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Facts
The assessee had claimed Long Term Capital Gain exemption on the sale of shares. The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under section 263, alleging the assessment order was erroneous and prejudicial to the revenue, citing issues with share price manipulation and bogus entries. However, an appeal by the assessee against the reassessment order was already pending before the CIT(A) on the same issue.
Held
The Tribunal held that the PCIT wrongly assumed jurisdiction under section 263 because an appeal on the same subject matter was already pending before the CIT(A). Relying on Explanation 1(c) to Section 263(1) and judicial precedents, the Tribunal found the assumption of jurisdiction to be invalid.
Key Issues
Whether the PCIT can invoke revisionary powers under section 263 when an appeal on the same issue is pending before the CIT(A).
Sections Cited
147, 148, 263, 144B
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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: DR. BRR Kumar & Shri T. R. Senthil Kumar
ITA No: 1140/Ahd/2025 Assessment Year: 2018-19 Jignasa Atulkumar Shah The PR.CIT-1, 4 Somalay Bunglows, Ahmedabad Sarasvati Soc., Vs Jain Merchant, Paldi, Ahmedabad, Gujarat PAN: APZPS1602N (Respondent) (Appellant) Assessee Represented: Shri M.S. Chhajed, A.R. Revenue Represented: Shri Prathvi Raj Meena, CIT-DR Date of hearing : 11-02-2026 Date of pronouncement : 24-02-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the Revision order dated 07-11-2025 passed by the Principal Commissioner of Income Tax-1, Ahmedabad arising out of the assessment order passed under section 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2018-19.
Brief facts of the case is that the assessee is an individual filed his original Return of Income for the Asst. Year 2018-19 on 17-07-2 A.Y. 2018-19 Page No 2 Jignasa Atulkumar Shah vs. PR.CIT declaring total income of Rs.15,53,920/-. Information received from the department that assessee is one of the beneficiaries of bogus accommodation entries operated and managed by entry operator Shri Naresh Jain. The information also suggests that the assessee is one of the beneficiaries in manipulation of share price of M/s. Oasis Tradelink Ltd. amounting to Rs.40,95,442/- and assessee claimed Long Term Capital Gain exempt u/s. 10(38) of the Act amounting to Rs.37,24,755/-. Therefore a show cause notice u/s. 148 of the Act issued on 29-03-2022.
2.1. In response, the assessee filed Return of Income on 12-04-2022. Since the Return of Income was electronically not verified, the same was treated as invalid. However notices 142(1) and show cause notice dated 02-03-2023 issued which was replied by the assessee which has resulted in making addition of sale of shares of M/s. Oasis Trade Link Ltd as penny stock and assessed to tax.
Aggrieved against the same, the assesse filed an appeal, which is pending before Ld. CIT(A). In the meantime, PCIT issued a show cause notice dated 29-10-2024 stating that perusal of the assessment order shows that the assessing officer should have disallowed assessee’s claim of exemption amounting to Rs.48,17,533/- under section 69 of the Act, when the assessee has not maintained books of account and source of unaccounted income of Rs.40,95,442/- has not been explained. The A.O. ought to have made addition u/s. 69A of the Act r.w.s. 115BBE of the Act. Thus the reassessment order passed by the Ld. A.O. is erroneous and prejudicial to the interest of A.Y. 2018-19 Page No 3 Jignasa Atulkumar Shah vs. PR.CIT Revenue. Therefore assessee was given opportunity to reply to the above proposal.
3.1. Assessee made a detailed reply to the above show cause notice as follows: “Assessee has purchased 1,15,000 shares of face value of Rs.10/- amounting to Rs.11,50,000/- of M/s Oasis Tradelink Limited on 07-07-2014, Assessee has made payment through banking channel. Assessee has made request for Demat and shares were credited into Demat account of assessee on 07.07.2014.
Asst. Opening Purchase (B) Sale (c) Closing Bal Year Bal (A) D=(A+B+C) 2015-16 Date of Qty Date of sale Qty purchase - 07-07-2014 115000 - - 01-10-2014 12000 Total - 127000 - 12700
2016-17 12700 15-07-2015 12000 06-08-2015 12000 10-08-2015 16000 11-08-2015 16000 05-09-2015 20000 05-10-2015 4000 12700 2000 6000 87000 2017-18 87000 13-06-2016 4000 14-06-2016 4000 21-06-2016 6000 15-09-2016 (Bonus issue in ratio of 1.3) 16-11-2016 364000 21-03-2017 2500 87000 24334 52900 58434 2018-19 58434 29-05-2017 27000 30-05-2017 14000 31-05-2017 5310 13-06-2017 12090 14-06-2017 3534 15-06-2017 1500 58434 0 58434 0 Assessee has been holding the shares of M/s Oasis Tradelink Lid since 2014 e for more than 3 years. Assessee submits that the department has not disputed any purchase or sale of shares of M/s Oasis Tradelink Ltd in earlier years and has been accepted in case of assessee which was done through registered share broker namely ACML Capital Markets Limited on online platform of ASE A.Y. 2018-19 Page No 4 Jignasa Atulkumar Shah vs. PR.CIT The sales were as per the rates of prevailing market share price on that day.
The Summary of sale of shares of M/s Oasis Tradelink Limited during the captioned assessment year is as under:
Sr. No. Date of Sale Qty (B) Rate (c) Sale Brokerage Other Ne Amount (A) amount charges receipt (D=B+C) (like STT, (F=D-E) BSE trf Tax, SEBI chg. Etc.)(E) Opening 58434 balance 1 29/05/2017 22000 70 1540000 3960 2317 1533723 2 30/05/2017 14000 69.8 976500 2380 1460 972660 3 31/05/2017 5310 70 371700 955.8 574.2 370170 4 13/06/2017 12090 70.5 852345 2176 1311.8 848857.2 5 14/06/2017 3534 70.5 249147 636 390.88 2481201 6 15/06/2017 1500 70.5 105750 270 179 105301 Total 58434 40,95,442 10,378 6,233 40,78,831
Closing 0 Balance Assessee has already shown profit earned on sale of shares in return of income filed U/s. 148 of the Act as it being exempted U/s. 10(38) of the Act and no fax was payable on such profit.
Assessee did all the transaction of purchase & sale of shares through brokers and all the payment received through bank account only. Amount received from brokers credited to bank account of assessee Assessee is making investment in shares since long and assessee has earned capita gain in various previous years and had shown same in return of income. It is not disputed fact that shares of M/s Oasis Tradelink Limited Ltd are held by assesses since 2014-15 which has not been disputed by department in earlier years. Assessee has undertaking the transactions in the share market through registered broker namely ACML Capital Markets Limited since so many years. Not a single authority has doubted the genuineness of transaction undertaken through ACML Capital Markets Limited Considering the facts of the case and above cited judicial decisions your goodself is requested to drop the revisional proceedings-initiated U/S 263 of the Act.
3.2. The above reply was considered by Ld. PCIT and held that the reassessment order passed is erroneous and prejudicial to the interest of Revenue thereby set-aside the reassessment order with a direction to the A.O. to pass fresh assessment order in accordance A.Y. 2018-19 Page No 5 Jignasa Atulkumar Shah vs. PR.CIT with the provisions of law after duly examining the facts of the case by giving reasonable opportunity of hearing to the assessee.
Aggrieved against the Revision order, the assessee is in appeal before us raising the following Grounds of Appeal:
1. The order passed by the Ld. PCIT is against the law, equity and principle of natural justice.
2. The Ld. PCIT has erred in law in assuming jurisdiction U/s. 263 of the Act as no assessment order passed by the Ld. A.O. is void, illegal and not tenable in eyes of law.
3. The Ld. PCIT has erred in law and on facts in initiating proceedings U/s. 263 relying on Audit objection and without independent application of mind
4. The Ld. PCIT has erred in law and on facts assuming jurisdiction U/s. 263 of the Act when issue is pending before CIT (A).
5. The Ld. PCIT has erred in law and on facts in assuming of jurisdiction U/s. 263 on incorrect facts.
6. The Ld. PCIT has erred in law and on facts in alleging sales consideration as unaccounted income.
7. The Ld. PCIT has erred in law and on facts in considering assessment order as erroneous and prejudicial to interest of revenue.
8. The appellant craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal.
5. Heard rival submissions and perused the materials available on record. First let us adjudicate the assumption of jurisdiction u/s. 263 by Ld. PCIT when assessee’s appeal on the very same issue pending before Ld. CIT(A) which is raised as Ground No. 4 before us.
5.1. Explanation 1(c) to Sub-section (1) of Section 263 provides as follows:
“Revision of orders prejudicial to revenue 263: (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record at any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer for the Transfer Pricing Officer, as the case may be erroneous in so far as it is prejudicial to the interests of the revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary pass such order thereon as the circumstances of the case justify (including (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment, or (ii) an order modifying the order under section 92CA or (iii) an order cancelling the order under section 9204 and directing a fresh order under the said section] Explanation -For the removal of doubts it is hereby declared that for the purposes of this sub-section- (a) (b) (c) where any order referred to in this sub-section and passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be] had been the subject matter of any appeal filed on or before or after the 1st day of June 1988 the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as hail not been considered and decided in such appeal.
5.2. It is undisputed fact that as against the reassessment order, assessee filed an appeal before Ld. CIT(A) on 28-04-2023 which is pending when Ld. PCIT initiated the proceedings u/s. 263 of the Act. In fact on the very same issue on sale of shares of M/s. Oasis Tradelink Ltd. which is the subject matter of appeal pending before Ld. CIT(A). Therefore as per Clause (c) of Explanation 1 to Section 263(1), Ld. PCIT is not correct in invoking u/s. 263 on the very same issue pending before Ld. CIT(A). Thus the assumption of jurisdiction A.Y. 2018-19 Page No 7 Jignasa Atulkumar Shah vs. PR.CIT itself is against the provisions of law. Therefore the entire Revision order is liable to be quashed.
Ld. Counsel reliance on Madras High Court in the case of Smt. Renuka Philip vs. ITO [2019] 101 taxmann.com 119 (Madras) held as follows:
“The Explanation to section 263(1)(c) makes it clear that when the appeal is pending before the Commissioner, the exercise of jurisdiction under section 263 is barred The Commissioner in the order states that the appeal pertains to the claim made by the assessee under section 54 and it has got nothing to do with the order passed by the Assessing Officer under section 54F. The said finding rendered by the Commissioner is wholly unsustainable, since the assessee went on appeal against the re-assessment order stating that his claim for deduction under section 54 should be accepted (Para 22) Therefore, in the process of considering as to what relief the assessee is entitled to, the Assessing Officer held that the assessee is entitled to claim deduction under section 54F and assigned certain reasons for that. Therefore, the larger issue was pending before the Commissioner Appeals, and in such circumstances, the Commissioner could not exercise power under section 263 on account of the statutory bar. Therefore, on this ground also, the assumption of jurisdiction under section 263 was wholly erroneous. (Para 23]”
Allahabad High Court in the case of CIT vs. Vam Resorts & Hotels (P.) Ltd. [2019] 111 taxmann.com 62 (Allahabad) held as follows:
”25. As. Clause (c) of Explanation 1 to Section 263 of the Act provides that when an appeal is pending before the Commissioner, the exercise of jurisdiction under Section 263 of the Act by CIT is barred. Thus, in the present case, the CIT wrongly exercised jurisdiction under Section 263 of the Act by remanding back the matter to assessing authority on 25.3.2013, while the appeal was decided by CIT (A) on 5.6.2013 Thus, the order passed by the ITAT does not suffer from any irregularity and needs no interference.”
Respectfully following the above judicial precedents, we have no hesitation in holding that the assumption of jurisdiction by Ld. PCIT A.Y. 2018-19 Page No 8 Jignasa Atulkumar Shah vs. PR.CIT u/s. 263 itself is invalid in law. Therefore the Revision order passed by ld. PCIT is hereby quashed.
In the result, the appeal filed by the Assessee is allowed.
Order pronounced in the open court on 24-02-2026