VANDANA JAIN,SONIPAT vs. PCIT(CENTRAL)-1, DELHI

“On the facts and circumstances of the case, the order passed by the Ld. Pr. Commissioner of Income Tax (CIT) u/s 263 of the Act is bad, both in the eye of law and on facts.

On the facts and circumstances of the case, the order passed by the Ld. PCIT assuming juri iction u/s 263 is bad in law in the absence of twin conditions of the order passed by the AO being erroneous as well as prejudicial to the interest of the Revenue having been satisfied.

On the facts and circumstances of the case, the order passed by the Ld. PCIT has erred in rejecting the contention of the assessee that his action of assuming juri iction u/s 263 is bad in law, as the issues raised in show cause notice u/s 263, already being a matter pending before the Commissioner of Income Tax (Appeals), the juri iction u/s 263 is in violation of clause (c) of the Explanation under sub section (1) of section 263. 4. (i) On the facts and circumstances of the case, the Ld. PCIT has erred both on facts and in law in ignoring the fact that the issues raised by him in notice u/s 263 were before the AO and as such the juri iction on these issues u/s 263 cannot be assumed by him.

(i) On the facts and circumstances of the case, the Ld. PCIT has erred both on facts and in law in enhancing the income of the assessee by Rs.1,62,99,640/- on account of Sales held to be bogus.

(i) On the facts and circumstances of the case, the Ld. PCIT has erred both on facts and in law in directing the Assessing Officer to re-compute the interest u/s 234A of the Act. (ii) That the re-computation of interest u/s 234A may at most be a matter of rectification u/s 154 of the Act, not of revision u/s 263 of the Act. 7. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”

Ld. Counsel for the assessee, at the outset, submitted that the order passed by the Ld. PCIT assuming juri iction u/s 263 is bad in law since the issues raised in show cause notice u/s 263 were already subject matter of appeal before the CIT(Appeals) and therefore the juri iction u/s 263 is in violation of clause (c) of explanation under sub-clause (1) of section 263 of the Act. Ld. Counsel for the assessee referring to page 100 to 104 submitted that this is a copy of Form 35 filed before the Ld. CIT (Appeals) for the AY 2017-18 and referring to page 106 of the Paper Book which are the grounds of appeal submits that one of the grounds raised by the assessee before the Ld. CIT(Appeals) that the Assessing Officer erred in making addition on account of commission at 0.5% without there being any basis. Ld. Counsel for the assessee also referring to page 107 which is the show cause notice issued by the Ld. PCIT submits that Ld. PCIT proposed to treat the transactions which were considered by the AO for estimating the commission at 0.5% as unexplained cash credit u/s 68 of the Act. Ld. Counsel for the assessee submitted that since the addition made by the AO on account of commission and the entire transaction is under appeal the Ld. PCIT lacks juri iction to invoke the provisions u/s 263 of the Act. Reliance was placed on the decision of the Hon’ble Madras High Court in the case of Smt. Renuka

On the other hand, the Ld. DR strongly supported the orders of the authorities below.

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 juri iction 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 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 juri iction 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. ITA Nos. 2341 to 2343/DEL/2025 VANDANA JAIN

In the result, appeals of the Assessee are allowed. Order pronounced in the open court on 21.11.2025 (M BALAGANESH) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 21.11.2025 *Kavita Arora, Sr. P.S.