DAYAL PARTAP SINGH C/O DAYAL KIDNEY HOSPITAL, BATHINDA,BATHINDA vs. THE CIT (CENTRAL), LUDHIANA, PUNJAB

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ITA 288/CHANDI/2026Status: DisposedITAT Chandigarh03 August 2026AY 2020-20215 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had satisfactorily explained the cash payments during the revisionary proceedings. The Pr. CIT failed to satisfy the mandatory jurisdictional requirements of Section 263 as no independent inquiry was conducted and the assessment order was not demonstrably erroneous or prejudicial to the revenue.

What were the facts?

The assessee's assessment order was revised by the Pr. CIT, who flagged issues regarding cash payments made in contravention of Section 40A(3). The assessee had explained these payments, including salary payments and capital expenditure on construction materials, stating they did not exceed the threshold or were not claimed as revenue expenditure.

What were the issues?

Whether the Pr. CIT validly exercised revisionary jurisdiction under Section 263 when the assessee had provided satisfactory explanations for the flagged issues, and whether the assessment order was erroneous and prejudicial to the revenue.

Which sections of the Income-tax Act were involved?

Section 263,Section 40A(3),Section 133A,Section 143(3),Section 43(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, CHANDIGARH

Before: HON’BLE SHRI LALIET KUMAR, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, CHANDIGARH HYBRID HEARING BEFORE HON’BLE SHRI LALIET KUMAR, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./ ITA No.288/CHANDI/2026 (िनधा�रणवष� / Assessment Year: 2020-21) Dayal Partap Singh Pr. CIT (Central) C/o Dayal Kidney Hospital SCO 1–6, 3rd Floor, Opp. BVM बनाम/ Vs. Opp. Bhatti Road, G.T. Road Kitchlu Nagar, Ludhiana Bhatinda, Punjab – 151001 Punjab – 141001 �ायीलेखासं./जीआइआरसं./PAN/GIR No. AQHPS-5765-R (अपीलाथ�/Appellant) (��थ� / Respondent) : अपीलाथ�कीओरसे/ Appellant by : Sh. Sudhir Sehgal (Advocate) & Sh. Kushal Chopra (CA) – Ld. ARs ��थ�कीओरसे/Respondent by : Smt. Jai Shree Sharma (CIT) - Ld. DR (Virtual सुनवाईकीतारीख/Date of Hearing : 20-07-2026 घोषणाकीतारीख /Date of Pronouncement 03-08-2026 : आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee assails invocation of revisionary jurisdiction u/s 263 by Ld. Pr. Commissioner of Income Tax, Central, Ludhiana (Pr. CIT) for the Assessment Year (AY) 2020-21 vide impugned order dated 08-01-2026 proposing revision of an assessment as framed by Ld. Assessing Officer [AO] u/s.143(3) on 10.04.2023.

2.

The Ld. AR advanced arguments to assail the impugned revision on the ground that there was no error in the assessment order. The twin issues as flagged in the impugned revisionary order were duly been explained by the assessee during revisionary proceedings itself. The Ld. CIT-DR, on the other hand, advanced arguments supporting the impugned revisionary order. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. 3. From the case records, it emerges that the assessee is a Doctor by profession. The assessee filed return of income on 30.01.2021 at Rs.246.56 Lacs which include surrender made by the assessee pursuant to survey action u/s 133A on 05.11.2019. The Ld. AO made addition of Rs.10.85 Lacs on account of unexplained expenditure on construction of a project by the assessee and framed the assessment. 4. Subsequently, Ld. Pr. CIT, upon perusal of case records, observed that as per cash book, there were multiple entries to whom the payments were made by the assessee in contravention of Sec.40A(3) of the Act. These entries have been tabulated in the impugned order and the same was in nature of salary to staff, and purchase of construction / sanitary items from two suppliers. The payments aggregated to Rs.4,88,355/- which were proposed to be disallowed u/s 40A(3) and accordingly, the assessee was show- caused. The assessee filed relevant details and demonstrated that the salary payment of Rs.1,42,500/- was a consolidated figure but the salary paid to each of the employee did not exceed threshold limit of Rs.10,000/- per employee. The payments towards purchase of sanitary

and paint items was made to M/s Lovely Bath Concept and M/s Bansal & Co. These amounts were stated to be debited to building construction amount and were stated to be in the nature of capital expenditure. The assessee also demonstrated that on such cash payments, depreciation was not claimed by the assessee as per proviso to Sec. 43(1). However, Ld. Pr. CIT concluded that aforesaid examination was possible during assessment proceedings only. The assessment order was passed without due application of mind and in a mechanical manner. Finally, the impugned order was set aside for fresh assessment on these issues by Ld. AO after conducting requisite enquiries in accordance with law. Aggrieved as aforesaid, the assessee is in further appeal before us. 5. From the facts, it clearly emerges that the twin issues as flagged in the impugned revisionary order were satisfactorily been explained by the assessee by way of submissions during revisionary proceedings. So far as the payment of salary of Rs.1,42,500/- is concerned, the same is in the nature of salary payable and the assessee well demonstrated that the payment to each of the employee did not exceed threshold limit of Rs.10,000/- in each of the cases. This being so, the provisions of Sec. 40A(3) could not be invoked in the case of the assessee. On the second issue, viz. payment of purchases in cash, it is uncontroverted fact that the assessee has booked the said expenditure as capital expenditure and the assessee has not claimed any depreciation on the cash payment so made. The financial statements were before Ld. AO during the course of regular assessment

proceedings. This being so, the provisions of Sec.40A(3) could also not be invoked in such a case since the assessee has neither claimed the expenditure as revenue expenditure nor claimed depreciation on this item in its return of income. Therefore, the assessment order could not be branded as erroneous in nature. The conditions of Sec.263 remain unfulfilled and therefore, impugned revision of the order could not be sustained in law. 6. The case law of Hon’ble Delhi High Court in the case of Pr. CIT vs. Delhi Airport Metro Express Pvt. Ltd. (93 Taxmann.com 382) duly supports our aforesaid view. In this decision, it has been held by Hon’ble Court that for the purposes of exercising jurisdiction u/s 263, the conclusion that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue, has to be preceded by some minimal inquiry. In fact, if the Pr. CIT is of the view that the Assessing Officer did not undertake any inquiry, it becomes incumbent on the Pr. CIT to conduct such inquiry. We find that the ratio of this decision squarely applies to the fact of present case before us. 7. In the present case before us, except for observing that further enquiry ought to have been made by Ld. AO, the learned Pr. CIT has not recorded any finding that the twin claims as made by the assessee were factually incorrect or legally unsustainable. There is no independent enquiry conducted by the revisionary authority and no material has been brought on record demonstrating escapement of income. The impugned order is thus founded only upon suspicion and not upon satisfaction of the mandatory jurisdictional requirements u/s

263.

In our considered opinion, the revisionary authority could not abdicate his statutory obligation of arriving at his own satisfaction by merely directing the AO to examine the matter afresh. Such an order amounts to exercising revisional jurisdiction for the purpose of making further enquiries which is beyond the scope of Sec. 263. The impugned order merely remands the matter to AO for conducting fresh enquiries, which is not the object of Sec. 263. Accordingly, we hold that the learned Pr. CIT failed to satisfy the mandatory jurisdictional requirements contemplated u/s 263. The assumption of jurisdiction is, therefore, invalid. In other words, the impugned revisionary order passed u/s 263 is quashed and the assessment order passed by the Assessing Officer is restored. 8. The appeal stand allowed. Order pronounced on 03rd August, 2026 -Sd- -Sd- (LALIET KUMAR) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AS Dated: 03-08-2026 आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

ASSISTANT REGISTRAR ITAT CHANDIGARH

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