Loading judgment…
Facts
The assessee, an individual, filed an income tax return for AY 2020-21, declaring regular and agricultural income. During assessment, the agricultural income was reclassified as 'Income from other sources' due to non-compliance, leading to a revised total income. The assessee appealed this assessment order to the Ld. CIT(A). Concurrently, the PCIT initiated revisional proceedings under Section 263 of the Income Tax Act, 1961, against the same assessment order, despite the ongoing appeal before the CIT(A).
Held
The Income Tax Appellate Tribunal held that the Ld. PCIT lacked jurisdiction to initiate revisional proceedings under Section 263 when the subject matter of the assessment order was already pending in appeal before the Ld. CIT(A). The Tribunal emphasized that Explanation 1(c) to Section 263(1) restricts the PCIT's power in such scenarios, and found that the PCIT had misread the law. Relying on judicial precedents, the Tribunal quashed the PCIT's order under Section 263 for erroneously assuming jurisdiction.
Key Issues
Whether the PCIT has jurisdiction to initiate revisional proceedings under Section 263 of the Income Tax Act, 1961, on an issue that is already the subject matter of an appeal pending before the CIT(A).
Sections Cited
263, 143(1)(a), 144, 142(1), Chapter VIIA
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, DELHI BENCHES : A : NEW DELHI
Before: SHRI M. BALAGANESH & SHRI RAJ KUMAR CHAUHAN
(Appellant) (Respondent) Assessee by : Shri Navin Gupta, Advocate & Shri Nakul Gupta, Advocate Revenue by : Shri Jitendra Singh, CIT-DR Date of Hearing : 23.12.2025 Date of Pronouncement : 30.12.2025 ORDER
PER RAJ KUMAR CHAUHAN, JM:
This appeal is directed against the order dated 21st March, 2025 passed by the PCIT, Rohtak u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) wherein the assessment order dated 20th September, 2022 was revised and set aside with the direction to pass an order afresh after conducting the required inquiries and verification keeping in view the observation made by the ld. PCIT.
The facts, in brief, as culled out from the proceedings of the authorities below are that the assessee is an individual and organizer of Dera Mehent Baba Ishwar Shah. The assessee filed its return of income on 28th March, 2021 for the concerned year declaring the total income at Rs.8,70,201/- after claiming deduction under Chapter VIIA of the Act. The assessee has also shown an income of Rs.98,23,352/- as agricultural income after claiming expenses of Rs.48,12,360/- making out the gross receipts corresponding to the agricultural profits to the tune of Rs.1,46,35,712/-. The return was processed u/s 143(1)(a) and during the assessment proceedings, a show cause notice was issued u/s 144 of the Act seeking explanation with regard to the agricultural income claimed as exempt by the assessee along with other relevant inquiries. Further, statutory notices u/s 142(1) of the Act dated 2nd November, 2021 was also issued to the assessee seeking specific information. The assessee failed to comply with the notice dated 22nd November, 2021 issued u/s 142(1) of the Act and, accordingly assessment proceedings were completed through Faceless e-Assessment Scheme-2019. While concluding the assessment a consideration of Rs.98,23,352/- was proposed as variation under the head, ‘Income from other sources’ and total income was assessed at Rs.1,06,24,622/-. The assessee is stated to have challenged the said assessment order and appeal is stated to be pending before the ld.CIT(A) which is evident from pages 1-6 of the paper book filed before us.
In the mean time, the ld.PCIT has issued a show cause notice u/s 263 of the Act which was served through ITBA by registered e-mail of the assessee. Shri Navin Gupta, counsel of the assessee attended the proceedings in person on 21.02.2025 and submitted a reply dated 21.02.2025. In the reply to the notice u/s 263 of the Act, apart from challenging the notice on merit, para 2.1 of the reply specifically raised the issue of lack of jurisdiction acquired by the ld.PCIT on the ground that no revisional proceedings could be initiated against the assessee because the subject matter was already pending in appeal before the ld.CIT(A). the copy of Form 35 filed by the assessee before the ld.CIT(A) was also enclosed along with the reply. However, the ld.PCIT has not agreed to the submission/objection of the assessee regarding the jurisdiction assumed by the Ld. PCIT and proceeded to pass the impugned order wherein the assessment order was set aside and directions were issued to pass an order afresh after conducting required inquiries and verification.
Aggrieved by the impugned order, the assessee is in appeal before us and has raised the following grounds of appeal:- “1. That the order of the Ld. PCIT is against law and facts.
2. That the Ld. PCIT erred in passing order u/s 263 setting aside the assessment order to pass a fresh order, although the prerequisites of passing order u/s 263 are not satisfied in this case.
3. That the Ld. PCIT erred in assuming jurisdiction and in passing order u/s 263, although the same issue is already the subject matter of an appeal filed by the appellant before Ld. CIT (Appeals).
4. That the Ld. PCIT erred in passing order u/s 263 and in directing the Ld. AO to again make enquires and verification in respect of agricultural income, although the Ld. AO had already considered the issue in detail, made high pitched assessment and made addition of Rs. 98,23,352/- to the total income of the appellant.
5. That the Ld. PCIT erred in passing order u/s 263 and set aside the assessment order to the Ld. AO with the observation that the Ld. AO erred by not invoking section 69A and 115BBE in the matter, although the issue involved doesn’t fall within the purview of section 69A and 115BBE.
6. That the appellant craves leave to add, alter, modify, amend or withdraw any of the ground of appeal at the time of hearing.”
We have heard the ld. AR who has, at the very outset, submitted that the impugned order is not legally sustainable as the same has been passed despite the pendency of the appeal against the assessment order instituted by the assessee and submitted that this fact was brought to the notice of the ld.PCIT by filing a detailed reply and taking objection specifically with respect to the exercise of the jurisdiction during the pendency of the appeal against the assessment order. Apart from this, the ld. AR has also submitted on merit stating that it was not a case of non-inquiry which is evident from the questionnaire issued during the assessment proceedings and once a plausible view has been taken by the AO, there was no occasion for the PCIT for revising the order and setting aside the assessment order. The ld. AR of the assessee has referred and relied the following case laws:- (i) Renuka Philip 409 ITR 567 (Mad);
(ii) Vam Resorts & Hotels Pvt. Ltd. 418 ITR 723 (All); (iii) Corporate International Financial Services Ltd., 220, 221, 223, 240, 349 & 243/Del/2024 (ITAT Delhi Benches); (iv) Vandana Jain, to 2343/Del/2025 (ITAT Delhi Benches)
We have also heard the ld. DR who has supported the impugned order passed by the Ld. PCIT.
We have considered the rival submissions and examined the record. The reply of the assessee to the notice u/s 263 is placed as page 246 of the paper book and paras 2 and 2.1 which are relevant are extracted below:- “2. That the notice issued u/s 263 by your goodself is without jurisdiction and unsustainable in law and thus the appellant hereby strongly opposed to the notice issued, for the following reasons:- 2.1 That in the humble submission of the assessee, the notice issued by your goodself is without jurisdiction as the matter is already pending before Ld. CIT(Appeals) on the same issue of agricultural income. It is settled law and as per the provisions of section 263 also, no revision proceedings could be initiated against the assessee if the same issue is subject matter of any appeal. In the present case, your goodself has issued notice u/s 263 on the issue of agricultural income/expense which is already agitated by the assessee before Ld. CIT (Appeals). Copy of Form-35 filed by the assessee before Ld. CIT (Appeals) is enclosed herewith at Page no. 1 to 6 of PB.”
We have examined the impugned order to find out how the Ld. PCIT had considered and dealt with this reply. Para 5 of the impugned order contains the discussion on the stand taken by the assessee questioning the exercise of jurisdiction by the Ld. PCIT u/s 263 of the Act which is extracted below:-
“5. I have carefully examined the facts of the case and the submissions of the assessee. Assessee in his reply has requested to drop proceedings 263 as an appeal against the assessment order is pending before Ld. CIT(A). The contention of assessee is not acceptable as his appeal is pending before CIT(A). The clause (c) of explanation 1 to section 263 of the Income Tax Act, clarifies that the Pr. CIT can revised the order in respect of such matter which has not been considered or decided by the CIT(A). In instant case, the CIT(A) has not decided the appeal of the assessee, therefore, revisional power as per the section 263 are available with the undersigned.”
It is evident from the contents of para 5 of the impugned order that the Ld. PCIT seems to have misread the provisions of clause (c) of Explanation 1 to section 263 of the Act. Moreover, the findings of the Ld. PCIT in para No.5 while rejecting the ground taken by the assessee regarding pendency of the appeal before the ld.CIT(A) is contrary to the settled legal precedents and the decision of the coordinate Benches which has already decided the identical issue in favour of the assessee. While deciding the identical issue, the coordinate Bench in the case of Vandana Jain, (supra), the ITAT Delhi Bench has relied the decision of the Hon’ble Madras High Court in the case of Renuka Philip (supra) and the decision of the Hon’ble Allahabad High Court in the case of Vam Resorts & Hotels Pvt. Ltd. (supra). The relevant findings of the coordinate Bench in Vandana Jain’s case (supra) in which one of us (the Ld. AM) was also a party, is extracted as below:- “4. Heard rival submissions, perused the orders of the authorities below. We find considerable merit in the submissions of the assessee. The provisions of Explanation 1 to sub section (1) to section 263 clause (c) restricts the power of the Ld. PCIT to invoke jurisdiction u/s 263 of the Act on the issues which have been subject matter of any appeal before the Ld. CIT(Appeals). The Madras High Court in the case of Smt. Renuka Philip vs. ITO (supra) has squarely held that when the larger issue was pending 6
before the Commissioner of Appeals in such circumstances the Commissioner could not exercise power u/s 263 on account of statutory bar in view of the clause (c) of explanation to section 263(1) of the Act. Similar view has been taken by the Hon’ble Allahabad High Court in the case of CIT vs. Vam Resorts & Hotels Pvt. Ltd. (supra). Thus, respectfully following the said decision, we hold that the PCIT had no jurisdiction to invoke the provisions of section 263 of the Act since the issue in show cause notice was already subject matter of appeal before the Ld. CIT(Appeals) in all these cases. Thus, we quash the orders passed by the Ld. CIT(Appeals) u/s 263 of the Act for the assessment years 2017-18 to 2019-20.”
Thus, in view of the provisions of Clause (c) of Explanation 1 to sub- section (1) of section 263 and the findings on the identical issue by the coordinate Bench of the ITAT, we are of the considered opinion that the Ld. PCIT was not empowered to exercise jurisdiction u/s 263 of the Act because of the pendency of the appeal against the assessment order before the ld.CIT(A) as instituted by the assessee. Therefore, respectfully following the decision of the coordinate Bench in the case of Vandana Jain referred (supra), we hold that the Ld.PCIT had wrongly exercised jurisdiction to invoke the provisions of section 263 of the Act because the issue of show cause notice was the subject matter before the Ld. CIT(A). Accordingly, we quash the order passed by the Ld. PCIT u/s 263 of the Act for the assessment year under consideration.
In the result, the appeal of the assessee is allowed.