,47,350/- in value of acquisition and stamp duty
value?
iv) Whether on the facts and in the circumstances of the case, the Learned Tribunal was justified
in law to decide the issue relating to excess claim of deduction under Section 43B of the Act by
reversal entry inasmuch as under Section 43B of the Act it has been specifically stated that
certain deductions are allowable only on actual payment and whereas the assessee has disclosed in
Form 3CA with its return of income that an amount of Rs.10,80,71,268/ was actually paid
towards sales tax and other taxes creating a provision of disallowance to the tune of Rs.
14,47,32,736/ under Section 43B of the Income Tax Act, 1961?
We have heard Mr. Amit Sharma, learned standing counsel appearing for the
appellant/revenue and Mr. J.P. Khaitan, learned senior advocate appearing for the
respondent/assessee.
The assessment for the year under consideration, AY 2018-19, was a scrutiny assessment
under the E-assessment Scheme 2019 on various issues and an assessment order dated 22.3.2021
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was drawn. The Principal Commissioner of Income Tax, Kolkata – 1, [PCIT] invoked his power
under Section 263 of the Act and issued show cause notice dated 30.11.2022 calling upon the
assessee to show cause as to why assessment order under Section 143(3) of the Act dated
22.03.2021 should not held as erroneous in so far as it is prejudicial to the interest of the
revenue. Totally there were five issues which were raised in the show cause notice of which we
are concerned only with two issues in this appeal, namely, no.(i) applicability of Section 56(2)(x)
on the acquisition of leasehold land and building and freehold land and (ii) disallowance of
claim under Section 43B in relation to reversal or write back of provision for liabilities. The
assessee submitted their replies dated 13.1.2023, 13.2.2023 and 13.3.2023 after which the PCIT
passed an order under Section 263 dated 29.3.2023 setting aside the assessment order passed
under Section 143(3) of the Act and directed the assessing officer to pass a fresh assessment
order after considering the issues which were discussed in his order dated 29.3.2023.
Challenging the said order, the assessee preferred appeal before the learned Tribunal which was
allowed by the impugned order and the revenue being aggrieved has preferred the present
appeal.
The first aspect to be considered is whether the power under Section 263 of the Act
could have been invoked. A reading of section 263 of the Act would clearly show that unless
and until the twin conditions are satisfied that the assessment order should be erroneous and it
should be prejudicial to the interest of revenue, the power under Section 263 of the Act cannot
be invoked. Apart from that, the statute mandates that the PCIT should inquire and be satisfied
that the case warrants exercise of its jurisdiction under Section 263 of the Act and such
satisfaction should be manifest in the show-cause notice which is issued under the said
provision. The Tribunal considered the factual position and found that out of the five issues
which were raised in the show-cause notice issued under Section 263 of the Act, except for two
issues the explanation offered by the assessee in respect of the other issues were accepted by the
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PCIT. Furthermore, on facts it is clear that the PCIT invoked its jurisdiction under Section 263 of
the Act at the instance of the Assessing Officer, which was incorrect. In this regard, there are
several decisions, some of which have also been referred to by the learned Tribunal and as the
legal position is well settled, we refrain from referring such decisions. Therefore, the finding of
the learned Tribunal that the PCIT could not have invoked its power under Section 263 of the
Act solely based upon the reference made by the Assessing Officer is well founded.
With regard to the valuation of the property and whether section 56(2)(x) of the Act
would apply, we are required to examine the facts. The assessee acquired leasehold land and
building from Bombay Dyeing and Manufacturing Company Limited, a listed Company
pursuant to an agreement for sale dated 31.12.2016 since approval was required from the
Maharashtra Industrial Development Corporation, the deed of assignment was registered on
27.3.2018, that is, during the assessment year under consideration. The leasehold land and
building situated at Ranjangaon, Maharashtra so acquired for an aggregate consideration of
Rs.168,85,00,000/- which consideration was calculated on the basis of valuation report from the
registered Valuer, who had valued the land based on the Direct Comparison Method and the
building based on Depreciated Replacement Cost Method. The leasehold land was registered
with the local authority, who valued the leasehold land and building at Rs.211,63,11,850/- [for
leasehold interest in land] and Rs.147,57,26,950/- [for leasehold interest on building]
aggregating to Rs.364,80,38,000/-. The freehold land was acquired for a consideration to
Rs.13,56,79,600/- by an agreement to sell dated 6.9.2017 and the deed of conveyance was
registered on 26.09.2017, where the value assessed by the Stamp Valuation Authority was
Rs.30,00,33,000/- and according to the valuation report the fair market value of the property
was Rs.12,75,00,000/-. The land and building was acquired for setting up of a mega industrial
unit and the Government of Maharashtra had sanctioned several incentives which includes
100% reimbursement of capital investment made by the assessee company. Therefore, the
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assessee had not gained in any manner whatsoever from valuing the property at a lower value
than the value adopted by the Stamp Duty Authority. Further, it is seen that the property was
valued on scientific basis after conducting due diligence by a registered valuer. That apart, the
property was not fully developed and has uneven surfaces and the assessee had to spend
substantial money to enable setting up of a mega industrial unit. It is not in dispute that all
these facts were placed before the NFAC and they were also disclosed in the notes of the tax
audit report and the notes to the computation of income filed along with the return of income
and those were scrutinised by the Assessing Officer. In fact, the learned Tribunal has extracted
the relevant portion of the notes filed by the assessee before the Assessing Officer. Therefore, it
cannot be stated that the Assessing Officer did not take into account all the factors and had
accepted the plea of the assessee and completed the assessment. Therefore, the PCIT to invoke
its power under Section 263 of the Act has to apply its mind to the audit report and record its
satisfaction that the twin conditions required to be complied with under Section 263 of the Act
have not been satisfied. That apart, the Income Tax Act has a provision for disputing the sta mp
value being taken as the full value of consideration in certain cases in section 50C of the Act.
The very existence of such a provision is a clear indication that the valuation adopted by the
Stamp Authorities is not always sacrosanct and power has been given for reference to the
valuation authority where the assessee would also be entitled to contest such valuation as the
said authority is being treated as an expert on the said subject. Therefore, the Tribunal was fully
justified in holding that the PCIT could not have invoked its power under Section 263 of the
Act. Though in the show-cause notice it is alleged that these aspects were incorrectly considered
by the Assessing Officer, curiously enough in the order passed under Section 263 of the Act
dated 29.3.2023 the PCIT states that the Assessing Officer has not considered these aspects
during the course of assessment; he has not made any inquiry on the issue nor did he issue any
questionnaire in this regard and also held that the assessee in its reply dated 13.3.2023 did not
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contradict these facts. This finding rendered by the PCIT in its order dated 29.3.2023 is factually
incorrect and the outcome of total non application of mind. Therefore, the finding rendered by
the learned Tribunal is fully justified. That apart, while submitting the reply to the show-cause
notice the assessee has pointed out section 56(2)(x) of the Act would not apply as the property
was acquired by the assessee pursuant to an agreement for sale dated 31.12.2016 and on the said
date section 56(2)(x) was not in the statute book as it was inserted with effect from 1.4.2017.
Hence, the order passed under Section 263 of the Act was thoroughly faulty.
On the second issue namely, with regard to disallowance of claim under Section 43B in
relation to reversal or write back of provision for liability, the assessee in its reply dated
13.1.2023 to the show-cause notice issued under Section 263 of the Act after giving all the
relevant facts contended that the reversal of a provision which was not allowed as an expense
when created by virtue of section 43B of the Act, cannot now be brought to tax upon its
reversal/write back and such an action would effectively amount to double addition of the said
sum, which is wholly impermissible under law. Therefore, the PCIT was required to consider
the explanation offered and take a decision in the matter. On the contrary, PCIT, while passing
the order under Section 263 of the Act dated 29.3.2023, miserably failed to render any finding
despite the fact that the assessee placed reliance on the decision in the case of PCIT vs. Eveready
Industries India Limited, ITAT/96/2017 dated 29.11.2021 and, accordingly, set aside the order
passed by the Assessing Officer with a direction to the Assessing Officer to examine whether
the decision in the case of Eveready Industries India Ltd. would be applicable to the case of the
assessee or not after giving due opportunity of being heard to the assessee. The manner in
which the PCIT has dealt with this issue is wholly untenable and, therefore, the learned
Tribunal was justified in setting aside the order passed by the PCIT on that score.
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Thus, for all the above reasons, we are of the clear view that the learned Tribunal was
right in allowing the assessee’s appeal and setting aside the order passed by the PCIT. In the
result, the appeal fails and the same is dismissed and the substantial questions of law are
answered against the revenue.
Consequently, the application/GA/2/2025 also dismissed.”
Let the corrected order shall be uploaded which will be in substitution of the
order dated 9th July, 2025.
(T.S. SIVAGNANAM, CJ)
(CHAITALI CHATTERJEE (DAS), J.)
SM/pkd
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