Loading judgment…
Facts
Following a search and seizure operation in the case of Alankit Group, information was recovered which indicated potential transactions related to the assessee. The Assessing Officer initiated proceedings under Section 153C of the Income Tax Act, and subsequently completed the assessment accepting the returned income after conducting inquiries.
Held
The Tribunal held that the Principal Commissioner of Income Tax (PCIT) failed to demonstrate how the assessment order was erroneous or prejudicial to the revenue when invoking Section 263 powers. The PCIT's order was found to be a replica of a previous order that was quashed by a co-ordinate bench.
Key Issues
Whether the PCIT correctly exercised powers under Section 263 of the Income Tax Act to revise an assessment order where the Assessing Officer had conducted inquiries and passed a plausible order.
Sections Cited
263, 153C, 132, 143(3), 142(1), 143(2), 41(1)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI JAGADISH
O R D E R Per Bench: The captioned appeals by the same assessee assail four separate orders, all dated 29.03.2025, passed by the Principal Commissioner of Income Tax (Central), Mumbai (‘ld. PCIT’ for short) u/s. 263 of the Income Tax Act, 1961 (‘the Act’ for short), pertaining to the assessment years (A.Ys. for short) 2015-16, 2016-17, 2018-19 and 2019-20.
Not only the facts involved in all the appeals are identical, but even the grounds of challenge are identical. Hence, for ease of reference, we will take up A.Y. 2015-16 as the lead appeal and discuss the facts involved therein, which would cover all the appeals.
3539, 3540 & 3540/Mum/2025 (A.Ys. 2015-16, 2016-17, 2018-19 & 2019-20) Sunita Khandelwal vs. PCIT(Central) 3. Briefly stated, the assessee is a resident individual. For A.Y. 2015-16, the assessee had filed her original return of income on 25.09.2015, declaring total income of Rs.1,25,180/-. Subsequently, a search and seizure operation u/s. 132 of the Act was conducted on 18.10.2019 in case of Alankit Group. Allegedly, in course of search and seizure operation, certain information recovered from the laptop of Shri Alok Agarwal of Alankit Group were found and seized from the residence of Shri Sunil Kumar Gupta at Delhi. Based on the information/material gathered in course of search and seizure operation, the Assessing Officer (A.O. for short) of the searched person as well as the assessee recorded a satisfaction note that some materials found in the search and seizure operation belonged to the assessee. Based on such satisfaction note, proceedings u/s. 153C of the Act were initiated in case of the assessee. In response to the notice issued u/s. 153C of the Act, the assessee filed her return of income on 20.10.2002, declaring income of Rs.1,25,180/- as was offered in the original return of income. In course of assessment proceeding, the A.O. issued statutory notices u/s. 142(1) and 143(2) of the Act from time to time and called for various information and details. In response to such notices, the assessee furnished requisite information/details before the A.O. After verifying the information/details furnished by the assessee, the A.O. ultimately completed the assessment u/s. 143(3) r.w.s. 153C of the Act vide order dated 20.04.2023, accepting the returned income.
After completion of assessment as aforesaid, ld. PCIT called for and examined the assessment records and while doing so, he was of the view that the assessment order is erroneous and prejudicial to the interest of the Revenue. Hence, the assessment order is required to be revised in exercise of power conferred u/s. 263 of the Act. Accordingly, he 3539, 3540 & 3540/Mum/2025 (A.Ys. 2015-16, 2016-17, 2018-19 & 2019-20) Sunita Khandelwal vs. PCIT(Central) issued a show cause notice dated 11.02.2025, requiring the assessee to show cause as to why the assessment order should not be revised. In response to the show cause notice, the assessee filed a detailed written submission vehemently objecting to the exercise of power u/s. 263 of the Act. It was submitted by the assessee that in course of the assessment proceeding, the A.O. had carried out a thorough enquiry and having been satisfied with the documentary evidences submitted by the assessee, had completed the assessment, accepting the returned income. Ld. PCIT, however, was not satisfied with the submissions of the assessee. Ultimately, he concluded that the A.O. having not made proper enquiry in terms with Explanation 2 to section 263 of the Act, he has the authority to revise the assessment order. Thus, he set aside the assessment order with a direction to complete the assessment afresh, keeping in view the observations made by him in the order passed u/s. 263 of the Act and after examining all applicable facts and available information as well as the binding judicial precedents.
Before us, ld. Counsel appearing for the assessee submitted that in the satisfaction note recorded for initiation of proceedings u/s. 153C of the Act, the A.O. has specifically referred to the seized material including the materials referred to by ld. PCIT in the show cause notice issued u/s. 263 of the Act. He submitted, the very basis of proceedings u/s. 263 of the Act are the seized materials. Drawing our attention to notice issued u/s. 142(1) of the Act on 30.11.2022, a copy of which is placed at pg. no. 80 of the paper book, the ld. Counsel submitted, the A.O. had specifically called upon the assessee to furnish the details of the transaction with Alankit Group along with all documentary evidences. He submitted, in response to the said notice, the assessee furnished its reply on 12.12.2022. He submitted, thereafter, the A.O. issued another notice u/s. 142(1) of the Act on 10.01.2023 calling upon 3539, 3540 & 3540/Mum/2025 (A.Ys. 2015-16, 2016-17, 2018-19 & 2019-20) Sunita Khandelwal vs. PCIT(Central) the assessee to furnish details relating to the transactions found in the seized material. He submitted, in response to the said notice, the assessee furnished its reply with all documentary evidences. He submitted, the A.O. issued further notice u/s. 142(1) of the Act on 27.02.203. In response to which the assessee furnished her reply on 10.03.2023 and 11.04.2023 with all documentary evidences. He submitted, the aforesaid facts clearly demonstrate that the A.O., before completing the assessment, had made a thorough enquiry and only after proper application of mind to the facts and circumstances available on record had completed the assessment.
He submitted, neither in the show cause notice nor in the order passed u/s. 263 of the Act, ld. PCIT has demonstrated how the assessment order is either erroneous or prejudicial to the interest of the Revenue. He submitted, ld. PCIT has not indicated even a single transaction involving the assessee leading to loss of Revenue. He submitted, in the garb of revisionary jurisdiction, ld. PCIT has merely took up of roving and fishing enquiry without any concreate material available with him to demonstrate any error or prejudice to the Revenue by virtue of the assessment order. He submitted, based on the same seized material, identical proceedings were initiated by ld. PCIT against another family member of the assessee namely Shri Mridul S. Khandelwal. He submitted, while deciding the appeals preferred by Shri Mridul S. Khandelwal, the co-ordinate bench has quashed the orders passed u/s. 263 of the Act. In this context, ld. Counsel furnished before the bench a copy of order dated 11.11.2025 in and 3645/Mum/2025. Thus, he submitted, the issue being squarely covered by the decision of the co-ordinate bench, the order passed u/s. 263 has to be quashed. In support of his contention, ld. Counsel relied upon the following decisions: - 3539, 3540 & 3540/Mum/2025 (A.Ys. 2015-16, 2016-17, 2018-19 & 2019-20) Sunita Khandelwal vs. PCIT(Central) PCIT vs. Britannia Industires Ltd. [2023] 453 ITR 576 (Calcutta)(HC) PCIT vs. Shree Gayatri Associates [2019] 263 Taxman 673 (Guj.)(HC) PCIT vs. SN Tradelink (P.) Ltd. [2022] 145 taxmann.com 73 (Gujarat) PCIT vs. Deccan Jewellers P. Ltd. [2021] 438 ITR 131 (AP) DIT vs. Jyoti Foundation 357 ITR 388 (Del) CIT vs. Reliance Communication Ltd. [2016] 240 Taxman 655 (Bom) Shri Devan Gandhi vs. PCIT (in & 3746/Mum/2016, dated 21.11.2017)(Mum-Trib)
The ld. Departmental Representative (ld. DR for short) strongly relying upon the observations of ld. PCIT in the order passed u/s. 263 of the Act submitted that the search materials found in course of search and seizure operation conducted in case of an associate of Alankit Group, clearly revealed various other transactions which were not properly enquired into by the A.O. in course of assessment proceedings of the assessee. Drawing our attention to the assessment order, the ld. DR submitted, the A.O. has not at all discussed the significance of the seized materials and their impact on the undisclosed income at the hands of various persons, including the assessee. Thus, he submitted, ld. PCIT has rightly exercised his jurisdiction u/s. 263 of the Act to revise the assessment order, which is erroneous and prejudicial to the interest of revenue.
We have considered rival submissions in the light of judicial precedents cited before us and perused the materials available on record. As discussed earlier, the genesis of the proceedings initiated u/s. 153C of the Act in case of the assessee, is the search and seizure operation conducted in case of Alankit Group. In course of such search operation, certain information/materials recovered from the laptop of an associate of Alankit Group, allegedly reveals certain transactions between various entities/ persons, including the 3539, 3540 & 3540/Mum/2025 (A.Ys. 2015-16, 2016-17, 2018-19 & 2019-20) Sunita Khandelwal vs. PCIT(Central) assessee and her family members. In the satisfaction note recorded u/s. 153C of the Act, the A.O. has specifically referred to the seized material and has observed that the unaccounted cash transactions are required to be brought to tax. Accordingly, the A.O. proceeded to conduct enquiry in course of assessment proceeding to ascertain the source of cash transactions. For doing so, he has issued notices u/s. 143(2) and 142(1) of the Act from time to time. Perusal of the aforesaid statutory notices with their Annexures clearly reveal that the A.O. conducted enquiry in various stages based on the information/details called for and furnished by the assessee. Thus, the facts and materials on record clearly reveal that before completing the assessment, the A.O. had conducted a thorough enquiry with reference to the seized materials. Only after verifying the seized materials and the information/details, including the documentary evidences furnished by the assessee and being satisfied with the authenticity, the A.O. has completed the assessment with due diligence and proper application of mind.
9. Whereas, perusal of the show cause notice issued u/s. 263 of the Act by ld. PCIT, a copy of which is available at pg. no. 150 of the paper book, clearly reveals that ld. PCIT has merely referred to the seized materials, which referred to certain transaction involving some entities and invoices. Neither in the show cause notice, nor in the order passed u/s. 263 of the Act, ld. PCIT has specifically referred to any material which demonstrates the direct involvement of the assessee in any transaction, resulting in escapement of income at her hands, thereby, resulting in prejudice to the Revenue. In fact, in the order passed u/s. 263 of the Act, ld. PCIT has merely reproduced the facts stated in the show cause notice issued u/s. 263 of the Act. Even, there is no categorical observation of ld. PCIT either in the show cause notice or in the order passed u/s. 263 of the Act, in what way and manner, 3539, 3540 & 3540/Mum/2025 (A.Ys. 2015-16, 2016-17, 2018-19 & 2019-20) Sunita Khandelwal vs. PCIT(Central) the assessment order is erroneous and prejudicial to the interest of the Revenue. Simply stating that the A.O. has not made enquiries which he ought to have made and taking shelter under Explanation 2 to section 263 of the Act, ld. PCIT cannot invoke his powers u/s. 263 of the Act to merely initiate a roving and fishing enquiry.
Pertinently, ld. PCIT had initiated similar proceeding u/s. 263 of the Act in respect of one of the family members of the assessee, Shri Mridul S. Khandelwal. In course of hearing, this Bench had the occasion to go through the show cause notice issued u/s. 263 of the Act and the order passed u/s. 263 of the Act in case of Shri Mridul S. Khandelwal in A.Ys. 2018-19 and 2020-21. On a careful perusal of such documents, we are satisfied that the show cause notice and order passed u/s. 263 of the Act in case of the present assessee are nothing but replicas of the show cause notice and order passed u/s. 263 of the Act in case of Shri Mridul S. Khandelwal. While deciding the appeals filed by Shri Mridul S. Khandelwal, challenging identical orders passed u/s. 263 of the Act, the co-ordinate bench in the order referred to elsewhere in the order, after considering similar line of argument put forward by ld. DR and more or less identical facts and materials on record, has quashed the orders passed u/s. 263 of the Act, holding as under: 7. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by ld. AR of the assessee. We find that case of assessee was reopened after issuing notice under section 153C. The assessing officer during the assessment issued show cause notice vide notice dated 08.12.2022. In the notice dated 08.12.2022, the assessing officer asked about the details of transaction with Alankit Ltd. along with all relevant documentary evidence. We find that in response to such show cause notice, the assessee filed his reply dated 20.12.2022 and furnished all required details including transaction with Alankit Ltd. and with regard to transaction with Alankit Ltd., the assessee stated that he has not entered into any transaction with Alankit Ltd. We further find that assessing officer again issued show cause notice dated 10.01.2023. In the said notice, the assessing officer required the assessee to furnish reply in response to various material extracted from the laptop of Sunil Kumar Gupta, a family member of assessee which consists of ledger account of Anarkali Complex and ledger copy of Sashikant Khandelwal. In response to such show cause notice, the assessee filed his reply dated 20.01.2023. In the reply, the assessee explained that he was Director in Bondwell Corps Solution Pvt. Ltd. and earned salary income from said company. With regard to the transaction of his family member as recorded in the statement of Sunil 3539, 3540 & 3540/Mum/2025 (A.Ys. 2015-16, 2016-17, 2018-19 & 2019-20) Sunita Khandelwal vs. PCIT(Central) Kumar Gupta, the assessee stated that he never dealt with Sunil Kumar Gupta, so he cannot made his comment about data maintained by him in his computer and he is unable to understand in the nature and manner and the purpose of transaction.
8. In without prejudice submission, the assessee submits that his name is mentioned at certain place wherein it is written Mridula Khan or Mridual Khandewal, so it is unidentifiable as to which context as referred the transaction. He is unable to explain such transaction is understanding unless he has given cross examination. For transaction recorded in tally, the assessee submitted that such transaction relates back to 20 years back. The assessee accordingly denied all the transaction shown in alleged recovered material. We further find that show cause notice dated 27.02.2023 was also issued to the assessee. The assessee filed his reply dated 10.03.2023. In his reply, the assessee submitted that he never dealt with Sunil Kumar Gupta and he cannot comment as it difficult to understand the nature and purpose of transaction unless he has given cross- examination to get proper clarity on the record maintained by him. It appears that on considering the aforesaid show cause notice and reply of assessee, the assessing officer accepted the returned income.
We find that in the show cause notice under section 263, the ld. PCIT vaguely recorded that assessment order appears to be erroneous and prejudicial to the interest of revenue. Further, even after receipt of reply in response to show cause notice under section 263, the ld. PCIT failed to give his clear finding as to how the assessment order is erroneous. We find that assessing officer passed the assessment order with prior approval of additional commissioner, thus ld. Additional commissioner appears to have examined the record and the view taken by assessing officer which was approved by him before giving approval for passing assessment order.
10. We find that Delhi High Court in DIT Vs Jyoti Foundation (supra) held that where revisionary authority opined that further inquiry was required, such inquiry should have been conducted by revisionary authority himself to record finding that assessment order passed by Assessing Officer was erroneous and prejudicial to revenue. It was also held that orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the revenue, but orders which are passed after inquiry/investigation on the question /issue are not per se cannot be treated as erroneous and prejudicial to the interest of the revenue, because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. Hon’ble Gujarat High Court in PCIT Vs S.N. Trade links (P) Ltd (supra) also held that where Pr. Commissioner invoked revision jurisdiction on ground that there was difference in amount of opening/closing balance of liabilities shown as compared to total liabilities which ought to have been disallowed under section 41(1) and, thus, order passed by Assessing Officer was erroneous and prejudicial to interest of revenue, since Assessing Officer after applying his mind and making due enquiries had taken a plausible view and passed assessment order, Pr. Commissioner could not invoke revision jurisdiction under section 263 merely because view taken by Assessing Officer was not found acceptable to him. Hon’ble Delhi Tribunal in Amira Foods Pvt Ltd Vs PCIT (2018) 63 ITR 335 (Trib) also held that PCIT cannot treat the assessment order as erroneous and prejudicial to the interest of revenue without conducting enquiry and recording a finding of fact as to how the assessment order is erroneous. As noted earlier, the PCIT himself recorded that the assessment order appears to be erroneous without giving a clear finding, thus, in view of the aforesaid factual and legal discussion, we find that ld PCIT failed to spell out as to how the assessment order, which is passed after due verification of fact, is erroneous, hence, we do not find any justification resume jurisdiction under section 263 by ld PCIT for revising assessment order. In the result, the grounds of appeal
raised by the assessee are allowed.
1. 1. 11. The aforesaid decision of the co-ordinate bench clearly applies to the facts of the present appeal. In view of the aforesaid, respectfully following the decision of the co- ordinate bench as referred above, we have no hesitation in holding that the order passed 3539, 3540 & 3540/Mum/2025 (A.Ys. 2015-16, 2016-17, 2018-19 & 2019-20) Sunita Khandelwal vs. PCIT(Central) u/s. 263 of the Act in the instant case is unsustainable. Accordingly, we quash the same. As a natural corollary, the assessment order is restored back to its original position. The facts involved in the other appeals being materially identical to the appeal decided by us above, our observations qua the said appeal would apply mutatis mutandis to the rest of the appeals. Hence, the orders passed u/s. 263 of the Act in A.Ys. 2016-17, 2018-19 and 2019-20 are quashed as well.
12. In the result, all the appeals are allowed as indicated above. Order pronounced in the open court on 23.12.2025 Sd/- Sd/- (Jagadish) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 23.12.2025 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,