NILESHKUMAR M BHALODI,RAJKOT vs. INCOME TAX OFFICER, WARD - 2(1)(1), RAJKOT, RAJKOT

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ITA 496/RJT/2026Status: DisposedITAT Rajkot07 August 2026AY 2016-1715 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer had conducted sufficient inquiry, distinguishing between 'lack of inquiry' and 'inadequate inquiry'. It was noted that the AO had adopted a permissible course of action, and the PCIT could not invoke Section 263 merely for a different opinion.

What were the facts?

The assessee's assessment for AY 2016-17 was completed with an addition for cash deposits in Axis Bank. The PCIT initiated revision proceedings under Section 263, citing the Assessing Officer's failure to inquire into similar cash deposits in an HDFC Bank account.

What were the issues?

Whether the PCIT was justified in invoking Section 263 when the Assessing Officer had conducted an inquiry, even if considered inadequate by the PCIT, regarding cash deposits.

Which sections of the Income-tax Act were involved?

Section 263,Section 147,Section 144B,Section 69A,Section 44AD

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Rajkot Bench, Rajkot

Before: Dr. Arjun Lal Saini & Shri Sonjoy Sarma

For Respondent: Shri Abiram Kartikeyan S., Ld. CIT (DR)
Hearing: 25/06/2026Pronounced: 07/08/2026

आयकर अपीलीय अिधकरण, राजकोट �यायपीठ, राजकोट । In The Income Tax Appellate Tribunal, Rajkot Bench, Rajkot Before Dr. Arjun Lal Saini, Accountant Member And Shri Sonjoy Sarma, Judicial Member आयकर अपील सं./ITA No. 496/Rjt/2026 [ िनधा�रण वष�/Assessment Year: 2016-17 ] Nileshkumar M. Bhalodi, Income Tax Officer, Madhav Residency, Third Floor, Ward - 2(1)(1), Rajkot Vs. Block No.302 150 Ft Ring Road, Aayakar Bhavan Race Course Ring Rajkot Gujarat 360001 Road, Rajkot, Gujarat 360001 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AJUPB8323Q (अपीलाथ�/assessee) (��यथ�/Respondent) Assessee by : D.M. Rindani, Ld. AR Respondent by : Shri Abiram Kartikeyan S., Ld. CIT (DR) Date of Hearing : 25/06/2026 Date of Pronouncement : 07/08/2026 ORDER Per, Dr. Arjun Lal Saini, AM: By way of this appeal, the assessee has challenged the correctness of the order dated 24.02.2026 passed by the Learned Principal Commissioner of Income-tax (in short “Ld PCIT”) under section 263 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 2016-17. Grievances raised by the assessee, which, being interconnected, will be taken up together, are as follows: 1. The Hon’ble Principal Commissioner of Income Tax, Rajkot- 1, Rajkot has erred both in law and on facts in passing the revisionary order under section 263 of the Income Tax Act, 1961, which is unwarranted, unjustified and bad in law.

2.

The Hon’ble PCIT has erred in holding that the Assessing Officer failed to conduct inquiry regarding cash deposits in HDFC Bank, without appreciating that the assessment was completed after due consideration of facts and thus, the impugned order is based on incorrect assumptions and is not sustainable in law. 3. The appellant craves leave to add, alter, amend, modify or withdraw any of the above grounds of appeal at or before the time of hearing, with the permission of the Hon’ble Appellate Authority. 3. The facts necessary for disposal of the appeal are stated in brief. The assessee has filed his return of income for Assessment Year 2016-17, on 20.03.2017 declaring total income of Rs.4,09,080/-. Subsequently, the case was reopened by issue of notice u/s 148 of the Income-tax Act, 1961, on 25.07.2022. In response thereto, the assessee filed return of income on 17.10.2022, declaring total income of Rs.4,09,080/-. The assessment was completed u/s 147 r.w.s. 144B of the Act, on 17.05.2023, determining the total income of the assessee at Rs.58,79, 116/-. 4. Later on, Learned Principal Commissioner of Income-tax (in short “Ld PCIT”) exercised his jurisdiction under section 263 of the Income-tax Act, 1961. The ld. PCIT noticed that assessee has deposited aggregate cash of Rs.54,70,036/- in his Axis Bank account. As the assessee failed to explain the source of these cash deposits, the same were treated, as unexplained money and added to the total income u/s 69A of the Income-tax Act, 1961. Further, on examination of assessment records, it was noticed that the assessee has also maintaining another bank account with HDFC Bank, wherein cash deposits aggregating to Rs.60,25,535/-, were made during the relevant previous year. It was also observed that the details of the HDFC Bank account were available in ITS information on record. However, the Assessing Officer has not conducted any enquiry or verification regarding the source of cash deposits made in the HDFC Bank account. When cash deposits in Axis Bank were treated as unexplained money u/s 69A of the Act, the cash deposits in the HDFC Bank account, being similar in nature and circumstances, also required to be examined and should treated as unexplained. However, the assessing officer failed to examine and tax the cash deposits amounting to Rs.60,25,535/-in account maintained by the assessee with HDFC Bank. Considering such facts, notice u/s 263 of the Income-tax Act, 1961 bearing DIN & Notice No.ITBA/REV/F/REV1/2025-26/108379068(1) dated 17.12.2025 was issued and duly served upon the assessee.

5.

In response to the above notice, the assessee submitted its reply, before ld. PCIT, vide reply dated 12.01.2024, however, such a reply of the assessee was not brought on record by ld.PCIT. The reply so filed by the assessee, before the learned PCIT is reproduced below:

“With reference to the above notice proposing revision of the assessment order passed u/s 147 r.w.s. 1448 dated 17.05.2023, I respectfully submit my reply as under: 1. Background of the Case 1. I filed my original return of income for AY 2016-17 on 20.03.2017 declaring total Income of Rs.4,09,080/-. 2. The assessment was reopened u/s 148 and completed u/s 147 r.w.s. 1448 on 17.05.2023 determining total income at Rs.58,79,116/- by making an addition of Rs. 54,70,036/-on account of cash deposits in Axis Bank accounts by treating the same as unexplained money u/s 69A. 3. During the reassessment proceedings, I furnished complete details of my bank accounts, nature of business, explanations regarding cash deposits and withdrawals, and documentary evidences. 2. Nature of Business and Source of Bank Transactions 1. During the relevant year, I was engaged in the business of cheque drawing /discounting (angadia / shroff business) under the name N.S. Consulting. 2. Under this business model:  Customers deposit cash with me and I issue cheques / drafts / RTGS/NEFT to them; or  Customers give cheques./ transfers and I pay cash to them. 3. For such services, I earn only commission income, which was duly offered to tax in the return of income. 4. Both Axis Bank and HDFC Bank accounts were disclosed in my return of Income and before the Assessing Officer, and copies of bank statements were furnished during the reassessment proceedings. 5. The cash deposits and withdrawals in both the bank accounts pertain to business transactions carried out on behalf of customers, and do not represent my personal Income or investments. 3. No Error in the Assessment Order 1. The issue of cash deposits was specifically examined by the Assessing Officer during the reassessment proceedings. Detailed replies were filed explaining:  The nature of shroff business;  That deposits represented business receipts on behalf of customers;  That income component was only commission; and  That there were continuous deposits and withdrawals, evidencing rotation of funds. 2. After examination, the Assessing Officer made an addition only in respect of Axis Bank deposits. Thus, it cannot be said that the order was passed without enquiry or without application of mind. 3. The proposed revision merely seeks to take a different view by including cash deposits in HDFC Bank also as unexplained money. It is settled law that Section 263 cannot be invoked merely because the Commissioner does not agree with the conclusion of the Assessing Officer, when the issue has already been examined.. 4. HDFC Bank Deposits Not Unexplained Money 1. The HDFC Bank accounts were fully disclosed in the return of income and during assessment proceedings. HDFC Bank and AXIS Bank Account statement already uploaded through ITBA portal. Copy of the letter along with Acknowledgment Receipt is attached herewith for your honour's kind verification. 2. The transactions in the HDFC Bank account were also business-related transactions arising from the same shroff activity and not my personal income. 3. There is no material or evidence on record to suggest that:  The deposits represent my own undisclosed Income;  I made any Investments or Incurred any personal expenditure from such cash; or  The money returned back to me after issuing cheques. 4. In the absence of any incriminating evidence, mere cash deposits cannot be treated as unexplained money u/s 69A. 4A. Documentary Evidence Bank Statements Filed In support of the above submissions, the assessee has enclosed couples of complete bank statements for the relevant previous year: (i) Axis Bank Account Annexure A, and (ii) HDFC Bank Account No. 01011000141030 - Annexure B. A perusal of the said statements clearly demonstrates that there are continuous cash deposits followed by corresponding withdrawals and cheque/RTGS payments, evidencing rotation of funds in the ordinary course of the assessee's shroff / cheque-discounting business. The statements further show that the accounts were active business accounts, and not repositories of unexplained personal money. Importantly, both accounts were fully disclosed in the return of income and during reassessment proceedings, and copies of the statements were already furnished before the Assessing Officer. The figures of cash deposits referred to in the assessment order and in the present notice are directly traceable from these statements. There is no material in the statements to indicate any personal investment, asset acquisition, or diversion of funds by the assessee. Therefore, the bank statements themselves conclusively establish that the deposits represent business receipts on behalf of customers, and at no point can the gross deposits be equated with the assessee's income. At best, only the commission element, already offered to tax, can be brought to tax. 4B. HDFC Bank Account Used Predominantly for Statutory / Government Payments Without prejudice to the above, it is respectfully submitted that the HDFC Bank account was primarily used for making statutory and government payments such as Income Tax, Service Tax, VAT/GST, Excise and other official dues. A perusal of the HDFC Bank statement (Annexure B) clearly evidences that most of the debits represent payments to Government departments and statutory authorities, including tax challans and regulatory payments. These transactions are official in nature, duly identifiable, and leave no scope for any allegation of personal use, unexplained expenditure or unaccounted investments. Thus, the HDFC Bank account functioned substantially as a business and compliance account for statutory payments, further establishing that the transactions therein are fully accounted, verifiable, and devoid of any element of unexplained money. On this ground also, no addition or revision is legally sustainable in respect of transactions routed through the said account. 5. Principle of Netting of Cash Deposits and Withdrawals Without prejudice to the above, it is submitted that:  There were substantial cash withdrawals from the same bank accounts.  If deposits are considered as income, corresponding withdrawals must also be allowed as business outgo.  The Income-tax Act does not require maintaining record of purpose of each cash withdrawal. Where funds are continuously deposited and withdrawn, real income /peak credit theory must be applied and not gross deposits.

6.

Jurisdictional Judicial Precedents The issue is squarely covered by binding decisions holding that in cases of shroff / angadia / cash-rotation business, only commission income is taxable and not the entire cash deposits, including:  Hon'ble Gujarat High Court in Shree Sidhnath Enterprise v. ACIT (387 ITR 646);  Hon'ble ITAT, Rajkot Bench in Smt. Ruksana Samir Makhani (IT(SS)A No. 134/Rjt/2017);  Hon'ble ITAT, Rajkot Bench in M/s Panchnath Enterprise (ITA Nos. 139 to 141/Rjt/2016). These authorities clearly hold that when deposits represent business transactions on behalf of customers, the same cannot be assessed as unexplained income………………..”.The assessee further submits that the enclosed bank statements (Axis Bank and HDFC Bank) and details of statutory tax payments conclusively support the factual and legal position explained above and may kindly be taken on record while dropping the proceedings u/s 263”. 6. However, ld. PCIT rejected the above contention of the assessee, and observed that during the course of assessment proceedings, source of aggregate cash of Rs.60,25,535/- deposited by the assessee in his HDFC bank account remained unexplained. Further, no enquiry/investigation was carried out by the AO to verify the correctness and genuineness of the source of total cash deposit of Rs.60,25,535/- made by the assessee during the year under consideration in his HDFC bank account. In these circumstances, the Assessing Officer ought to have treated the total cash deposits of Rs.60,25,535/- as unexplained u/s. 69A of the I.T. Act and taxed the same as per the provision of section 115BBE of the I.T. Act. In this case, the Assessing Officer has failed to do the same. Therefore, learned PCIT set-aside the assessment order u/s 147 r.w.s. 144B of the Income-tax Act, 1961 dated 17/05/2023 and directed the Assessing Officer to pass a fresh assessment order after making necessary enquiries relating to cash deposit made by the assessee in his HDFC bank account.

7.

Aggrieved by the order of the learned PCIT, the assessee is in appeal before this Tribunal.

8.

D.M. Rindani, Learned Counsel for the assessee, argued that action of ld. PCIT, under section 263 is unwarranted; as the very issue of HDFC Bank deposits was inquired into by the assessing officer, hence there cannot be said to be an error in the order u/s 147 r.w.s. 144B of the Act dated 17-05-2023. There is no lack of inquiry by assessing officer, as can be seen from the notices u/s 142(1) of the Act, vide paper book Page Nos. 25-27, 30-33, and replies filed by the assessee, in response thereto, vide Page nos. 28-29, 34-36 of paper book, and evidence filed during the course of assessment proceedings, vide Page nos. 45-80 of paper book, regarding all bank accounts. Inadequacy of inquiry alleged by Ld. PCIT is not a valid ground to assume jurisdiction u/s 263 of the Act, for this, ld. Counsel relied on the following judgements, viz: (i) Reckitt Benckiser Healthcare India (P.) Ltd. (2025) 179 taxmann.com 355 (Gujarat HC) which is confirmed by Hon’ble Supreme Court, (2025) 180 taxmann.com 160 (SC). Not making any addition on a particular issue, which is inquired into by assessing officer and replied to by assessee, would not by itself lead to inference that assessing officer did not apply his mind to the issue. Therefore, learned Counsel for the assessee contended that revision order of Ld. PCIT may be quashed. 9. Learned Counsel for the assessee, further argued that assessee filed the return of income under section 44AD of the Act and therefore, ld. PCIT cannot exercise his jurisdiction under section 263 of the Act to revise the assessment order when the assessee has filed the return of income under section 44AD of the Act. Therefore, on this technical issue revision order of learned PCIT may be quashed.

10.

On the other hand, Ld. CIT- DR for the revenue submitted that assessing officer, no doubt made enquiries about Axis Bank, however, assessing officer did not apply his mind and did not make enquiry about HDFC bank, therefore, to that extent, order passed by the assessing officer, is erroneous and prejudicial to the interest of the revenue. 11. The Ld. CIT- DR for the revenue, further submitted that even if the assessee filed the return of income, under section 44AD of the Act, the learned PCIT may exercise his jurisdiction under section 263 of the Act. 12. We have heard, the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. According to us, the present order of AO passed u/s 147 r.w.s 144B of the Act dated 17.05.2023 of the Act cannot be termed as erroneous since enquiry was, in fact, carried out by assessing officer on the issue on which the ld PCIT has found fault with and has taken a plausible view. We note that the AO has made enquiry during the assessment proceedings about HDFC bank account. Thus we note that the AO enquired during assessment proceedings and the assessee had filed details before him. So we find that the AO’s action cannot be termed “erroneous”. Since not only enquiry was carried out by the AO on the issue under consideration and based on the evidence gathered he has taken a plausible view, which at any rate cannot be called as an un-sustainable view. For that, let us take the guidance of judicial precedents laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the PCIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”. 14. Taking note of the aforesaid dictum of law laid down by the Hon’ble Apex Court, let us examine, what type of enquiries, the assessing officer conducted during the assessment proceedings. During the assessment proceedings, the assessing officer issued first show cause notice u/s 142(1) of the Act dated 18.01.2023, the relevant questions asked by the assessing officer, are as follows:

15.

In response to the above show cause notice, the assessee submitted its reply before the assessing officer, which is reproduced below:

“In connection with the above, I submit the following details/clarifications: 1. Copy of computation of total income for the year under consideration is attached at Annexure 1 2. Details regarding bank accounts maintained in Axis Bank during the relevant previous year are as under; Name of Bank Account No. Axis Bank SA-915010029473133 Axis Bank CA-913020001527257 2.1. Relevant copies of bank statements for the year under consideration are Annexure 2.

2.2 As regards to cash deposited in bank accounts, it is submitted that during the relevant previous year, I was engaged in the business of cheque drawing/discounting under the name and style N.S. Consulting. This can also be termed as shroff. To elaborate the business, it is explained that (a) customers come to us carrying cash with them and we issue drafts / cheques to them and (b) customers provide cheques/RTGS/NEFT and we pay cash to them. Normally bank charges very high for cash deposits and withdrawals. However, we open accounts with banks and keep balances as per their requirements. Due to which the charges are reduced substantially. Therefore, customer comes to us for cheque drawing/discounting. For providing such services we charge commission which normally ranges at Rs. 75/- per lakh of amount drawn/discounted. Out of such commission income, routine business expense of Rs. 25/- per lakh is occurred and net operative margin is around Rs. 50/- per lakh. 2.3 Said cash deposits and withdrawals in Axis Bank accounts are pertaining to Shroff business le. receipts from and payment to customers on commission basis. Commission income earned from the same is duly offered to tax in return of income. 3. Details regarding bank accounts maintained with other bank during the relevant previous year are as under Name of Bank Account No. & Type Account Holder HDFC Bank CA-50200001051227 Self HDFC Bank SA-01011000141030 Self 4. Relevant copies of Bank statements for the year under consideration are attached at Annexure 3. 5. As mentioned above, I am engaged in Shroff business and said cash deposits and withdrawals in HDFC Bank accounts are pertaining to Shroff business i.e. receipts from and payment to customers on commission basis. Commission income earned from the same is duly offered to tax in return of income. 6. I have filed my return of income for the year under consideration u/s. 44AD of the Act. Therefore, I have not maintained books of accounts for the relevant previous year. I have furnished the details called for as above and hope that the same will satisfy your requirements. However kindly grant me an opportunity to provide further details required if any before taking any adverse decision.

16.

In order to conduct further enquiry, during the assessment proceedings, the assessing officer has issued second show cause notice, the relevant portion of the show-cause notice is reproduced below:

17.

In response to the above show cause notice, the assessee submitted its reply before the assessing officer, which is reproduced below:

“In connection with the above, I submit the following details/clarifications: 1. I have filed my return of income for the year under consideration uls. 44AD of the Act. Therefore, I have not maintained books of accounts for the relevant previous year. 2 Original return of income was filed u/s 139 of the Act on 20.03.2017. Relevant acknowledgement of return of income is attached at Annexure 1 and full return of income is attached at Annexure 2.

3 In the original return of income filed u/s. 139 of the Act on 20.03.2017, I have duly shown my bank accounts with Axis Bank and HDFC Bank and duly considered commission income earned out of transactions carried out in these bank accounts. 4 Copy of license issued by statutory authority is attached at Annexure 3. 5 There are number of persons / concerns on daily basis whose amounts were transacted during the relevant previous year. Keeping record of every person was not practically feasible. 6 As the transactions are to be carried out in bank itself, major duration of working day was spent in bank i.e. 10 AM to 4PM. In remaining hours, I used to operate the business from Office No. 302, Madhav Complex, 150 Feet Ring Road, Rajkot. 6.1 As regards staff expense it is submitted that majority of work were done by me at bank. For remaining clerical work, I had employed Shri Sachin Kumar Hiralal Bhojani. Relevant copy of his Aadhar Card is attached at Annexure 4. 7. It is observed that as per the provisions of section 44AD(6)(ii) of the Act is not applicable to commission income. In this regards it is submitted that out of my gross commission receipts of Rs. 11,25,432/-, I have offered net income of Rs. 4,71,150/-, which is 41.86% of gross receipt and far higher than 8% specified u/s, 44AD of the Act. 8. Vide the above notice, I am required to show cause as to why the entire credits into bank accounts should not be added to my income for the year under consideration. In this regards it is once again humbly stated that the deposits and withdrawals in form of cash/RTGS/NEFT/Cheques pertain to angadia / shroff business i.e. cheque drawing / discounting. I have submitted registration certificate for shroff business. I was deriving commission income only from cash deposited at the respective station which I withdrew and hand it over to the concerned persons. The commission so received by me normally ranges to Rs. 75 per lac. 1, therefore, request to treat the said commission as my income and not the entire cash deposits. 8.1 Without prejudice to the above it is submitted that there were huge cash deposit in the bank account. But at the same time there were huge withdrawals also from the same bank in cash. Thus, if the cash deposits are treated as income, then at the same time cash withdrawal from the bank should be treated as expenses. As such the AO cannot take a view which is benefiting the Revenue without considering the fact for the withdrawal of cash. There are continuous cash deposits and withdrawals. 8.2 As per the accounting rule all the withdrawal of cash goes into cash book and if it is unspent, it would bear the character of cash in hand so that if any amount is deposited into the bank, it would undoubtedly correspond to the available cash in hand. Moreover, the Income Tax Law does not contain any provision to maintain record of reason or purpose of each withdrawal in cash from the bank. Thus, I should be given a benefit of doubt to relate the deposits in cash out of previous withdrawal from the banks. 8.3 Further there is no iota of evidence suggesting that I have made any investments or incurred any expenditure of personal nature out of the cash withdrawn from the bank. Thus, the amount of cash deposits alone cannot be treated as income. The action of making addition on account of all deposits made in the bank accounts is without any justification and resulting to the high pitch assessment. 8.4 Reliance is placed on the decisions of following jurisdictional High Court and ITAT;  Hon'ble ITAT, Rajkot Bench Rajkot in the case of Smt. Ruksana Samir Makhani IT(SS)A No. 134/Rjt/2017 (copy attached at Annexure 2).  Hon'ble Gujarat High Court in the case of Shree Sidhnath Enterprise v. Asstt. CIT (2016) 387 ITR 0646: (2017) 293 CTR 0535.  Hon'ble ITAT, Rajkot Bench Rajkot in the case of Mis. Panchnath Enterprise ITA Nos. 139 to 141/Rjt/2016 (copy attached at Annexure 3). I have furnished the details called for as above and hope that the same will satisfy your requirements. However kindly grant me an opportunity to provide further details required if any before taking any adverse decision”.

18.

From the above questions and answers between the assessing officer and assessee, during the assessment proceedings, clearly shows that assessing officer has conducted sufficient enquiry in respect of cash deposit in the HDFC bank account. There is difference between ‘Lack of enquiry’ and ‘inadequate enquiry’. It is for the AO to decide the extent of enquiry to be made as it is his satisfaction as what is required under law. Reliance is placed on the decision of CIT v. Sunbeam Auto Ltd. [(2010) 332 ITR 167], wherein Hon’ble Delhi High Court has held that if there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass order u/s 263 of the Act, merely because the Commissioner has a different opinion in the matter and that only in cases where there is no enquiry, the power u/s 263 of the Act can be exercised. The ld. PCIT cannot pass the order u/s 263 of the Act on the ground that further/thorough enquiry should have been made by AO. In any event, we note that the Assessing Officer has adopted one of the courses permissible in law and even if it has resulted in loss to the revenue, the said decision of the Assessing Officer cannot be treated as erroneous and prejudicial to the interest of the revenue as held by Hon’ble Supreme Court in Malabar Industries Ltd. vs. CIT (supra). Since the order of the assessment order cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is ‘’null’’ in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Principal CIT. Therefore, we quash the order of the Principal CIT dated 24.02.2026, being ab initio void.

19.

In the result, appeal filed by the assessee, is allowed.

Order is pronounced in the open Court on 07/08/2026.

Sd/- Sd/- [Shri Sonjoy Sarma] [Dr. Arjun Lal Saini] �याियक सद�य/Judicial Member S लेखा सद�य/Accountant Member //True Copy// राजकोट/Rajkot िदनांक/ Date: 07/08/2026 Copy of the order forwarded to : 1. The assessee 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, Rajkot 6. Guard File By order

Private Secretary ITAT, Rajkot

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