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Facts
The assessee filed an appeal against the revision order passed by the PCIT under Section 263, which set aside the assessment order and directed the AO to pass a fresh assessment. The assessee argued that the original assessment order was passed after proper verification and that the revision notice under Section 263 was not maintainable.
Held
The Tribunal held that the revision order passed by the PCIT under Section 263 was not sustainable. Once the Assessing Officer had reopened the case, examined all documents, and accepted the returned income without pointing out shortcomings, it was not open for the CIT to revisit the issue under Section 263.
Key Issues
Whether the CIT can initiate revision proceedings under Section 263 when the Assessing Officer has already completed the assessment after due verification and the same was accepted by the assessee.
Sections Cited
147, 148, 143(2), 263
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘B’, CHANDIGARH
Before: SHRI LALIET KUMAR & SHRI KRINWANT SAHAY
आदेश/Order Per Krinwant Sahay, AM : Appeal in this case has been filed by the assessee against the order dated 17.03.2025 passed by the Ld. Principal Commissioner of Income Tax, Chandigarh-1 [ herein referred to as ‘PCIT’]
Grounds of appeal, as raised by the Assessee are reproduced as under:
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1. The Id. CIT is wrong in passing revision order u/s 263 by setting-aside the assessment order and directing the assessing officer to pass fresh assessment order, without appreciating the fact that during the course of assessment, the then Id. assessing officer did not issue notice u/s 143(2) to the assessee and passed assessment order just for the sake of completing the assessment admitted by the Id. A.O. himself, so passing of assessment order without issuing notice u/s 143(2) is a void-ab-initio order as per the judgment of Hon'ble SC in the case of ACIT vs Hotel Blue Moon: 321 ITR 362, therefore, question of revision u/s 263 of void-ab-initio assessment order does not arise at all.
2. The Id. CIT is wrong in passing revision order u/s 263 by setting-aside the assessment order and directing the assessing officer to pass fresh assessment order, without appreciating the fact that the Id. assessing officer can not issue any notice u/s 143(2) to the assessee, as the same was already time barred on 30.06.2023, so passing of revision order u/s 263 by Id. CIT and directing for fresh assessment is an infructuous exercise, because id. A.O. cannot pass valid assessment order without issuing notice u/s 143(2), as same has already become time barred on 30.06.2023.
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The Id. CIT is wrong in passing revision order u/s 263 by setting-aside the assessment order and directing the assessing officer to pass fresh assessment order, without appreciating the fact that the assessment order was passed without authority of law, as the assessment order was required to be passed by the faceless assessing officer, and the same was duly admitted by the id. jurisdictional assessing officer in the assessment order itself, so assessment order passed by the Id. jurisdictional assessing officer is without authority of law and void-ab-initio order, therefore, question of revision u/s 263 of void-ab-initio assessment order does not arise at all.
The Id. CIT is wrong in passing revision order u/s 263 by setting-aside the assessment order merely on suspicion basis and directing the assessing officer to examine the cash receipt of Rs. 17,00,000, ignoring the undisputed fact that the Id. A.O. made requisite enquiry or verification and further, copy of sale agreement is duly on record to the file of Id. assessing officer and mere absence of notarization or registration of sale agreement does not render the sale agreement invalid and moreover, there is no contrary evidence on record to the file of Id. CIT to establish that cash receipt is an ingenuine.
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5. The Id. CIT is wrong in passing revision order u/s 263 by setting-aside the assessment order and directing the assessing officer to examine the source of stamp duty of Rs. 7,71,000 from the assessee, without appreciating the fact that the amount of stamp duty was paid by the seller named M/s Skyz Life Sciences Pvt ltd. and not by the assessee, as clear from the copy of sale deed itself which is a part of the assessment record, so question of enquiring the source of payment of stamp duty of Rs. 7,71,000 from the assessee is not applicable, as stamp duty was paid by the seller M/s Skyz Life Sciences Pvt Ltd and not the Assessee, therefore, revision u/s 263 is invalid in the eyes of law and liable to be quashed. 3. Brief facts of the case, as per the order of the ld. CIT(A) are as under:
The brief facts of the case are that the Return of Income (Rol) was filed by the assessee for the year under consideration on 17.10.2016, declaring a loss of Rs. 21,615/- Thereafter, the provisions of section 147 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") were invoked in this case to verify the source of investment of Rs.7,71,00,000/- made by the assessee for purchase of immovable property during the F.Y. 2015-16 relevant to A.Y. 2016-17. The assessee,
1. 690-Chd-2025 5 in response to notice u/s 148 of the Act, stated that her original Rol should be treated as return filed in response to the said notice. Subsequently, assessment was completed u/s 147 of the Act on 31.03.2023 by the Jurisdictional Assessing Officer(JAO), i.e., ITO, Ward-5(5), Chandigarh, accepting the loss declared in the Rol.
4. Later on, the ld. PCIT Chandigarh-1, started the proceedings u/s 263 by issuance of notice. The Assessee filed its detailed reply on each issue. The Ld. CIT, Chandigarh-1 after taking into consideration the detailed reply filed by the Assessee gave his findings as under:
1. “2. On examination of assessment records, it is noticed that the Assessee had made investment in purchase of property for a sum of Rs. 1,54,20,000/- (20% of Rs. 7,71,00,000/-) and while giving explanation for the source of investment during the course of assessment proceedings, the assessee has stated that out of the above amount, a sum of Rs. 17,00,000/- was received in cash from sale of plot at Ecocity, Village Mullanpur, Teh-Kharar. A careful perusal of the records shows that for this cash receipt of Rs. 17,00,000/-, only a sale agreement has been provided at the time
1. 690-Chd-2025 6 of assessment proceedings. The agreement is neither notarised nor registered and even not on valid stamp paper and without any details of stamp vendor. Furthermore, during the course of assessment proceedings, no document has been provided which could prove that the assessee is the legal owner of the said plot. Even there are no statements or evidence which can prove that cash has been paid by the said sellers. Therefore, the claim of the assessee for receipt of cash is not proved. Further, the source of 20% of stamp paper value which amounts to Rs. 7,71,000/-, was also not explained during the course of assessment proceedings. However, the JAO, without examining the issues, has completed the assessment proceedings, accepting the loss declared by the assessee in her Rol. In view of this, it is clear that the JAO failed to make necessary enquiries/verification, which should have been done in order to assess the correct income of the assessee as per the applicable provisions. The order passed u/s 147 of the Act, dated 31.03.2023, thus appears to be erroneous, and prejudicial to the interest of revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by Finance Act, 2015.”
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The Assessee has filed appeal before us against the order / revocation of section 263 by the PCIT.
During proceedings before us, the ld. Counsel for the Assessee brought it on record that in the assessment order passed by the Assessing Officer dated 31.3.2023, it has been clearly mentioned as under: -
1. “2.1 In response the assessee furnished the relevant details and documents related to the source of investment made of Rs. 1,54,20,000/- (20% of Rs. 7,71,00,000/-) for purchase of property on 05.05.2015 situated at house no 141 plot no 36-P, street B, sector 28-A, Chandigarh, which are duly examined and duly placed on record. Copy of purchase deed is also placed on record. Since the assessee has provided the relevant document with regard to the source of investment mentioned above with documentary evidence, the original return filed in response to notice u/s 148 dated 31.03.2021 declaring loss of Rs. 21,025/- on 17.10.2016 is hereby accepted.”
The ld. Counsel for the Assessee discussed various case laws including Delhi Bench decision in ‘Krishan Kumar Saraf vs CIT’, [2017] 83 taxmnn.com 331(Delhi) order dated 24.9.2015 and ‘ACIT & Anr vs M/s Hotel Blue
1. 690-Chd-2025 8 Moon’, Civil Appeal No. 1198 of 2010 (arising out of SLP (c) No. 22973 of 2007) decided by the Hon'ble Supreme Court and it was submitted that once the Assessing Officer has reopened the case on the same issue and got satisfied on the basis of papers / documents and details filed by the Assessee, it is not open to CIT to revisit it u/s 263. Herein in this case, the AO also examined all papers and then accepted the returned income of the Assessee without pointing out any short comings, therefore, issuance of notice u/s 263 of the Act on the same issue by the Ld. PCIT is not as per law.
8. The ld. DR relied on the orders of the authorities below.
We have considered the findings given by the Assessing Officer on the issue which was taken up for issuance of notices u/s 147, the detailed reply / documents and submissions filed by the Assessee before the Assessing Officer and final findings of the Assessing Officer on this issue. We find that AO has clearly mentioned in the assessment order that the Assessee has 690-Chd-2025 9 furnished relevant details and documents related to the source of investment for purchase of property on 5.5.2015. These documents were duly examined by the Assessing Officer and they were placed on record. In our considered view, once the AO has reopened the case on an issue and the Assessee has filed all the details and required documents as per the satisfaction to the Assessing Officer, the same issue cannot be taken up for issuance of notice u/s 263. Various case laws brought on record by the counsel of the Assessee clearly shows that it is not permissible under law. Another small issue of purchase of stamp paper / stamp duty has also been explained by the Assessee in its reply to the Ld. PCIT Chandigarh-1. The Ld. PCIT’s findings that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of Revenue, is therefore, not appropriate and thus cannot be sustained. Accordingly, the issuance of notice and order passed u/s 263 of the Act by the Ld. PCIT-1, Chandigarh is hereby quashed and the Assessee’s appeal on this issue is allowed.Since the order passed by the Ld. PCIT on the issue itself is 690-Chd-2025 10 quashed by us, thus, the appeal of the Assessee stands allowed.
In the result, appeal of the Assessee is allowed.
Order pronounced on 12. 03.2026.