HEMENDRA AGARWAL,AGRA vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1), AGRA

ITA 364/AGR/2026Status: DisposedITAT Agra29 September 2026AY 2014-201521 pages
AI SummaryAllowed

What were the facts?

The assessee, Hemendra Agarwal, is in appeal against an order dated 27.02.2026 passed by the Principal Commissioner of Income Tax (PCIT), Agra-1, under Section 263 of the Income Tax Act, 1961. The PCIT had cancelled the assessment order dated 02.05.2023, passed by the Assessing Officer (AO) under Section 147 read with Section 144 of the Act for Assessment Year 2014-15. The reassessment was initiated based on a notice under Section 148 dated 29.07.2022, concerning cash deposits of Rs. 12,26,58,051/- and withdrawals from a savings bank account. The assessee explained that total cash deposits were Rs. 2,00,30,000/-, sourced from unsecured loans for an unfulfilled purpose, which were subsequently redeposited and loans repaid. The AO accepted this explanation. The PCIT, however, found the assessment order erroneous and prejudicial to the revenue, directing the AO to pass a fresh assessment order.

What did the Tribunal hold?

The Tribunal held that the revisionary order passed by the PCIT under Section 263 of the Income Tax Act, 1961, was bad in law and a nullity. The Tribunal relied on the principle that an invalid or non-est order cannot give rise to legally valid proceedings. In this case, the assessment order dated 02.05.2023, passed under Section 147 read with Section 144, was itself considered bad in law because it was passed pursuant to a notice under Section 148 dated 29.07.2022, which was deemed bad in law. Following the precedent of a co-ordinate bench of the Tribunal in Mumbai, the Tribunal held that the PCIT could not assume jurisdiction under Section 263 to revise an order that was non-est in the eyes of law. Such revision would prejudice the assessee's accrued rights. Therefore, the impugned order passed by the PCIT under Section 263 was quashed. The Tribunal did not deal with other legal aspects or issues raised on merits, as the jurisdictional ground was allowed. The order clarified that it would have no bearing on the tax liability determined by the original assessment order.

What were the issues?

1. Whether the revisionary order passed by the PCIT under Section 263 of the Income Tax Act, 1961, is bad in law and without jurisdiction, as the conditions precedent for exercising such jurisdiction were absent. 2. Whether the twin conditions precedent for revisionary jurisdiction under Section 263, namely that the AO's order must be (i) erroneous and (ii) prejudicial to the interests of the revenue, were cumulatively satisfied. 3. Whether the AO's acceptance of the assessee's explanation for cash deposits of Rs. 2,00,30,000/- constituted a lawful judicial outcome that could not render the order erroneous. 4. Whether the PCIT erred in invoking Explanation 2(a) to Section 263(1) by treating the reassessment order as 'deemed erroneous' without establishing prejudice to the revenue or demonstrating that the AO failed to make necessary inquiries. Assessee's Contentions: - The conditions precedent for Section 263 jurisdiction were not met. - The AO's order was not erroneous or prejudicial to the revenue. - The AO conducted due examination and found the cash deposits explained, making it a lawful outcome. - An order is not erroneous merely because the CIT holds a different view. - The PCIT failed to establish how the order was prejudicial to the revenue. - Explanation 2(a) does not override the requirement of establishing both erroneousness and prejudice; the AO did conduct inquiries, and a redundant bank inquiry was not necessitated. Revenue's Contentions: - Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 263,Section 147,Section 144,Section 148,Section 143(3),Section 158BFA(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AGRA(DB

Before: SUNIL KUMAR SINGHBRAJESH KUMAR SINGH

For Appellant: Shri Sushil Kumar Maheshwari, CA
For Respondent: Ms. Sangeeta Yadav, CIT DR
Hearing: 09.07.2026Pronounced: 29.09.2026

PER: BRAJESH KUMAR SINGH, A.M.

This appeal is directed against the impugned order dated 27.02.2026 passed in Revision No PCIT, Agra-1/Revision-263/100000977595/2026 by the Ld. Pr. Commissioner of Income Tax, Agra-1 u/s. 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2014-15, wherein

ITA 364/Agr/2026

ld. PCIT cancelled (set aside) the assessment order passed u/s 147 r.w.s 144 of the Act dated 02.05.2023 with the directions to the AO to pass fresh assessment order.

2.

Brief facts of the case: In this case the Ld. PCIT passed an order u/s 263 of the Act setting aside the assessment order passed u/s 147 r.w.s 144 of the Act dated 02.05.2023. The

The order continues below.

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