ITAT Upholds Revision Order Against Ambuja Cements, Flags Unverified INSIGHT Portal Inputs on Alleged Accommodation Entries [Read Order]

In a recent ruling, the Mumbai ITAT upheld the PCIT’s Section 263 revision against Ambuja Cements, holding that the Assessing Officer did not properly verify the very low Section 14A disallowance despite huge exempt income, and also ignored INSIGHT portal inputs about alleged accommodation entries.

Ambuja Cements challenged the PCIT order passed under Section 263 for AY 2019-20. The original assessment was completed on 29.09.2022 under Section 143(3) r/w 144B and total income was assessed at Rs. 14,82,47,32,193.

The PCIT found that Ambuja earned exempt income of Rs. 274.21 crore but disallowed only Rs. 1.82 crore under Section 14A. The PCIT also saw that Ambuja had strategic investments of Rs. 11,813.76 crore and felt Rule 8D was not properly applied. The PCIT said the correct disallowance should be about Rs. 118.13 crore and there was short disallowance of around Rs. 116.30 crore.

The PCIT also relied on INSIGHT portal information, saying Ambuja was shown as beneficiary of accommodation entries from Shri Dilip Chotalal Patel, linked with Sankalp Group, based on search. The PCIT said the AO did no enquiry on this issue.

The petitioner’s counsel argued that AO had already asked questions on Section 14A through notice under Section 142(1) and Ambuja gave reply with an expert report, so it was not a case of no enquiry. On accommodation entry issue, Ambuja argued that PCIT relied only on INSIGHT portal and did not give any supporting material like bank trail, statements or documents.

The Department argued that AO never recorded satisfaction or checked Rule 8D properly, and the difference between exempt income and disallowance shows non-application of mind. It also argued that AO ignored INSIGHT portal information.

The two-member bench comprising Judicial Member Sandeep Gosain and Accountant Member Prabhash Shankar observed that Section 263 can be used when AO passes order without proper enquiry. The tribunal observed that AO accepted the disallowance without verifying Rule 8D and strategic investments.

The tribunal observed that the Assessing Officer did not examine the INSIGHT portal information at all. The tribunal observed that Ambuja’s argument about non-supply of material does not change the fact that the AO overlooked the information available with him. The tribunal also observed that the PCIT only directed the AO to re-examine the issues and provide full opportunity to the assessee during fresh proceedings.

The tribunal dismissed Ambuja’s appeal and upheld the PCIT revision order.

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