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Facts
The assessee's return for AY 2021-22 was accepted under section 143(3). The Principal Commissioner of Income-Tax (PCIT) initiated revision proceedings under section 263, citing alleged unexplained cash investment and non-taxation of deemed rental income. The PCIT set aside the assessment order, directing a fresh assessment.
Held
The Tribunal held that the Assessing Officer (AO) had conducted due enquiry regarding the cash investment and had accepted the assessee's explanation in the absence of corroborative evidence, making it a plausible view. Similarly, for house property income, the AO had considered the assessee's explanations. The Tribunal concluded that the PCIT's order was based on a mere change of opinion, which is impermissible under section 263.
Key Issues
Whether the revisionary order passed by the PCIT under section 263 was valid when the AO had conducted due enquiry and taken a plausible view, or if it was merely a change of opinion.
Sections Cited
143(3), 263, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: DR. B.R.R. KUMAR, VICE-MS. SUCHITRA KAMBLE
O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
This appeal filed by the assessee is directed against the order passed by the learned Principal Commissioner of Income-Tax (Central), Surat [herein-after referred to as “PCIT”] dated 31.03.2025, in exercise of revisionary powers under Section 263 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for the Assessment Year (AY) 2021-22.
The assessee has raised the following grounds of appeal:
1. That on the facts and in the circumstances of the case as well as in law, the order passed by ld. Principal Commissioner of Income Tax (Central), Surat (PCIT) u/s. 263 of the I. T. Act, 1961 ("the Act") is wrong and unjustified because there has been no error so as to be prejudicial to the interest of revenue in the assessment order passed u/s 143(3) of the Act and Id. PCIT has passed the said order u/s 263 just by taking a different possible view and incorrect view. Appellant prays for quashing the order so passed by ld. PCIT, which is contrary to the settled law.
And other grounds….”
Sunil Kumar Baheti Vs. PCIT Asst. Year : 2021-22 - 2– 3. The brief facts of the case are that the assessee filed his return of income for AY 2021-22 on 17.02.2022 declaring total income of Rs.57,46,649/-. The case was selected for scrutiny and assessment was completed under section 143(3) of the Act on 30.03.2023 accepting the returned income. Subsequently, the Ld. PCIT examined the assessment records and issued show-cause notices dated 07.03.2025 and 28.03.2025 proposing revision u/s 263 of the Act on two issues:
(i) Alleged unexplained cash investment of Rs.27,87,450/- for purchase of shop No. 547 based on seized documents found during search. (ii) Non-taxation of deemed rental income from four immovable properties shown in the balance sheet, i.e. Avadh Markey Shop, Flat, Shop Raj Textile Tower and Shop at Raj Tower.
After considering the assessee’s replies, the Ld. PCIT passed the impugned order setting aside the assessment and directing the Assessing Officer to pass a fresh assessment after proper verification.
Aggrieved by the order of the Ld. PCIT, the assessee is in appeal before the Tribunal.
Before us, the Ld. AR submitted that, during the assessment proceedings, the Assessing Officer issued a specific notice under section 142(1) dated 21.09.2022 calling upon the assessee to explain the alleged cash payment of Rs.27,87,450/- for purchase of shop No. 547. The assessee categorically denied having purchased any such shop or having made any payment and this reply was duly filed and acknowledged. The Ld. AR further submitted that the Assessing Officer, after examining the explanation and in absence of any corroborative evidence linking the assessee with the alleged purchase, accepted the explanation and completed the assessment. The Ld. AR, therefore, contended that the issue was subject to due enquiry and application of mind by the Assessing Officer, and revision u/s 263 amounts to mere change of opinion. As regards house property income, the Ld. AR submitted that the properties were either used for business Sunil Kumar Baheti Vs. PCIT Asst. Year : 2021-22 - 3– purposes, self-occupation, or the possession had not been received during the relevant year. These facts were verifiable from records already available with the Assessing Officer. The Ld. AR relied on the decision of the Hon’ble Supreme Court in the case of PCIT vs. Shreeji Prints (P.) Ltd., [2021] 130 taxmann.com 294, affirming the Gujarat High Court decision, wherein it was held that section 263 cannot be invoked merely because the PCIT holds a different opinion.
The Ld. DR, on the other hand, supported the order of the Ld. PCIT.
We have carefully considered the rival submissions and perused the material available on record. It is an undisputed fact that during assessment proceedings, the Assessing Officer issued a specific notice under section 142(1) calling upon the assessee to explain the alleged cash investment of Rs.27,87,450/. The assessee categorically denied having purchased any shop or having made any such cash payment. The Assessing Officer, after considering the explanation furnished and in the absence of any corroborative material such as a registered sale deed, allotment or possession letter, or any evidence of payment in the assessee’s books of account or bank statements, accepted the explanation offered by the assessee. In these circumstances, it cannot be said that the assessment order was passed without enquiry. The Hon’ble Supreme Court in the case of PCIT vs. Shreeji Prints (P.) Ltd. (supra) has held that where the Assessing Officer has made enquiries and taken a plausible view, the provisions of section 263 cannot be invoked merely because the ld. PCIT does not agree with such view. Mere presence of the PAN of the assessee in third-party seized documents, in the absence of any independent corroborative evidence establishing a nexus between the assessee and the alleged transaction, cannot by itself justify revision under section 263 of the Act.
8.1 As regards the issue of income from house property, the assessee had explained that one shop was used for business purposes, one flat was self- Sunil Kumar Baheti Vs. PCIT Asst. Year : 2021-22 - 4– occupied, one shop was not in possession during the relevant previous year, and one property was only booked. These explanations formed part of the assessment record. The Ld. PCIT has failed to demonstrate that the view taken by the Assessing Officer was unsustainable in law. On the contrary, the revisionary order reflects nothing but a substitution of the ld. PCIT’s opinion for that of the Assessing Officer, which is impermissible under Section 263 of the Act. We, therefore, hold that the assumption of jurisdiction by the ld. PCIT u/s 263 of the Act is invalid in law and the impugned order is accordingly quashed. We make it clear that this order has been passed with regard to the revisionary powers of Ld. PCIT in the specific facts of the case.
In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 17.02.2026