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Facts
The Assessee filed appeals against the orders of the Principal Commissioner of Income Tax (PCIT) passed under Section 263 of the Income Tax Act for assessment years 2017-18 to 2019-20. The PCIT initiated proceedings under Section 263 on the grounds that the Assessing Officer (AO) had made an erroneous and prejudicial order by adding only commission on bogus purchases/sales instead of the full amount and by computing lesser interest under Section 234A.
Held
The Tribunal held that the PCIT lacked jurisdiction to invoke Section 263 of the Act because the issues raised in the show-cause notice were already a subject matter of appeal before the Commissioner of Income Tax (Appeals). The Tribunal relied on judicial precedents stating that a matter already under appeal cannot be revised under Section 263.
Key Issues
Whether the PCIT has jurisdiction under Section 263 when the issues raised were already pending before the CIT(A)? Was the AO's order erroneous and prejudicial to the revenue regarding the addition of commission and interest computation?
Sections Cited
263, 143(3), 153C, 69C, 68, 234A, 154, 142(1), 132(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “A” NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI M BALAGANESH
सुनवाईक�तारीख/ Date of hearing: 17.09.2025 21.11.2025 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER C.N. PRASAD, J.M.
These three appeals are filed by the Assessee against different orders of the Ld. PCIT(Central), New Delhi for the assessment years 2017-18 to 2019-20 passed u/s 263 of the Act. The assessee has raised the following common grounds in all these appeals except for the figures: -
“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 jurisdiction 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.
3. 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 jurisdiction 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 jurisdiction u/s 263 is in violation of clause (c) of the Explanation under sub section (1) of section 263.
(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 jurisdiction on these issues u/s 263 cannot be assumed by him.
(ii) That the Ld. Pr. CIT has erred both on facts and in law in ignoring the contention of the appellant that the proceeding u/s 263 cannot be used for substituting opinion of the AO by that of the Pr. CIT.
(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.
(ii) That the Ld. PCIT has erred ignoring the fact that the assessee having declared the bogus purchases also, enhancement will lead to double taxation of the same income.
(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.
That the appellant craves leave to add, amend or alter any of the grounds of appeal
.” to 2343/DEL/2025 VANDANA JAIN
2. Ld. Counsel for the assessee, at the outset, submitted that the order passed by the Ld. PCIT assuming jurisdiction 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 jurisdiction 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 jurisdiction 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 Philp vs. ITO (409 ITR 567) and the decision of the Hon’ble Allahabad High Court in the case of CIT vs. Vam Resorts & Hotels Pvt. Ltd. (418 ITR 723) the assessee also made the following elaborate submissions:
On the other hand, the Ld. DR strongly supported the orders of the authorities below. to 2343/DEL/2025 VANDANA JAIN 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 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. to 2343/DEL/2025 VANDANA JAIN 5. In the result, appeals of the Assessee are allowed.
Order pronounced in the open court on 21.11.2025