Pranav B Prem

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has held that the Principal Commissioner of Income Tax (PCIT) is empowered to invoke revisionary jurisdiction under Section 263 of the Income Tax Act even when the same issue is already pending adjudication before the Commissioner of Income Tax (Appeals) [CIT(A)]. The Bench comprising Madhumita Roy (Judicial Member) and Naveen Chandra (Accountant Member) dismissed the assessee’s appeal and affirmed that Section 263 can be exercised so long as the appellate authority has not yet decided the issue, regardless of whether a related appeal is pending.

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The assessee, deriving income from salary and business, filed a return declaring ₹24,93,630. The assessment was reopened under Section 148 based on findings of the Investigation Wing, which reported that the assessee had allegedly booked non-genuine long-term capital gains (LTCG) through accommodation entry providers. According to the investigation, the assessee purported to have purchased shares in 2009, but evidence later revealed that the shares were acquired only in FY 2014–15 through operator-controlled entities, and backdated documentation was created to make it appear as a long-term investment.

During reassessment proceedings, the Assessing Officer (AO) treated the LTCG claim as bogus. He added ₹1,57,25,322 under Section 68 as unexplained credit and ₹3,30,069 under Section 69C as alleged commission for obtaining accommodation entries. However, despite holding the transaction to be sham and non-genuine in its entirety, the AO allowed deduction of the supposed cost of purchase and brought to tax only the “net gain” instead of the full sale value.

On examining the reassessment order, the PCIT found this approach erroneous and prejudicial to the interests of the Revenue. The PCIT held that once the AO concluded that the transaction was fictitious, the entire sale consideration of ₹1,65,03,478 ought to have been treated as unexplained income, not merely the net difference. The reassessment order, therefore, showed a clear lack of proper inquiry and incorrect appreciation of facts. Invoking Section 263, the PCIT revised the order and enhanced the taxable income.

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Challenging the revision, the assessee argued that since the issue of LTCG was already pending before CIT(A), the PCIT could not assume jurisdiction on the same matter. It was further argued that the reassessment order itself was invalid, and therefore no revision could be undertaken.

Rejecting the objections, the Tribunal held that Clause (c) of Explanation 1 to Section 263 fully empowers the PCIT to revise an order unless the issue has been “considered and decided” by the appellate authority. Mere pendency of an appeal does not curtail the PCIT's jurisdiction. The Bench relied on the Supreme Court decisions in Shri Arbuda Mills Ltd. v. CIT and CIT v. Eimco KCP Ltd., which clarify that the revisional power is barred only when the issue is already adjudicated in appeal, and not merely when an appeal is filed.

The ITAT also noted that the question of whether the reassessment order under Sections 147/144B was valid is a matter exclusively within the jurisdiction of the CIT(A), and such issues cannot restrict the PCIT from exercising power under Section 263.

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Holding that the assessment order was indeed erroneous and prejudicial to the revenue, the Tribunal upheld the PCIT's revision in full and dismissed all grounds raised by the assessee. The ruling reinforces the principle that the PCIT’s revisional powers remain intact even when parallel proceedings are pending before the CIT(A), unless the appellate authority has already rendered a decision on the disputed issue.

Appearance

Counsel For  Appellant: Dr. Rakesh Gupta

Counsel For Respondent: Mahesh Kumar, CIT-DR

Cause Title: Sanjay Singh Rana Versus PCIT

Case No: ITA No. 3463/DEL/2024 [A.Y. 2015-16]

Coram: Madhumita Roy (Judicial Member), Naveen Chandra (Accountant Member)