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Facts
The PCIT initiated revisionary proceedings under Section 263 for AYs 2017-18 to 2020-21, alleging that assessment orders framed under Section 153C (and Section 143(3) for AY 2020-21) were erroneous and prejudicial to the Revenue. The grounds for revision included alleged untaxed on-money of Rs. 29.64 crore from a Makarba land transaction, unexamined TDR transactions, and insufficient inquiry into the assessee's voluntary survey disclosure of Rs. 2.30 crore treated as short-term capital gain, all stemming from survey and search operations.
Held
The Tribunal held that the Assessing Officer had conducted specific and detailed inquiries into all the issues, and the assessee's explanations, supported by judicial precedents, were on record. For the Makarba land deal, the alleged on-money was already taxed in AY 2023-24 upon sale deed execution, precluding double taxation. For TDR transactions and survey disclosures, the AO's acceptance after inquiry constituted a plausible view, and the PCIT could not assume revisional jurisdiction merely based on a difference of opinion or without demonstrating real prejudice. The Tribunal concluded that the twin conditions for exercising revisional jurisdiction under Section 263 were not met.
Key Issues
Whether the PCIT's revisional orders under Section 263 were valid, specifically regarding alleged untaxed on-money from a land deal, unexamined TDR transactions, and the treatment of a survey disclosure as short-term capital gain, given that the AO had conducted inquiries and taken a plausible view.
Sections Cited
263, 133A, 132, 143(3), 153C, 153D, 142(1), 133(6), 131, 139(1), 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI MAKARAND V.MAHADEOKAR
PER MAKARAND V.MAHADEOKAR, AM: These appeals by the assessee are directed against the revisionary orders passed by the Principal Commissioner of Income- tax, Central, Ahmedabad [hereinafter referred to as “the PCIT”] under section 263 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], dated 31.03.2025, for the assessment years 2017-18, 2018-19, 2019-20 and 2020-21. By the impugned orders, the learned PCIT held that the assessments framed by the Assessing Officer (AO) u/s. 153C of the Act (except A.Y. 2020-21 where proceedings were u/s. 143(3)) on 29.09.2022, were erroneous in so far as they were prejudicial to the interests of the Revenue. The assessments were accordingly set to 1160/Ahd/2025 2 aside to the file of the AO for fresh examination on the issues highlighted in the revisionary orders.
2. Common Factual Background:
2.1 The assessee, an individual associated with the B-Safal group, derives income from business and allied activities, including land development transactions. A survey u/s. 133A was carried out in the case of the assessee and the group concerns on 12–13.02.2019. During the course of such survey, the group collectively surrendered undisclosed income of Rs.50.03 crore, out of which Rs.1.04 crore was offered by the assessee for A.Y. 2018-19 and Rs.2.30 crore for A.Y. 2019-20.
2.2 Subsequently, a search u/s. 132 was conducted on 15.10.2019 in the case of the “Land Broker & Financier Group”, including Shri Suresh R. Thakkar. During the course of such search, several incriminating documents and electronic data were seized. Amongst these were notings/images retrieved from the mobile phone of Shri Thakkar (pages 105, 576, 579 and 271 of seized material, Vol. XI) evidencing negotiations for sale of land parcels situated at Makarba, Ahmedabad, jointly owned by the assessee and Smt. Arunaben Zaveri. The notings suggested a total sale consideration of Rs. 61.44 crore, of which only Rs.18.11 crore was recorded in the registered document, while Rs.43.32 crore represented alleged on-money, substantially received in cash. As per the noting, assessee’s share in such on- money was computed at Rs.29.64 crore.
2.3 Further, seized and impounded documents also reflected dealings in Transferable Development Rights (TDRs) involving the assessee and the group, including receipts of substantial sums in cash. The survey and cross-enquiries initiated in the cases of third to 1160/Ahd/2025 3 parties, including Shri Suresh Thakkar, further brought out references to transactions with Shri Narendra Patel of Sun Builders, Malaybhai Multani, Manoj Vadodaria and others. Notices u/s. 133(6) were issued in that connection, to which the assessee responded stating that the land transactions had not materialised and that advances received had been refunded through normal banking channels.
2.3 Following is the Tabulated Statement of Incriminating Material:
Operation & Date Nature of Particulars Material Survey u/s. 133A – Statements & - Statement of assessee 12/13.02.2019 (B- Voluntary recorded u/s. 131 on Safal Group) Disclosure 13.02.2019. - Group disclosed Rs.50.03 crore as additional income. - Assessee’s share: Rs.1.04 crore (A.Y. 2018- 19) and Rs. 2.30 crore (A.Y. 2019-20). Search u/s. 132 – Loose Papers & - Negotiation papers for 15.10.2019 (Land Digital Data sale of Makarba land Broker & Financier (Vol. XI – pages parcels (Survey Nos. Group, Suresh R. 105, 576, 579, 430/2, 430/3/1, 430/4, Thakkar) 271) 429). - Total consideration: Rs. 61.44 crore. - Registered consideration: Rs. 18.11 crore. - Balance Rs. 43.32 crore treated as on-money in cash. to 1160/Ahd/2025 4 - Assessee’s share worked at Rs. 29.64 crore. - References to receipt/payment schedules, including “cash” notings. Seized Papers - Doc No. 37 of Annexure A-1, Page 260 Vol. I. on TDR Transactions - Receipts of Rs. 4.20 crore including Rs. 2 crore in cash. - Payments of Rs. 2.24 crore. - Linked with statements of Shri Suresh Thakkar. Other Cross- - Pages 152–170: References Transactions with Shri Malay Multani/Parshwa Infraventures. - References to dealings with Shri Narendra Patel, Manoj Vadodaria. - Cross-enquiries u/s. 133(6) issued, assessee replied on 13.04.2021 that advances refunded through banks. Survey Follow- - Assessee’s statement up Statement recorded u/s. 131 during (06.07.2022) survey at Aayakar Bhavan. - Confirmed joint ownership of Makarba land; clarified that land was still agricultural; NA conversion under dispute; no conveyance deed executed till date.
2.4 The Assessing Officer, after issuing notices u/s. 142(1) on 02.05.2022 and 17.08.2022 and after obtaining the assessee’s responses, completed assessments for all four years on 29.09.2022, accepting the returned income without making any addition in respect of the seized material or surrendered income. Approvals u/s. 153D were also obtained from the Additional CIT.
2.5 The learned PCIT, upon examination of records, was of the view that the AO had failed to make proper and meaningful enquiries into the seized material, survey disclosures, and corroborative statements. It was observed that the AO’s failure to bring to tax the assessee’s share of on-money in the Makarba land transaction, the cash receipts in TDR transactions, and the survey disclosure of Rs. 2.30 crore had rendered the assessment orders erroneous and prejudicial to the interests of the Revenue. Accordingly, revisionary orders u/s. 263 were passed for all the years under appeal, setting aside the assessments for fresh examination.
2.6 Details of return filed, and assessment completed are tabulated below for easy reference:
Particulars A.Y. 2017-18 A.Y. 2018-19 A.Y. 2019-20 A.Y. 2020-21 Date of 14.02.2018 09.03.2019 26.10.2019 15.02.2021 Original Return Returned Rs.1,33,49,570/- Rs.1,05,04,150 Rs.3,17,04,460/ Rs.1,68,97,83 Income /- - 0/- (Original) Date of 19.07.2021 19.07.2021 19.07.2021 Not applicable Return in (same as response to original) s.153C Returned Rs.1,33,49,570/- Rs.1,05,04,150 Rs.3,17,04,460/ Rs.1,68,97,83 Income /- - 0/-
(s.153C return) Date of AO’s 29.09.2022 29.09.2022 29.09.2022 29.09.2022 Order u/s. 143(3)/153C Date of PCIT’s 31.03.2025 31.03.2025 31.03.2025 31.03.2025 263 Order
3. Aggrieved by the orders of the PCIT, the assessee is in appeals before us raising following assessment year-wise grounds of appeal:
In ITA/No.1157/Ahd/2025 for AY 2017-18
1. The Ld. PCIT has erred in law and on facts in passing the order u/s. 263 of the Act by holding in Para 9 on Page 40 that "the assessment order passed by the AO u/s. 143(3) r.w.s. 153C of the Act on 29.09.2022 for AY. 2017-18 and order of approval u/s.153D of the Act dated 29.09.2022 issued by the Addl. CIT, Central Range-1, Ahmedabad are erroneous and prejudicial to the interest of Revenue. Accordingly, the same are set aside to the file of the Assessing officer and Addl. CIT for examining the above issue in detail while framing the fresh assessment order".
2. The Ld. PCIT has erred in not appreciating that the core issue under consideration in the proceedings initiated under section 263 pertains to the seized material recovered during the course of search conducted on 15.10.2019 in the case of the "Land Broker & Financier Group and also includes the statement recorded of Shri Suresh Thakkar regarding the sale of land bearing Survey Nos. 430/4, 430/2, 430/3/1, and 429 situated at Makarba, Ahmedabad. In this regard, a notice under section 142(1) of the Act was already issued by the Learned Assessing Officer, and the appellant has duly submitted a detailed explanation and supporting documents in response. Therefore, the very foundation of the revisionary proceedings under section 263—on the premise that the relevant details were not verified-is factually incorrect, unjustified, and untenable in law.
3. The Ld. PCIT erred in ignoring the appellant's submission u/s 133(6) of the Act, clarifying that advances from Shilp Construction were received between Sept 2016 and July 2017 and fully returned by Oct 2019, prior to the search on Suresh Thakkar on to 1160/Ahd/2025 7 15.10.2019. Since the land deal was cancelled before the search and the Section 153C notice was issued much later (02.05.2022), drawing any adverse inference or linking Suresh Thakkar to the transaction is unjustified.
4. The Ld. PCIT has not considered the reply dated 13.04.2021 filed by the appellant in response to the notice issued u/s. 133(6) of the Act being cross enquiry in the case of Shri Suresh Thakkar wherein the appellant has duly explained the transaction undertaken between the appellant, Arunaben Zaveri and Narendra Patel that the deal was not materialized, the entire amount was returned back through regular banking channel. That during the course of survey proceedings conducted the case of appellant, statement u/s.131 of the Act was recorded on 06.07.2022 at Aayakar Bhavan, wherein the appellant has stated that no conveyance deed has been executed till date on which statement has been recorded in respect of various survey Nos land at Makarba.
5. The Ld. PCIT failed to consider various judicial pronouncements relied upon by the appellant in the case of CIT vs. Happy Home Corporation (2019) 103 taxmann.com 22 (SC) wherein it is held that any addition to be made on the basis of any incriminating material can be made in the year in which the sale deed has been executed and not in the year in which the advances has been received. The Ld. PCIT has erred in not appreciating that the Ld. AO while passing the order u/s. 143(3) of the Act dated 31.03.2025 for AY 2023-24, has already made the addition of Rs.19,72,00,000/- of alleged on-money on account of sale of these land parcels bearing Survey Nos 430/3/1, 430/2, 430/4 & 429 at Makarba as the sale deed has been entered into on 22.12.2022.
6. That the seized material referred in the show cause notice by the then Ld.AO at the time of assessment proceedings u/s. 143(3) r.w.s. 153C of the Act are the same seized material as stated in the 263 proceedings. Hence, there is no lapse or no subject matter has been remained unattended by the then Ld. AO at the time of passing order u/s. 143(3) r.w.s. 153C of the Act. Thus, the allegation in the 263 proceedings initiated by the Ld. PCIT the case of appellant is only in the grab of change of opinion. Reliance is placed on the decision of Hon'ble Supreme Court in the case of Pr. CIT-8, Mumbai vs. Sumatichand Tolamal Gouti (2019)
to 1160/Ahd/2025 8 111 taxman.com 287 (SC) and various other judicial pronouncements.
7. The appellant submits that the judicial rulings relied on by the Ld. PCIT are inapplicable, as the appellant's case involves distinct facts and thorough inquiries by the AO under Section 142(1). Therefore, the order u/s 143(3) r.w.s. 153C and the approval us 153D are neither erroneous nor prejudicial to the Revenue. In contrast, the case laws cited by the appellant are directly applicable.
8. The Ld. PCIT has erred in law and on facts in failing to properly consider the submission made before him as well as various judicial pronouncements relied upon by the appellant. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.
PRAYER
1. The appellant therefore respectfully prays that: The order passed by the Ld. PCIT passed u/s. 263 of the Act dated 31.03.2025 setting aside the assessment order passed u/s. 143(3) rws 153C of the Act dated 29.09.2022 and the approval granted by the Addl.CIT u/s.153D of the Act for A.Y. 2017-18 may kindly be quashed.
2. Such and further relief as the nature and circumstances of the case may justify. In for AY 2018-19
1. The Ld. PCIT has erred in law and on facts in passing the order u/s. 263 of the Act by holding in Para 9 on Page 37 that " the assessment order passed by the AO u/s. 153C of the Act on 29.09.2022 for AY. 2018-19 (Asstt. Year written as A.Y. 2020-21) and order of approval u/s. 153D of the Act dated 29.09.2022 issued by the Addl. CIT, Central Range-1, Ahmedabad are erroneous and prejudicial to the interest of Revenue. Accordingly, the same are set aside to the file of the Assessing officer and Addl. CIT for examining the above issue in detail while framing the fresh assessment order".
Transfer of TDR
The Ld. PCIT failed to appreciate the detailed replies and judicial precedents submitted by the appellant in the 263 proceedings. The AO had already sought and considered all relevant details during the assessment u/s 153C, as acknowledged in Para 3 of the order dated 29.09.2022, referring to multiple notices u/s 142(1) and corresponding replies.
3. The Ld. PCIT failed to consider that the AO had already examined the TDR transaction (Doc No. 37 of Annexure A-1 and Page 260 of Vol-1) during assessment us 153C. A detailed notice u/s 142(1) dated 02.05.2022 specifically sought clarification on these, including the statement of Shri Suresh Thakkar, and the appellant replied with full details on 21.06.2022. Both the notice and reply were on record, and the same material was cited again in the 263 proceedings. The appellant humbly submits that the images and relevant portion of statement of Suresh Thakkar reproduced by the Ld. PCIT in Para 7 of the notice u/s. 263 of the Act dated 27.02.2025 and the images of relevant portion of statement of Shri Suresh Thakkar in the notice u/s.142(1) dated 02.05.2022 issued in the assessment proceedings are same.
4. The Ld. PCIT has erred in not considering that during the course of assessment proceedings of Suresh Thakkar for A.Y. 2019-20, the notice u/s. 133(6) was issued to the appellant asking to provide the details in respect of transaction of appellant with Narendra K. Patel, Malay Shah and Manoj Vadodaria during A.Y. 2014-15 to A.Y. 2020-21 and in response to the same, appellant filed a reply dated 13.04.2021 duly explain that appellant is not dealing in TDR in his Individual capacity.
Transaction with Malaybhai
5. The Ld. PCIT erred in relying on transactions with Malaybhai (Pages 152-170 of seized documents), ignoring that the AO had already examined these in 153C proceedings through a notice u/s 142(1) dated 02.05.2022, and the appellant responded on 21.06.2022. Hence, the claim that the AO ignored key evidence is unjustified.
6. The Ld. PCIT has erred for the first time in the order passed u/s. 263 of the Act dated 31.03.2025 brought on record the name of Shri Malay Multani and M/s. Parshwa Infraventures who had to 1160/Ahd/2025 10 undertaken the transactions with M/s. Safal Constructions India Pvt. Ltd through Shri Rajesh Brahmbhatt.
Transaction in Makarba Land
7. The Ld. PCIT erred in not considering that during the course of assessment proceedings of Suresh R. Thakkar (A.Y. 2019-20), a notice under section 133(6) was issued to the appellant for cross inquiry regarding transactions with Narendra K Patel for A.Y. 2014-15 to A.Y. 2020-21. The Ld. PCIT has not considered the reply dated 13.04.2021 filed by the appellant in response to the notice issued u/s. 133(6) of the Act being cross enquiry in the case of Shri Suresh Thakkar wherein the appellant has duly explained the transaction undertaken between the appellant, Arunaben Zaveri and Narendra Patel clarifying that as the deal was not materialized, the entire amount received as advances from Shilp Construction was returned back through regular banking channel.
8. The Ld. PCIT has failed to appreciate the fact that survey proceedings were conducted in case of the appellant and during the course of survey proceedings statement u/s.131 of the Act was recorded on 06.07.2022 at Aayakar Bhavan wherein the appellant has stated that he is the joint owner of the land bearing Survey No. 430/3/1, 430/2, 430/4 and 429 situated at Makarba, Ahmedabad and the said lands are agricultural land and the conversion into N.A. Land is subjected to dispute and litigation.
9. The Ld. PCIT has erred in not appreciating that the Ld. AO while passing the order u/s. 143(3) of the Act dated 31.03.2025 for AY 2023-24, has already made the addition of Rs. 19,72,00,000/- of alleged on-money on account of sale of these land parcels bearing Survey Nos 430/3/1, 430/2, 430/4 & 429 at Makarba as the sale deed has been entered into on 22.12.2022.
The Ld. AO has failed to appreciate that the seized material referred in the show cause notice by the then Ld.AO at the time of assessment proceedings u/s. 143(3) r.w.s. 153C of the Act are the same seized material as stated in the 263 proceedings. Hence, there is no lapse or no subject matter has been remained unattended by the then Ld. AO at the time of passing order u/s. 143(3) r.w.s. 153C of the Act. Thus, the allegation in the 263 to 1160/Ahd/2025 11 proceedings initiated by the Ld. PCIT the case of appellant is only in the grab of change of opinion. Reliance is placed on the decision of Hon'ble Supreme Court in the case of Pr.CIT-8, Mumbai vs. Sumatichand Tolamal Gouti (2019) 111 taxman.com 287 (SC) and various other judicial pronouncements.
The appellant respectfully submits that the judicial pronouncements relied upon by the Ld. AO are not applicable, as the facts of the appellant's case are distinguishable. The Ld. AO conducted extensive inquiries by issuing notices under section 142(1), making the order under section 143(3) read with section 153C, along with the approval by the Addi. CIT under section 153D, not erroneous or prejudicial to the revenue. Furthermore, the judicial pronouncements cited by the appellant are fully applicable to the case.
The Ld. PCIT has erred in law and on facts in failing to properly consider the submission made before him as well as various judicial pronouncements relied upon by the appellant. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.
PRAYER
1. The appellant therefore respectfully prays that: The order passed by the Ld. PCIT passed u/s. 263 of the Act dated 31.03.2025 setting aside the assessment order passed u/s. 143(3) rws 153C of the Act dated 29.09.2022 and the approval granted by the Addl.CIT u/s.153D of the Act for A.Y. 2018-19 may kindly be quashed.
2. Such and further relief as the nature and circumstances of the case may justify. for AY 2019-20 :
1. The Ld. PCIT has erred in law and on facts in passing the order u/s. 263 of the Act by holding in Para 9 on Page 7 that "the assessment order passed by the AO u/s. 153C of the Act on 29.09.2022 for AY. 2019-20 and order of approval u/s.153D of the Act dated 29.09.2022 issued by the Addl. CIT, Central Range- 1, Ahmedabad are erroneous and prejudicial to the interest of Revenue. Accordingly, the same are set aside to the file of the to 1160/Ahd/2025 12 Assessing officer and Addl. CIT for examining the above issue in detail while framing the fresh assessment order".
Income declared due to survey
1. The Ld. PCIT has erred in stating in Para 4 of the 263 order that the income "the assessee had offered Rs.2.30 crore income in A.Y. 2019-20 on account of survey, being 50% share in 10% of Rs. 46 crore, being amount received in form of advances from members in Safal engineers and Realties LLP. However, the same was declared as short-term capital gain. The reason for declaring the same as STCG was not disclosed by the assessee not examined by the AO".
2. The Ld. PCIT has erred in not properly considering that reply filed by the appellant vide reply dated 17.03.2025 has duly explained the reason as regards to disclosing of income of Rs.2.30 crores as STCG while filing the return of income u/s. 139(1) of the Act.
The Ld. PCIT failed to consider that the appellant's statement under Section 131 was recorded on 13.02.2019, before the end of FY 2018-19 and before the due date for filing the return for AY 2019-20. Therefore, the income of Rs. 2.30 crore disclosed in the return cannot be treated as "undisclosed" or "unaccounted" since it was not based on any incriminating material from the survey but was earned in the regular course.
4. The Ld. PCIT erred in invoking revisionary jurisdiction u/s 263 of the Act without appreciating that the assessment u/s 143(3) r.w.s. 147 was completed after due enquiry and application of mind by the Ld. AO, wherein the appellant had duly disclosed the amount of Rs.2,30,00,000/- as Short Term Capital Gain, which was accepted by the AO. Further, no revenue loss has occurred as the income would have been taxed at the same rate irrespective of the head of income under which it was offered."
The appellant humbly submit that the Ld. AO has conducted a detailed and thorough inquiry under Section 142(1) before passing the assessment order under Section 143(3) r.w.s. 153C for A.Y. 2019-20, with due approval under Section 153D. The facts of the appellant's case are clearly distinguishable from those in the judicial pronouncements relied upon by the Ld. AO, rendering them inapplicable, while the judicial precedents cited by the appellant are directly applicable. Hence, the assessment to 1160/Ahd/2025 13 order is neither erroneous nor prejudicial to the interest of revenue."
6. That there was no incriminating material in the case of the appellant when the statement of the appellant was recorded u/s. 131 of the Act during the course of survey proceedings. Thus, it can be concluded that there was no incriminating material with respect to sale of plot of land for which income has been earned by Shri Rajesh Brahmbhatt / Rupesh Brahmbhatt of Rs. 2.30 cr and offered as short term capital gain in the regular course. Thus, the allegation in the 263 proceedings that the Ld. AO has not examined the income offered amounting to Rs. 2.30 crore is only in the grab of change of opinion by the Ld.PCIT. Reliance is placed on the decision of Hon'ble Supreme Court in the case of Pr.CIT-8, Mumbai vs. Sumatichand Tolamal Gouti (2019) 111 taxman.com 287 (SC) and various other judicial pronouncements.
7. The Ld. PCIT has erred in law and on facts in failing to properly consider the submission made before him as well as various judicial pronouncements relied upon by the appellant. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.
PRAYER
1. The appellant therefore respectfully prays that: The order passed by the Ld. PCIT passed u/s. 263 of the Act dated 31.03.2025 setting aside the assessment order passed u/s. 143(3) rws 153C of the Act dated 29.09.2022 and the approval granted by the Addl. CIT u/s. 153D of the Act for A. Y. 2019-20 may kindly be quashed.
2. Such and further relief as the nature and circumstances of the case may justify. In for AY 2020-21 :
1. The Ld. PCIT has erred in law and on facts in passing the order us. 263 of the Act by holding in Para 9 on Page 40 that "the assessment order passed by the AO u/s. 143(3) r.w.s. 153C of the Act on 29.09.2022 for AY. 2020-21 and order of approval u/s.153D of the Act dated 29.09.2022 issued by the Addl. CIT, to 1160/Ahd/2025 14 Central Range-1, Ahmedabad are erroneous and prejudicial to the interest of Revenue. Accordingly, the same are set aside to the file of the Assessing officer and Addl. CIT for examining the above issue in detail while framing the fresh assessment order”.
2. The Ld. PCIT erred in not properly considering the appellant's detailed replies and relevant judicial pronouncements submitted during the proceedings u/s 263. The Ld. PCIT has erred in not duly appreciating that the core issue under consideration in the proceedings initiated under section 263 pertains to the seized material recovered during the course of search conducted on 15.10.2019 in the case of the "Land Broker & Financier Group and also includes the statement recorded of Shri Suresh Thakkar regarding the sale of land bearing Survey Nos. 430/4, 430/2, 430/3/1, and 429 situated at Makarba, Ahmedabad. The Ld. PCIT failed to appreciate that the documents referenced in the notice us 263 dated 16.03.2025 had already been addressed by the Ld. AO during the assessment proceedings under section 143(3) rws 153C by issuing the notice under section 142(1) along with the questionnaire.
3. The Ld. PCIT erred in not considering that during the course of assessment proceedings of Suresh R. Thakkar (A.Y. 2019-20), a notice under section 133(6) was issued to the appellant for cross inquiry regarding transactions with Narendra K Patel for A.Y. 2014-15 to A.Y. 2020-21. The Ld. PCIT has not considered the reply dated 13.04.2021 filed by the appellant in response to the notice issued u/s. s.133(6) of the Act being cross enquiry in the case of Shri Suresh Thakkar wherein the appellant has duly explained the transaction undertaken between the appellant, Arunaben Zaveri and Narendra Patel clarifying that as the deal was not materialized, the entire amount received as advances from Shilp Construction was returned back through regular banking channel.
4. The appellant humbly submits that during the assessment proceedings under section 143(3) rws 153C in the case of the appellant, the Ld. AO issued notices under section 142(1) on 02.05.2022 and 17.08.2022, seeking detailed explanations and supporting documents related to the seized material and Shri Suresh Thakkar's statement, which formed the basis for the section 263 proceedings. The L.d. PCIT has failed to appreciate the fact that survey proceedings were conducted in case of the appellant and during the course of survey proceedings statement u/s.131 of the Act was recorded on 06.07.2022 at Aayakar Bhavan wherein the appellant has stated that he is the joint to 1160/Ahd/2025 15 owner of the land bearing Survey No. 430/3/1, 430/2, 430/4 and 429 situated at Makarba, Ahmedabad and the said lands are agricultural land and the conversion into N.A. Land is subjected to dispute and litigation.
5. The Ld. PCIT has erred in not appreciating that the Ld. AO while passing the order u/s. 143(3) of the Act dated 31.03.2025 for AY 2023-24, has already made the addition of Rs. 19,72,00,000/- of alleged on-money on account of sale of these land parcels bearing Survey Nos 430/3/1, 430/2, 430/4 & 429 at Makarba as the sale deed has been entered into on 22.12.2022.
6. The Ld. AO has failed to appreciate that the seized material referred in the show cause notice by the then Ld.AO at the time of assessment proceedings u/s. 143(3) r.w.s. 153C of the Act are the same seized material as stated in the 263 proceedings. Hence, there is no lapse or no subject matter has been remained unattended by the then Ld. AO at the time of passing order u/s. 143(3) r.w.s. 153C of the Act. Thus, the allegation in the 263 proceedings initiated by the Ld. PCIT the case of appellant is only in the grab of change of opinion. Reliance is placed on the decision of Hon'ble Supreme Court in the case of Pr.CIT-8, Mumbai vs. Sumatichand Tolamal Gouti (2019) 111 taxman.com 287 (SC) and various other judicial pronouncements.
7. The appellant respectfully submits that the judicial pronouncements relied upon by the Ld. AO are not applicable, as the facts of the appellant's case are distinguishable. The Ld. AO conducted extensive inquiries by issuing notices under section 142(1), making the order under section 143(3) read with section 153C, along with the approval by the Addl. CIT under section 153D, not erroneous or prejudicial to the revenue. Furthermore, the judicial pronouncements cited by the appellant are fully applicable to the case.
8. The Ld. PCIT has erred in law and on facts in failing to properly consider the submission made before him as well as various judicial pronouncements relied upon by the appellant. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.
PRAYER to 1160/Ahd/2025 16 The appellant therefore respectfully prays that:
1. 1. The order passed by the Ld. PCIT passed u/s. 263 of the Act dated 31.03.2025 setting aside the assessment order passed u/s. 143(3) rws153C of the Act dated 29.09.2022 and the approval granted by the Addl.CIT u/s. 153D of the Act for A.Y. 2020-21 may kindly be quashed.
2. Such and further relief as the nature and circumstances of the case may justify. 3.1 In brief, the revisionary orders passed by the learned PCIT rest on three principal allegations.
3.2 First, the Makarba land transaction, arising in A.Ys. 2017-18, 2018-19 and 2020-21, is said to involve total consideration of Rs.61.44 crore, of which only Rs. 18.11 crore was recorded and the balance Rs. 43.32 crore was treated as unaccounted on-money. The assessee’s share was computed at Rs. 29.64 crore, which according to the PCIT remained untaxed in each of the said years.
3.3 Secondly, in A.Y. 2018-19, the PCIT pointed to seized papers on TDR transactions, showing receipts of Rs. 4.20 crore (including Rs.2 crore in cash) and payments of Rs. 2.24 crore. These, in the view of the PCIT, were not properly examined by the Assessing Officer, leading to prejudice to the Revenue.
3.4 Lastly, in A.Y. 2019-20, the PCIT questioned the survey disclosure of Rs. 2.30 crore, which had been offered by the assessee as short-term capital gain in the return. The PCIT held that the Assessing Officer accepted this disclosure without adequate enquiry, although it related to advances received through Safal Engineers and Realties LLP.
Thus, across the four years in appeal, the consolidated position is that the PCIT has found fault with (i) the non-taxation of alleged to 1160/Ahd/2025 17 on-money receipts from the Makarba land transaction, aggregating Rs. 29.64 crore each in three years, (ii) the lack of enquiry in relation to TDR dealings of Rs. 2.24 crore in A.Y. 2018-19, and (iii) the improper acceptance of survey disclosure of Rs. 2.30 crore in A.Y. 2019-20. These three issues form the foundation of the revisionary orders passed u/s. 263 and shall now be examined in light of the rival submissions, judicial precedents and the facts on record.
Makarba land transaction – in A.Ys. 2017-18, 2018-19 and 2020- 21 3.5 During the course of hearing, the learned Authorised Representative (AR) of the assessee submitted that the PCIT, in paragraphs 2 to 5 of the show-cause notice u/s 263, had referred to the very same issue of alleged on-money in respect of the Makarba land transaction which had already been specifically examined by the Assessing Officer.
3.6 It was pointed out that the AO in the course of assessment proceedings u/s 153C had issued detailed notices u/s 142(1) dated 02.05.2022 and 28.04.2023, wherein the assessee was confronted with the seized images and documents recovered from the mobile phone of Shri Suresh Ranchhodbhai Thakkar. The assessee had duly furnished detailed replies along with documentary evidence in response to these queries.
3.7 The AR emphasised that the show-cause notice of the PCIT reproduced in extenso the seized documents, namely:
1. Image No. a79b0a7e-82b1-4a8a-92b6-09375b984882 (Page No. 105 of Volume-1) – being a mutual agreement relating to land transactions for Survey Nos. 430/3/1, 430/2, 430/4 & 429 at Makarba, admeasuring 12,754 sq. yds. at Rs. 48,168 per sq.
to 1160/Ahd/2025 18 yd., aggregating to Rs. 61.43 crore. The said agreement also contained a payment schedule bifurcating the instalments across F.Ys. 2016-17 and 2017-18.
2. Image No. 0bb9c30a-5f7f-4c9a-bf9f-de81cf2547b7 (Page Nos. 576 & 271 of Volume-1) – being working notes and calculations reflecting the total sale consideration, premium amounts, cheque payments and balance outstanding.
3. Image No. 02c091f4-d083-4838-8489-d19ca50434d2 (Page No. 579) – reflecting details of total cost of Rs. 61.44 crore, payments already made of Rs. 59.28 crore (including Rs. 6.5 crore premium) and balance of Rs. 2.16 crore pending.
3.8 The AR submitted that these very documents had been placed before the AO during assessment, and the assessee’s replies dated 21.06.2022 and subsequent communications gave a detailed explanation of the nature of the transaction, its status, and the fact that the land had not been sold, and the assessee owned the land on the date of reply.
3.9 The AR further submitted that the assessee had sold his individual share of 5,510.50 sq. mtrs. out of the Makarba land to Smt. Rashmi Patel and Smt. Geetaben Patel. The AR emphasised that the assessee’s final sale of his share was concluded only on 22.12.2022, which was much after the search in the case of Shri Suresh Thakkar. It was pointed out that the registered sale deed for the assessee’s share of land was executed only on 22.12.2022 falling in A.Y. 2023- 24. The Also pointed out that the scrutiny assessment for A.Y. 2023- 24 completed u/s. 143(3) on 31.03.2025 and the Assessing Officer has already made an addition of Rs. 19.72 crore on account of alleged on-money on the basis of same incriminating material referred by the PCIT. Thus, once the transaction stood taxed in the year of sale deed execution, there was no legal basis to impute the same income in earlier years like A.Ys. 2017-18, 2018-19 and 2020-21. Any such allocation across years would result in impermissible double taxation.
3.10 The AR further submitted that the on-money component alleged by the learned PCIT could not be brought to tax in the years under consideration, as the law is well-settled that advances or earnest money received in the course of negotiations for sale of land or property do not constitute taxable income until the sale deed is executed. Reliance was placed on the judgment of the Hon’ble Supreme Court in the case of CIT vs. Happy Home Corporation (2019) 103 taxmann.com 22 (SC), wherein it was held that income accrues only on completion of sale and execution of registered conveyance deed, and any advance received earlier remains in the nature of deposit till such time. Similar view was reiterated by the Hon’ble Gujarat High Court in CIT (Central), Surat vs. Happy Home Corporation (2018) 94 taxmann.com 292 (Guj), holding that unless and until sale is completed, advances cannot be treated as income in the hands of the assessee.
3.11 The AR also highlighted that the learned PCIT, while invoking section 263, has overlooked the settled proposition of law that once the Assessing Officer has made due enquiries and taken a plausible view in law, the order cannot be branded as erroneous merely because the PCIT holds a different opinion. Reliance was placed on the recent judgment of the Hon’ble Gujarat High Court in PCIT vs. Asiatic Bearing Co. (Tax Appeal No. 331 of 2024, dated 04.03.2025), where it was held that the jurisdiction under section 263 does not empower the PCIT to substitute his opinion for that of the Assessing Officer.
The learned Departmental Representative supported the order of the PCIT, submitting that in paras 6.1 to 7 of the impugned order, the PCIT has comprehensively examined the incriminating documents recovered during the search of Shri Suresh Thakkar as well as his to 1160/Ahd/2025 20 statement recorded under section 132(4), which directly pertain to the assessee’s land transaction at Makarba. These aspects, it was urged, were overlooked by the Assessing Officer while completing the assessment. The DR contended that the seized documents, which record the transaction value and contain a detailed schedule of cheque and cash payments, could not be dismissed as “dumb documents.” Once the cheque payments reflected therein are accepted as genuine, the accompanying cash payments necessarily stand corroborated.
The learned DR further pointed out that the Assessing Officer himself, in his orders, has appended a specific note clarifying that the assessee’s case was assessed pursuant to satisfaction recorded under section 153C, consequent to the search under section 132 in the case of the ‘Land Broker & Financier Group’ and subsequent centralisation of the B Safal Group. The Assessing Officer expressly recorded that the seized material and digital data were under verification in the key cases of the B Safal Group and that appropriate action, if required, would be taken after verification of such material in those proceedings. By incorporating this note, the Assessing Officer consciously refrained from making any addition in the hands of the assessee at that stage. According to the learned DR, this shows that the Assessing Officer has not discharged his duty in the manner expected under law, as he deferred consideration of incriminating material despite being obliged to adjudicate the same in the assessee’s case under section 153C. It was therefore submitted that the PCIT was justified in exercising jurisdiction under section 263, as the assessment order was erroneous insofar as it was prejudicial to the interests of the Revenue. to 1160/Ahd/2025 21 4.1 On this premise, it was argued that the Assessing Officer failed to undertake the requisite enquiry into the seized material and the statement of Shri Thakkar while framing the order. The PCIT was, therefore, justified in holding the assessment to be erroneous and prejudicial to the interests of the Revenue.
5.0 Transferable Development Rights (TDR) transactions in A.Y. 2018-19 5.1 The learned AR, adverting to the issue of TDR transactions, submitted that the reliance placed by the learned PCIT on seized documents bearing Doc. No. 37 of Annexure A-1 and digital data at Page 260 of Volume-I was wholly misplaced. It was explained that during the course of assessment proceedings, the Assessing Officer had specifically issued a detailed notice under section 142(1) dated 02.05.2022 calling upon the assessee to furnish an explanation in respect of the said documents. In response thereto, the assessee had, vide reply dated 21.06.2022, categorically denied the ownership of such transactions, pointing out that the seized page neither pertained to the relevant previous year nor contained the signature or acknowledgment of the assessee, nor did it bear any proper description so as to link the entries with him.
5.2 The AR further contended that the seized page represented a loose paper bereft of evidentiary value, which could not be attributed to the assessee merely on the basis of loose narration. The assessee had further clarified before the Assessing Officer that insofar as there were any dealings in TDR, the same were carried out in the capacity of a facilitator on behalf of Safal Construction India Private Limited, and not in his individual capacity. This explanation, it was urged, was placed on record in a timely manner and duly considered by the Assessing Officer. The acceptance of the assessee’s explanation after to 1160/Ahd/2025 22 examination of the seized page cannot, therefore, be regarded as non- application of mind. The learned AR further invited our attention to the fact that a notice under section 133(6) of the Act was issued to the assessee in connection with the case of Shri Suresh Thakkar for A.Y. 2019-20, wherein detailed information was sought in respect of certain transactions, including those relating to TDR. In response thereto, the assessee had categorically clarified vide letter dated 13.04.2021 that no transaction of purchase or sale of TDR was ever carried out by him in his individual capacity. It was explained that the business concern of the assessee, namely M/s Safal Construction (India) Pvt. Ltd., is engaged in the business of slum rehabilitation and dealing in TDR, and that the impugned papers, if at all, could be linked only with the said company and not with the assessee in his individual capacity.
5.3 On the other hand, the learned Departmental Representative placed strong reliance on the findings recorded by the learned PCIT in the impugned order.
Survey disclosure of Rs. 2.30 crore in A.Y. 2019-20 6.1 The learned AR submitted that during A.Y. 2019-20, the assessee had, on account of the survey, voluntarily offered a sum of Rs. 2.30 crore as income, being 50% share in 10% of Rs. 46 crore, representing advances received from members of Safal Engineers and Realities LLP. It was pointed out that such income was declared in the return of income under the head “Short-Term Capital Gain”. According to the AR, the assessee had made a complete disclosure of the said transaction, furnished supporting details during the course of assessment, and the Assessing Officer, after due consideration thereof, accepted the offered income. It was thus argued that to 1160/Ahd/2025 23 sufficient enquiry had been made by the AO, and therefore, the order passed under section 153C could not be regarded as erroneous merely because the learned PCIT held a different view.
6.2 The learned AR also invited our attention to the fact that the disclosure of Rs. 2.30 crore was made strictly in consonance with the statement of the assessee recorded on 12.02.2019 during survey proceedings, more particularly in response to Q.38 to Q.40 and the answers thereto, wherein the assessee had categorically admitted the amount being 50% share in 10% of Rs. 46 crore received in the form of advances from members of Safal Engineers and Realities LLP. It was submitted that the income so offered was duly reflected in the return for A.Y. 2019-20 and subjected to tax, and thus the action of the Assessing Officer in accepting the disclosure as short-term capital gain was in line with the contemporaneous evidences and statements on record.
6.3 The learned AR further contended that the assessee, on its own volition, had offered Rs. 2.30 crore to tax in the return of income, and the same was duly brought to tax under the head short-term capital gain. The AO, after examining the disclosure and the accompanying details, accepted such treatment. This acceptance, according to the AR, was not an inadvertent lapse but a conscious decision falling within the permissible domain of the Assessing Officer.
6.4 The learned DR, however, strongly supported the findings of the learned PCIT. It was contended that the assessee had not disclosed the precise reasons or basis for offering the said sum as short-term capital gain, and the Assessing Officer, without making further inquiry, simply accepted the claim. The learned DR argued that the assessee’s stand is untenable for the reason that no copy of any to 1160/Ahd/2025 24 agreement or corroborative document was ever placed on record before the Assessing Officer to substantiate the basis of determining the alleged 50% share in the amount of Rs. 46 crore. According to the DR, in the absence of any such agreement or written understanding, the claim of the assessee that the disclosure of Rs.2.30 crore was in conformity with his survey statement remains self-serving and unverifiable. According to the DR, the PCIT has correctly highlighted that this being a search assessment, the AO was required to examine incriminating material seized in a far more thorough manner. In such proceedings, the AO cannot rely merely upon the self-serving submissions of the assessee but is bound to link the seized documents with surrounding circumstances and corroborative evidence.
Having considered the rival submissions and the record, we note that the assumption of jurisdiction under section 263 requires satisfaction of the twin conditions that the assessment order is both erroneous and prejudicial to the interests of the Revenue. Where the Assessing Officer has made specific enquiries, elicited replies, and thereafter taken a plausible view on the material placed before him, the revisional authority cannot supplant its opinion merely because a different view is possible. We examine the three issues invoked by the learned PCIT against this legal backdrop.
Issue I: Alleged on-money in the Makarba land transaction (A.Ys. 2017-18, 2018-19 and 2020-21)
7.1 The show-cause under section 263 and the impugned orders rely upon images and notings from the mobile phone of Shri Suresh R. Thakkar, namely Page 105, Pages 576 and 579, and Page 271 of the seized compilation, recording a notional consideration of Rs. 61.44 crore for land at Makarba against a documented value of Rs. 18.11 to 1160/Ahd/2025 25 crore and imputing a cash component of Rs. 43.32 crore. The assessee’s alleged share is computed at Rs. 29.64 crore.
7.2 During assessment proceedings under section 143(3) read with section 153C, the Assessing Officer issued detailed notices under section 142(1) dated 02.05.2022 and 17.08.2022 specifically confronting the assessee with the above images and the statement of Shri Suresh Thakkar. The assessee furnished a detailed reply on 21.06.2022 and subsequent communications explaining that the arrangement did not culminate in a conveyance, that advances from Shilp Construction had been received between September 2016 and July 2017 and fully refunded by October 2019 through banking channels, and that the lands continued as agricultural with conversion under dispute.
7.3 It is an admitted position on record that the assessee’s registered sale deed for his share was executed later on 22.12.2022, relevant to A.Y. 2023-24, and that in the scrutiny assessment for that year, the Assessing Officer has already brought to tax Rs.19,72,00,000/- on account of alleged on-money referable to the same Makarba parcels. The Department has not demonstrated before us how the very same income can simultaneously be said to have accrued or been received in A.Ys. 2017-18, 2018-19 and 2020-21.
7.4 The record does not reveal any independent corroboration linking the alleged cash component to the assessee for the years under appeal. There is no buyer’s statement placed on record for these years, no banking trail for cash, no seizure of cash or contemporaneous acknowledgement by the assessee. The seized pages are unsigned vis-à-vis the assessee. The mere existence of a to 1160/Ahd/2025 26 schedule noting both cheque and cash figures is not, by itself, determinative of receipt by the assessee in the years under revision.
7.5 The Assessing Officer’s enquiries were not illusory. He raised pointed queries on the very seized pages and the third-party statement; the assessee gave a reasoned explanation with supporting materials including the cross-enquiry reply under section 133(6) dated 13.04.2021; and the assessment was completed thereafter. The premise in the section 263 orders that there was no enquiry is, therefore, factually incorrect. The note appended by the Assessing Officer acknowledging centralisation of the B-Safal matters and stating that appropriate action would follow upon group verification does not, in our view, erase the enquiries already made in the assessee’s case or empower the PCIT to redo the appreciation of the same material.
7.6 On the timing of taxability, the assessee’s case rests on the principle that alleged on-money relatable to a land sale is to be examined in the year in which the transfer is effected by a registered conveyance, absent cogent evidence of cash receipt earlier. On the facts before us, the Department has itself taxed Rs. 19,72,00,000/- in A.Y. 2023-24 upon execution of the registered sale deed dated 22.12.2022. Bringing the same allegation to tax again in earlier years, on the same record and without independent corroboration of year- wise cash receipt, would lead to double taxation and would not be in accordance with law.
7.7 On the jurisdiction under section 263, once it is seen that the Assessing Officer issued specific notices on the very seized images and the third-party statement, considered replies dated 21.06.2022 and other materials, and then accepted the assessee’s explanation for the to 1160/Ahd/2025 27 years under appeal, the learned PCIT could not invoke revision to merely substitute his appreciation of the same record. The allegation in the section 263 orders that there was no enquiry or that the documents were brushed aside is not borne out by the assessment record summarised above.
7.8 For A.Ys. 2017-18, 2018-19 and 2020-21, the twin conditions of section 263 are not satisfied. The assessments are not shown to be erroneous on the touchstone of lack of enquiry or incorrect application of law, nor is prejudice made out when the substantive addition has already been made in A.Y. 2023-24 on the same transaction. The section 263 orders on this issue are, therefore, set aside.
Issue II: TDR transactions based on Doc. No. 37, Annexure A-1 and digital data Page 260, Vol-I (A.Y. 2018-19)
7.9 The section 263 order proceeds on a seized page and digital extract indicating receipts of Rs. 4.20 crore, including Rs. 2.00 crore in cash, and payments of Rs. 2.24 crore, said to pertain to TDR dealings. The assessee’s case throughout has been that the page is a loose paper, undated and unsigned vis-à-vis him, does not pertain to the relevant previous year, and carries no description linking entries to his individual affairs. During assessment, the Assessing Officer issued a detailed notice under section 142(1) dated 02.05.2022 specifically on this document and the statement of Shri Suresh Thakkar. The assessee replied on 21.06.2022 denying individual involvement and clarifying that any TDR or slum-rehabilitation activity is undertaken by M/s Safal Construction (India) Pvt. Ltd. In the cross-enquiry for A.Y. 2019-20 in the case of Shri Suresh Thakkar, notice under section 133(6) was issued to the assessee and the reply dated 13.04.2021 reiterated that he does not deal in TDR in to 1160/Ahd/2025 28 his individual capacity. The learned PCIT has characterised the assessee’s stance as contradictory, but no verification finding has been placed on record to show that the impugned page actually pertains to the assessee as an individual in A.Y. 2018-19, or that the entries have been cross-matched with bank, counterparties or the company’s records to establish individual accrual.
7.10 A loose, unsigned page without date, description or linkage to the assessee’s individual capacity and the relevant year cannot, by itself, be the basis to hold that the Assessing Officer’s acceptance of the assessee’s explanation is erroneous. The Assessing Officer raised specific queries, obtained a categorical denial along with the company-capacity clarification, had the benefit of the section 133(6) reply, and thereafter accepted the explanation. This is an exercise of jurisdiction based on enquiry.
7.11 The revisional jurisdiction cannot be used to direct a fishing or roving verification when the PCIT has not demonstrated how the seized page correlates to the assessee individually and to A.Y. 2018- 19. The element of prejudice is also not established when the foundational linkage itself is missing.
7.12 For A.Y. 2018-19, the section 263 action on the TDR issue fails. The assessment cannot be branded erroneous and prejudicial merely because the PCIT prefers a different inference from a loose paper that is neither signed nor tied to the assessee and the year in question, particularly when pointed enquiries were made by the Assessing Officer and replies were on record. The revision on this issue is quashed.
Issue III: Survey disclosure of Rs. 2.30 crore in A.Y. 2019-20 and its treatment as STCG 7.13 The assessee disclosed Rs. 2,30,00,000/- in A.Y. 2019-20, stating that it represents 50 percent share in 10 percent of Rs. 46 crore, being amounts received as advances from members in Safal Engineers and Realties LLP. The disclosure is stated to be consistent with the survey statement recorded on 12.02.2019, particularly Q.37 to Q.40, and was offered as short-term capital gain in the return. The Assessing Officer accepted the disclosure after assessment enquiry. The section 263 order does not demonstrate that any specific primary evidence called for by the Assessing Officer was withheld by the assessee, or that contrary material was available on record that the Assessing Officer ignored. The learned DR has pointed out that no agreement was placed on record to evidence the 50 percent share. However, on the record before us, the Assessing Officer had the benefit of the assessee’s survey statement, disclosure in the return under section 139(1), and the contemporaneous correspondence.
7.13 The question under section 263 is not whether the head of income chosen by the assessee is the only possible head, but whether the Assessing Officer’s acceptance of the disclosure as short-term capital gain, on the materials before him, is a view that can be held to be unsustainable in law for want of enquiry. On the present record, the Assessing Officer examined the disclosure, correlated it with the survey statement, and accepted it. The PCIT has not brought on record any specific line of enquiry that was mandated but omitted, or any material showing that the disclosure had to be taxed under a different provision.
7.14 Prejudice to the Revenue must also be real and not hypothetical. The Department has not shown how acceptance of the disclosure as short-term capital gain, in the facts of this case, results in a lower to 1160/Ahd/2025 30 incidence of tax than any alternative head, or how the omission, if any, caused a quantifiable prejudice. In the absence of demonstrated prejudice, the second limb of section 263 is not met.
7.15 For A.Y. 2019-20, the section 263 action on the survey disclosure does not survive. The Assessing Officer’s acceptance of the voluntarily offered Rs. 2,30,00,000/- as short-term capital gain after enquiry is a plausible view on the record. The learned PCIT could not revise the assessment to merely pursue a different characterisation without demonstrating both error and prejudice. The revision on this issue is quashed.
Conclusion 8.1 We have carefully perused the judicial pronouncements relied upon by the learned PCIT in support of his action under section 263 wherein it has been held that lack of enquiry by the AO may render an order erroneous and prejudicial to the interest of Revenue. There can be no quarrel with the settled position of law that where the assessment order is passed without conducting any enquiry or verification, or in undue haste, or where the AO fails to discharge his duty of proper examination, the Commissioner is empowered to exercise revisional jurisdiction u/s. 263.
8.2 The statutory Explanation 2 to section 263, inserted by the Finance Act, 2015 with effect from 01.06.2015, indeed declares that an order shall be deemed to be erroneous and prejudicial to the interest of the Revenue where it is passed without making enquiries or verification which should have been made. However, the critical distinction which emerges from the binding pronouncements of the Hon’ble Supreme Court and High Courts is between cases of “lack of enquiry” and cases of “adequate enquiry but adoption of one plausible to 1160/Ahd/2025 31 view.” The Hon’ble Supreme Court in Malabar Industrial Co. Ltd. (243 ITR 83) clearly held that where two views are possible and the AO has taken one such view after enquiry, the order cannot be branded as erroneous merely because the Commissioner holds another opinion. The same principle has been reiterated by Hon’ble Supreme Court in CIT v. Kwality Steel Suppliers Complex (395 ITR 1, SC), and more recently by the Hon’ble Gujarat High Court in PCIT v. Asiatic Bearing Co. (Tax Appeal No. 331 of 2024, judgment dated 04.03.2025).
8.3 Applying this distinction to the facts before us, it is evident that the present case falls not in the category of “lack of enquiry” but in the category of “enquiry made, and view taken.” The assessment records demonstrate that the AO issued detailed notices u/s. 142(1), confronted the assessee with seized documents and statements, elicited explanations, and placed reliance on such replies. Thereafter, the AO consciously accepted the assessee’s explanation. More significantly, the very same incriminating material which forms the foundation of the PCIT’s action under section 263 has already been subjected to taxation in A.Y. 2023-24 by the AO in his order dated 31.03.2025, passed contemporaneously with the impugned 263 order. Thus, the Revenue’s interests already stand duly safeguarded and there is no prejudice.
8.4 We, therefore, find that the reliance of the learned PCIT on judicial precedents is misplaced, as those were cases where the AO had not conducted any enquiry at all or had passed stereotyped orders in undue haste. In the assessee’s case, however, the AO has made specific and detailed enquiries and taken a considered view, which falls within the protection of the ratio in Malabar Industrial Co. Ltd. (SC), Max India Ltd. (SC), and Asiatic Bearing Co. (Guj HC). Consequently, Explanation 2 to section 263 does not assist the to 1160/Ahd/2025 32 Revenue, since this is not a case of “lack of enquiry” but at best a difference of opinion on adequacy of enquiry.
8.5 In the light of the foregoing discussion and on a comprehensive consideration of the rival submissions, material placed on record, and applicable judicial precedents, we are of the considered view that the assumption of revisional jurisdiction by the learned PCIT under section 263 of the Act is not sustainable.
8.6 Accordingly, the impugned orders passed by the learned PCIT under section 263 for A.Ys. 2017-18, 2018-19, 2019-20, and 2020- 21, setting aside the assessments framed by the Assessing Officer and the consequential approvals under section 153D, are hereby quashed. In the combined result, the appeals of the assessee are allowed.
In the result, the appeals of the assessee is allowed. Order pronounced in the Court on 30th September, 2025 at Ahmedabad.