SHREE ANJANEY TRADERS LLP,NEW DELHI vs. PR, CIT DELHI-15, DELHI

PDF · subscribers
ITA 3432/DEL/2025Status: DisposedITAT Delhi16 September 2026AY 2020-2116 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the revisional powers under Section 263 cannot be exercised based on a proposal from the AO or an audit objection. The PCIT must independently call for and examine the record and form their own satisfaction that the assessment order is erroneous and prejudicial to the revenue.

What were the facts?

The assessee filed an appeal against an order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act. The PCIT had initiated revision proceedings based on an audit objection and a proposal from the Assessing Officer (AO).

What were the issues?

Whether the PCIT can initiate revision proceedings under Section 263 based on an audit objection or a proposal from the AO. Whether the assessment order was erroneous and prejudicial to the interest of the revenue.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 147,Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI

Before: SH. VIMAL KUMAR & SH. KRINWANT SAHAY

For Appellant: Ms. Ananya Kapoor, Advocate, Ms. Sejal Arora, Advocate, Ms. Sakshi Rustogi, Advocate
For Respondent: Dr. Rajinder Kaur, CIT DR
Hearing: 06/08/2026Pronounced: 16/09/2026

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI

BEFORE SH. VIMAL KUMAR, JUDICIAL MEMBER & SH. KRINWANT SAHAY, ACCOUNTANT MEMBER

ITA No.3432/DEL/2025 Assessment Year: 2020-21 Shree Anjaney Traders LLP PR. CIT 63/13 C, 1st Floor, Najafgarh Delhi-15 Vs Road, Industrial Area, New Delhi-110015 PAN No.ADGFS5485G (APPELLANT) (RESPONDENT)

Appellant by Sh. Salil Kapoor, Advocate Sh. Sumit Lalchandani, Advocate Ms. Ananya Kapoor, Advocate Ms. Sejal Arora, Advocate Sh. Shivam Yadav, Advocate Ms. Sakshi Rustogi, Advocate Respondent by Dr. Rajinder Kaur, CIT DR

Date of hearing: 06/08/2026 Date of Pronouncement: 16/09/2026

ORDER PER KRINWANT SAHAY AM Appeal in this case has been filed by the assessee against the order dated 30.03.2025 passed by the Ld. PCIT, Delhi-15 u/s.263 of the Act for the A.Y. 2020-21. Grounds of appeal are as under :-

“1. That in the facts and circumstances of the case the learned Pr. CIT has erred in law and facts of the case by starting proceedings under section 263 based upon the audit objection. 2. That on the facts and circumstances of the case as well as law on the subject the learned Pr. CIT has erred in passing the order us 263, although the assessment order passed u/s 143(3) of the Income Tax Act, 1961 was neither erroneous nor prejudicial to the interest of the revenue. 3. That on the facts and circumstances of the case as well as on the law on the subject, the learned Pr. CIT has erred in setting aside the order passed u/s 143(3) with a direction to the Assessing Officer as per para No. 9 of the revision order to pass fresh assessment order after taking into consideration, the issues as may be considered together with the issued discussed in order. 4. It is therefore prayed that above order passed by the Pr. CIT u/s 263 may please be quashed or modified as your honours deem it proper. 5. The Appellant craves leave to add, alter or delete any grounds(s) either before or in the course of hearing of the appeal.”

2.

During proceedings before us the Ld. Counsel of the assessee has filed a copy of approval for remedial action- Audit memo CIT(Audit), on the basis of which the AO put up to the Principle CIT

through Addl. CIT Range-43 for passing order u/s.263 of the IT Act. A copy of the same reproduced as under :-

3.

The Ld. Counsel also submitted he had obtained these documents through RTI

4.

Although the appellant has taken many grounds of appeal but the main jurisdiction/ legal issue on which the Ld. Counsel argued vehemently was that u/s.263 of the Act revisional powers of the Pr. CIT cannot be exercised on the basis of proposal from the AO or an audit objection. The Ld. Counsel has also filed brief synopsis which is reproduced as under :

5.

Per contra the Ld. DR relied on the order of the Ld. PCIT.

6.

We have heard the arguments of both the sides and we find that this issue is squarely covered by the many orders passed by the coordinate Benches of the ITAT and Hon’ble High Courts. An order of Pune Bench in ITA No. 1287/Pun/2017 is very much on this issue only. Relevant portion of that order is reproduced as under :-

“It can be seen from para 4 of the Id. CIT's order that: "A proposal for revision u/s 263 of the IT Act, 1961 was received from DCIT(IT)-1, Pune through the Jt.CIT(IT), Pune vide letter No. Pn/Jt.CIT(IT)/263/2016-17/61 dated 23.05.2016". It is thus manifest that the edifice of the revision in the extant case has been laid on the bedrock of receipt of the proposal from the AO. At this stage, it would be worthwhile to have a glance at sub- section (1) of section 263 of the Act, which runs as under:-

"The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment an directing a fresh assessment.” 4. interests of revenue. Sub-section (1) of section 263 of the Act is an enabling provision which confers jurisdiction on the CIT to revise an assessment order which he considers erroneous and prejudicial to the The process of revision u/s 263 of the Act initiates only when the CIT calls for and examines the record of any proceeding under this Act and considers that any order passed by the AO is erroneous and prejudicial to the interests of the revenue. The twin conditions of (i) the CIT calling for and examining the record; succeeded by (ii) his considering the assessment order as erroneous etc. are sine qua non for the exercise of power under this section. The use of the word 'and' between the expression 'call for and examine the record and the expression 'if he considers that any order is erroneous...' abundantly demonstrates that both these conditions must be cumulatively fulfilled by the CIT and in the same order, that is, the first followed by the second. In other words, the kicking in point for invoking jurisdiction u/s 263 is calling for and examining the record of any proceedings under the Act by the CIT leading him to consider the assessment order erroneous etc. communication from the AO is not 'the record of any proceedings under this Act'. To put it simply, the consideration that the assessment order is erroneous and prejudicial to the interests of the revenue should flow from and be the consequence of his examination of the record of proceedings. If such a consideration is not preceded by the examination of record of the proceedings under the Act, the condition for revision does not get magnetized.

5.

It is trite that a power which vests exclusively in one authority, can't be invoked or cause to be invoked by another, either directly or indirectly. Section 263 of the Act confers power on the CIT to revise an assessment order, subject to certain conditions. Instantly, we are confronted with a situation in which the

revision was initiated on the basis of the AO sending a proposal to the CIT and not on the CIT suo motu calling for and examining the record of the assessment proceedings and thereafter considering the assessment order erroneous and prejudicial to the interests of the revenue. The AO recommending a revision to the CIT has no statutory sanction and is a course of action unknown to the law. If AO, after passing an assessment order, finds something amiss in it to the detriment of the Revenue, he has ample power to either reassess the earlier assessment in terms of section 147 or carry out rectification u/s 154 of the Act. He can't usurp the power of the CIT and recommend a revision. No overlapping of powers of the authorities under the Act can be permitted. As the revision proceedings in this case have triggered with the AO sending a proposal to the Id. CIT and then the latter passing the order u/s 263 of the Act on the basis of such a proposal, we hold that it became a case of jurisdiction deficit resulting into vitiating the impugned order. Without going into the merits of the case, we quash the impugned order on this legal issue itself.

Apart from this order there are many other orders which were 7. produced by the Ld. Counsel of the assessee in which it has been clearly held that PCIT cannot invoke the revisionary jurisdiction u/s.263 of the IT Act, 1961 upon a proposal from the AO. Some of the cases cited by the Ld. Counsel are as under :-

i) Commissioner of Income-tax, [ (Central), Ludhiana v. Max India Ltd.2008] 166 Taxman 188 (SC) ii) Principal Commissioner of Income-tax v. Delhi Airport Metro Express (P.) Ltd. [2018] 99 taxmann.com 382 (Delhi)

iii) Income-tax Officer v. D.G. Housing Projects Ltd. [2012] 20 taxmann.com 587 (Delhi) iv) Director of Income-tax v. Jyoti Foundation [2013] 38 taxmann.com 180 (Delhi)

v) Commissioner of Income-tax v. Sunbeam Auto Ltd. [2010] 189 Taxman 436 (Delhi) vi) Narayan Tatu Rane v. Income-tax Officer, Ward 27(1)(1), Mumbai [2016] 70 (Mumbai) taxmann.com 227 vii) Mumbai-1 SWD Industries v. PCIT (Central), ITA No. 9007/Mum/2025 & Ors viii). Alka Agarwal Commissioner of Income Tax (Central) Delhi-3 Principal ITA No. 3369/Del/2025 ix) Alankit Associates Pvt. Ltd. v. Principal Commissioner of Income Tax (Central), Delhi-3 ITA No. 2051/Del/2024

8.

We have heard the arguments of Ld. Counsel of the assessee as well as that of Ld. DR. We have also gone through the submissions and various case laws filed by the Ld. Counsel. We are of this considered view that sub section 1 of section 263 of the IT Act confers the jurisdiction on the Principle CIT to revise an assessment order which in his considered opinion is erroneous as well as pre judicial to the interest of the revenue. In fact the initiation of process for revision u/s.263 of the IT Act is to be initiated by the Principle CIT only. He is supposed to call for the record and after examination of the record of any proceeding under the Act and in case he is of the opinion that an order passed by an AO is erroneous and pre judicial to the interest of the revenue he can pass an order u/s.263 of the Act for the revision of the order. Here it becomes important to see the personal satisfaction and on the basis of personal satisfaction the initiation of proceeding by recalling the file or record by the PCIT. The Act never pre suppose initiation of proceeding under section 263

of the Act on the basis of any proposal either by the AO or by the JCIT/ Addl. CIT. Since the personal satisfaction of the Principle CIT regarding an order being an erroneous and prejudicial to the interest of the revenue is necessary and pre-requisite, therefore, any proceedings u/s.263 of the Act cannot be initiated on the basis of an audit objection also when the satisfaction of the audit party becomes pre dominant.

9.

In this case the PCIT has passed an order u/s.263 of the Act for the revision of the order based on a note initiated by the AO that was based on an audit objection and it was sent through the Addl. CIT of the range.

10.

In our considered view this process is totally against the spirit of the Section 263 of the IT Act. Therefore, in our considered view the revision order passed by the Ld.PCIT in this case cannot sustained. Accordingly, it is quashed.

11.

In the result, the appeal filed by the assessee on this issue is allowed. Order pronounced in the court on 16.09.2026.

Sd/- Sd/-

[VIMAL KUMAR] [KRINWANT SAHAY] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 16.09.2026

Neha, Sr. PS

More judgments on Section 263

All 13,616 judgments and leading authorities on Section 263 →

Recent GST High Court judgments

Search GST case law →