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Judgment
PER AMITABH SHUKLA, AM
This appeal filed by the assessee is directed against the order of Ld. PCIT, Delhi-1, dated 19.03.2025, arising out of assessment order dated 11.03.2023 passed under section u/s 147 r.w.s. 144B of the Act for the Assessment Year 2018-19. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1(i) The orders passed u/s 263 of the act by the Ld. PCIT are unlawful & against principles of natural justice.
The Ld. PCIT is not justified in giving the direction to have an addition under provision 69C where an assessment has been completed by the Ld. A.O., such direction are not permitted by initiating the proceedings u/s 263.
Whereas the purchases of Rs. 53,48,116t- were accounted for in the books of accounts and the suppliers had also been paid via Bank mode, the proviso 69C is not applicable.
The addition alleged as Bogus Purchases by the Ld. A.O, is a matter of opinion thus the Ld. PCIT has erred in passing the orders u/s 263 of the act.
The orders passed are without jurisdiction as the was already pending before the Ld. CIT (Appeals)
The Ld. CIT (Appeal) in his appellate order ISSUC under consideration has reduced the addition of Rs.53,48,116/- to Rs.6,68,515/-
At the outset, the ld. Counsel for the assessee argued that the exercise of revisionary authority u/s 263 by ld. PCIT, Delhi-1 prima facie suffers from the fault of jurisdictional insufficiency in as much as the same was exercised when assessee’s appeal on the same issue was pending before the ld. CIT(A). The ld. Counsel brought to our knowledge the following brief factual matrix of the case. Return declaring income of Rs.11,72,640/- was filed on 25.09.2018 and assessment order u/s 147/144B was passed on 11.03.2023 determining total income at Rs.67,58,900/-. The ld. Assessing Officer had made additions of Rs.53,58,116/- on account of bogus purchases. The assessee filed an appeal on 05.04.2023 before the ld. CIT(A) NFAC contesting the impugned addition. After considering arguments of the assessee, the ld. CIT(A) held that an amount equal to 12.5% of the said bogus purchases of Rs.53,58,116/- was liable to be added in assessee’s hands. Accordingly, vide order dated 17.01.2025, he restricted the addition to 12.5%. The assessee further preferred an appeal before this tribunal, wherein, vide ITA No.1464/Del/2025 in order dated 08.01.2026, the assessee was given further relief and it was concluded that only an amount equal to 10% of the said bogus purchases of Rs.53,58,116/- was liable to be added in assessee’s hands. Necessary further relief was provided to the assessee.
Meanwhile, the ld. PCIT, Delhi-1 held the view that the impugned addition on account of bogus purchases of Rs.53,58,116/- was liable to be added in assessee’s hands u/s 69C of the Act along with invocation of section 115BBE of the Act. It was observed that the assessee was liable for higher rate of taxes. Accordingly, exercising his revisionary authorities u/s 263 of the Act, notice dated 21.10.2024 was issued to the assessee. Thereafter, order u/s 263 dated 19.03.2025 was passed holding order dated 11.03.2023 as erroneous in as much prejudicial to the interest of the Revenue.
The ld. Counsel for the assessee has vehemently argued that Explanation-1 of section 263 specifically prohibits invocation of any action in cases where first appeal is pending before ld. CIT(A). It was contended that in the present case, on the date of issuance of notice u/s 263 date 21.10.2024, qua the issue of treatment of bogus purchases of Rs.53, 58,116/-. An appeal was pending before the ld. First Appellate Authority. Thus, the notice u/s 263 was without any valid jurisdiction.
The ld. DR would like to make us belief on the correctness of order u/s 263 of the Act.
We have heard rival submissions in the light of material placed on records. Before proceeding further, we deem it appropriate to extract the statutory prescription defined in section 263 of the Act.
Revision of orders prejudicial to revenue.
263.(1) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer or the Transfer Pricing Officer, as the case may be, is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including,—
(i)an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or
(ii)an order modifying the order under section 92CA; or
(iii)an order cancelling the order under section 92CA and directing a fresh order under the said section.
Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,—
(a)an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall include—
(i)an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the direc-tions issued by the Joint Commissioner under section 144A;
(ii)an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer or the Transfer Pricing Officer, as the case may be, conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120;
(iii)an order under section 92CA by the Transfer Pricing Officer;
(b)"record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner;
(c)where any order referred to in this sub-section and passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be, had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.
Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,—
(a)the order is passed without making inquiries or verification which should have been made;
(b)the order is passed allowing any relief without inquiring into the claim;
(c)the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or
(d)the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.
Explanation 3.—For the purposes of this section, "Transfer Pricing Officer" shall have the same meaning as assigned to it in the Explanation to section 92CA.
(2)No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.
(3)Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.
Explanation.—In computing the period of limitation for the pur-poses of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and the period commencing on the date on which stay on any proceeding under this section was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by the jurisdictional Principal Commissioner or Commissioner shall be excluded.
A perusal of the above shows that sub-clause (c) of Explanation-1 clearly postulates and prohibits exercise of any revisionary authority under section 263 by a ld. PCIT in issues, which have been subject matter of dispute before an appellate authority. We have noted that in the present case, an appeal was preferred before the appellate authority on 05.04.2023 against order u/s 147 r.w.s. 144B of the Act dated 11.03.2023 and the ld. CIT(A) passed his order u/s 250 on 17.01.2025. We have further noted that the show cause notice u/s 263 was issued by PCIT on 21.10.2024. The SCN of ld. PCIT was concerning the same issue of treatment of bogus purchases. Thus, it is abundantly clearly that the notice u/s 263 was issued while appellate proceedings were pending considering the same matter.
As sub-clause (c) of Explanation-1 clearly prohibits exercise of any revisionary authority under section 263 by a ld. PCIT in issues, which have been subject matter of dispute before an appellate authority, the order u/s 263 dated 19.03.2025 of ld. PCIT-1, Delhi, has been found to be devoid of any meritorious jurisdiction. The same is therefore set-aside and quashed. Accordingly, appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.