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Judgment
This bunch of appeals are filed by the assessee directed the against the different orders dated 25.03.2024, 30.03.2025, and 30.06.2025 of the Learned Assistant Commissioner of Income Tax, Central Circle-31, Delhi [hereinafter referred to as the (Ld. ACIT)], Ld. Principal Commissioner of Income Tax (Central), Delhi-3 [hereinafter referred to as the (Ld. PCIT)] and ld. Commissioner of Income Tax (Appeals)-30, New Delhi [hereinafter referred to as the (Ld. CIT(A)] pertaining to Assessment Years (A.Ys.) 2019-20, 2020-21 and 2021-22. These appeals are heard together and common issues are involved in these appeals, the same are being disposed off by way of this common order for the sake of convenience and brevity.
Ground of appeal filed by the assessee (ITA No.-3437/Del/2025) are reproduced as under:
“1.That on the facts and in the circumstances of the case, the Learned Principal Commissioner of Income Tax (Central), Delhi-3, Delhi (hereinafter referred to the Ld. PCIT) has grossly erred on facts as well as in law in holding that the assessment order passed by the Assessing Officer u/s 153C of the income Tax Act, 1961 (hereinafter referred to as the Act) on 25.03.2024 as erroneous and prejudicial to the interest of Revenue and, therefore, set aside, "as no such order was passed and existed on 25.03.2024". Therefore, the Order passed u/s 263 deserves to be quashed.
2.That on the facts and in the circumstances of the case the Ld. PCIT has grossly failed to appreciate that no order u/s 153C dated 25.3.2024 was passed and on the contrary it was passed on 26.3.2024 as the same was digitally signed on 26.3.2024 (Tuesday). Therefore, the Order passed u/s 263 deserves to be quashed.
3.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case the Ld. PCIT has grossly erred in law in initiating the proceeding u/s 263 of the Act without fulfilling the mandatory requirements of section 263 which is essential before proceeding u/s 263(1). Therefore, the order is bad in law and deserves to be set aside.
4.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, the assessment order passed u/s 153C of the Act is not erroneous and accordingly the Ld. PCIT has erred in invoking the provisions of section 263 of the Act and has erred in setting aside the assessment order. Therefore, the order is bad in law and deserves to be set aside.
5.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, Ld. PCIT has grossly erred both on facts and in law in ignoring the fact that the issue raised by him in the notice issued u/s 263 dated 21.3.2025 was very much before the Ld. AO in the assessment proceedings and as such the jurisdiction on this issue has been assumed by him erroneously. Therefore, the order is bad in law and deserves to be set aside.
6.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, Ld. PCIT has grossly erred both on facts and in law in assuming jurisdiction and passing order u/s 263 on the basis of wrong facts that "AO does not have any documentary evidences which substantiate that the unaccounted cash of Rs. 1,60,16,945/- is related to business of assessee", ignoring the fact that "the assessment itself was made on the basis of seized materials, wherein the impugned transactions were reflected as business transactions of hotel and banquet business". Therefore, the order is bad in law and deserves to be set aside.
7.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, Ld. PCIT has grossly erred both on facts and in law in assuming jurisdiction and passing order u/s 263 on the basis of wrong facts that "AO has not issued any questionnaire to Sh. Sanjay Aggarwal or made necessary verification /enquiry in respect of nature of the transactions", ignoring the fact that "notices u/s 142(1) and SCN u/s 153C were issued on the basis of seized materials showing the impugned transactions as business transactions of hotel and banquet business". Therefore, the order is bad in law and deserves to be set aside.
8.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law the order u/s 263 dated 30.3.2025 passed by the Ld. PCIT is unsustainable as power to revise u/s 263 of the Act can be invoked in a case where the assessment order has been passed without making enquiries or verification which should have been made, whereas in the instant case enquiries were through notices u/s 142(1) and SCN u/s 153C. Therefore, the order is bad in law and deserves to be set aside.
9 That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law the order u/s 263 dated 30.3.2025 passed by the Ld. PCIT is unsustainable as power to revise u/s 263 of the Act cannot be invoked or used for substituting the opinion of Ld. PCIT for the opinion of Ld. AO.. Therefore, the order is bad in law and deserves to be set aside.
10 That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, Ld. PCIT has grossly erred both on facts and in law in assuming jurisdiction and passing order u/s 263 ignoring the fact that the Ld. AO had made the addition of Rs. 1,60,16,945/-u/s 28 of the Act by treating the same as business receipt, with proper application of mind to the seized material forming part of the record, so much so that an order u/s 154 was passed on 29.4.2024 to allow the benefit of set off of carried forward business loss to the extent of Rs. 1,60,16,945/-. Therefore, the order is bad in law and deserves to be set aside.
11.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, Ld. PCIT has grossly erred both on facts and in law in assuming jurisdiction and passing order u/s 263 without application of mind of the facts of the case and the record and against the principle of natural justice and not allowing effective opportunity to the appellant, in as much as the notice u/s 263 was issued on Friday, the 21st March, 20025 at 8.00 PM and the response date and time was fixed on 25.03.2025 at 11.00 AM. Therefore, the order is bad in law and deserves to be set aside.
12.That the appellant crave leave to add, amend, alter or modify any ground of appeal.”
The assessee has also filed additional grounds vide order application dated 01.05.2026.
“ 1. That on the facts and circumstances of the case, the PCIT has erred in assuming jurisdiction/s 263 even though underlying assessment order passed u/s 153C r.w.s.. 143(3) is invalid and void-ab-initio.
2.That even otherwise, the assessment order passed u/s 153C r.w.s 143(3) being subject matter of appeal before the CIT(A), the exercise of jurisdiction u/s 263 is contrary to Explanation 1(c) of section 263 and thus bad in law.”
Ground of appeal filed by the assessee (ITA No.-3438/Del/2025) are reproduced as under:
“1.That on the facts and in the circumstances of the case, the Learned Principal Commissioner of Income Tax (Central), Delhi-3, Delhi (hereinafter referred to the Ld. PCIT) has grossly erred on facts as well as in law in holding that the assessment order passed by the Assessing Officer u/s 143(3) of the income Tax Act, 1961 (hereinafter referred to as the Act) on 31.12.2022 as erroneous and prejudicial to the interest of Revenue and, therefore, set aside, "as the order passed u/s 143(3) dated 31.12.2022 was non est in the eye of law, ". Therefore, the Order passed u/s 263 deserves to be quashed.
2.That on the facts and in the circumstances of the case the Ld. PCIT has grossly failed to appreciate that the order u/s 143(3) dated 31.12.2022 was made and passed in violation of the CBDT Circular No. 19/2019 dated 14.8.2019, in as much as, the same does not bear DIN. Therefore, the Order passed u/s 263 deserves to be quashed.
3.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case the Ld. PCIT has grossly erred in law in initiating the proceeding u/s 263 of the Act without fulfilling the mandatory requirements of section 263 which is essential before proceeding u/s 263(1). Therefore, the order is bad in law and deserves to be set aside.
4.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, the assessment order passed u/s 143(3) of the Act is not erroneous and accordingly the Ld. PCIT has erred in invoking the provisions of section 263 of the Act and has erred in setting aside the assessment order. Therefore, the order is bad in law and deserves to be set aside.
5.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, Ld. PCIT has grossly erred both on facts and in law in ignoring the fact that the issue raised by him in the notice issued u/s 263 dated 21.3.2025 was very much before the Ld. Id. AO in the assessment proceedings and as such the jurisdiction on this issue has been assumed by him erroneously. Therefore, the order is bad in law and deserves to be set aside.
6.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, Ld. PCIT has grossly erred both on facts and in law in assuming jurisdiction and passing order u/s 263 on the basis of wrong facts that "AO does not have any documentary evidences which substantiate that the unaccounted cash of Rs. 69,31,090/- is related to business of assessee", ignoring the fact that "the assessment itself was made on the basis of seized materials, wherein the impugned transactions were reflected as business transactions of hotel and banquet business". Therefore, the order is bad in law and deserves to be set aside.
7.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, Ld. PCIT has grossly erred both on facts and in law in assuming jurisdiction and passing order u/s 263 on the basis of wrong facts that "AO has not issued any questionnaire to Sh. Sanjay Aggarwal or made necessary verification /enquiry in respect of nature of the transactions", ignoring the fact that "notices u/s 142(1) and SCN u/s 143(3) were issued on the basis of seized materials showing the impugned transactions as business transactions of hotel and banquet business". Therefore, the order is bad in law and deserves to be set aside.
8.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law the order u/s 263 dated 30.3.2025 passed by the Ld. PCIT is unsustainable as power to revise u/s 263 of the Act can be invoked in a case where the assessment order has been passed without making enquiries or verification which should have been made, whereas in the instant case enquiries were made through notices u/s 142(1) and SCN u/s 143(3). Therefore, the order is bad in law and deserves to be set aside.
9.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law the order u/s 263 dated 30.3.2025 passed by the Ld. PCIT is unsustainable as power to revise u/s 263 of the Act cannot be invoked or used for substituting the opinion of Ld. PCIT for the opinion of Ld. AO.. Therefore, the order is bad in law and deserves to be set aside.
10.That, without prejudice to the other grounds of appeal, on the facts and in the circumstances of the case and in law, Ld. PCIT has grossly erred both on facts and in law in assuming jurisdiction and passing order u/s 263 ignoring the fact that the Ld. AO had made the addition of Rs. 69,31,090/-u/s 28 of the Act by treating the same as business receipt, with proper application of mind to the seized material forming part of the record, Therefore, the order is bad in law and deserves to be set aside.
11.That the appellant crave leave to add, amend, alter or modify any ground of appeal.”
The assessee has also filed additional grounds vide order application dated 01.05.2026.
“1.That on the facts and circumstances of the case, the PCIT has erred in assuming jurisdiction u/s 263 even though underlying assessment order passed u/s 143(3) is invalid and void-ab-initio.”
Ground of appeal filed by the assessee (ITA No.-5283/Del/2025) are reproduced as under:
“1.The Commissioner of Income-tax (Appeals)-30, Delhi (hereinafter referred to as the CIT(A)) erred in upholding the action of the Assistant Commissioner of Income-tax, Central Circle 31. Delhi (hereinafter referred to as the Assessing Officer) in confirming the addition of Rs 176 lacs under section 69A of the Act on account of alleged payment of cash to persons in lieu of cheque/ RTGS received from them.
2.The appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought to have accepted that the source of payment of cash Rs 176 lacs to persons in lieu of RTGS/ cheque received from them is out of the business receipts of G.P. Hotel & Resorts, which has been separately brought to tax in their assessment, and hence, the impugned addition needs to be deleted.
3.The appellants further, contend that on the facts and in the circumstances of the case and in law, the source of income having already been brought to tax in the assessment of the appellants, separate addition in respect of payment therefrom ought not to have been brought to tax inasmuch as the same would amount to double taxation.
4.The appellants crave leave to add to, alter or amend the aforestated ground of appeal.
The assessee has also filed additional grounds vide order application dated 01.05.2026.
“ 1(i) That on the facts and circumstances of the case, the CIT(A) was not justified in upholding the validity of notice u/s 153C even though same was issued without jurisdiction and in direct violation of amended provisions of section 147 and 148 of the Act.
(ii)That the third party search material having been handed over the assessing officer after 01/04/2021, the assumption of jurisdiction u/s 153C is contrary to section 153C(3) of the Act and thus void-ab-initio.
2.That even otherwise, the CIT(A) was not justified in upholding the validity of notice u/s 153C even though the assessing officer has recorded common, mechanical and vague satisfaction note which is illegal and renders the notice u/s 153C null and void.
Ground of appeal filed by the assessee (ITA No.-5284/Del/2025) are reproduced as under:
“The Commissioner of Income-tax (Appeals)-30, Delhi (hereinafter referred to as the CIT(A)) erred in upholding the action of the Joint Commissioner of Income-tax, Range-8, Delhi (hereinafter referred to as the Jt CIT) in confirming the levy of penalty of Rs 1,60,16,945 under section 271DA of the Act on account of alleged receipt of monies from customers for banquet booking of G.P. Hotel & Resorts in violation of the provisions of section 269ST of the Act.
The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the levy of impugned penalty inasmuch as the CIT(A) has not appreciated the facts of the case in its entirety, and hence, the impugned levy needs to be deleted.
The appellants further, contend that on the facts and in the circumstances of the case and in law, the principal order framed under section 153C being the source of initiation of the impugned penalty is bad in law and hence, the impugned penalty has no legs to stand on.
The appellants crave leave to add to, alter or amend the aforestated ground of appeal
Ground of appeal filed by the assessee (ITA No.-5285/Del/2025) are reproduced as under:
“The Commissioner of Income-tax (Appcals)-30, Delhi (hereinafter referred to as the CIT(A)) erred in upholding the action of the Assistant Commissioner of Income-tax, Central Circle 31. Delhi (hereinafter referred to as the Assessing Officer) in making an addition of Rs 4,00,000 under section 68 of the Act for bogus loan obtained during the year under reference.
The appellants contends that on the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the Assessing Officer in making the impugned addition of Rs 4,00,000 under section 68 of the Act for bogus loan obtained during the year under reference inasmuch as the CIT(A) has not appreciated the facts of the case in entirety.
The appeliants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) erred in not accepting the averment of the appellants that the source of payment of cash Rs 4,00,000 to the lenders in lieu of RTGS/ cheque received from them is out of the business receipts of the appellants carrying on the business as owners of G.P. Hotel & Resorts.
The appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought to have accepted that the source of payment of cash Rs 4,00,000 to lenders in lieu of RTGS/ cheque received from them is out of the business receipts of G.P. Hotel & Resorts, and hence, the impugned addition needs to be deleted.
The assessee has also filed additional grounds vide order application dated 01.05.2026.
“ 1(i) That on the facts and circumstances of the case, the CIT(A) was not justified in upholding the validity of notice u/s 153C even though same was issued without jurisdiction and in direct violation of amended provisions of section 147 and 148 of the Act.
(ii)That the third party search material having been handed over the assessing officer after 01/04/2021, the assumption of jurisdiction u/s 153C is contrary to section 153C(3) of the Act and thus void-ab-initio.
2.That even otherwise, the CIT(A) was not justified in upholding the validity of notice u/s 153C even though the assessing officer has recorded common, mechanical and vague satisfaction note which is illegal and renders the notice u/s 153C null and void.
For A.Y. 2019-20, ITA No.- 5283/Del/2025, pertains to the assessment framed u/s 153C and ITA 3437/Del/2025 challenges the order of PCIT u/s 263 in respect of above assessment.
ITA No.- 5283/Del/2025,
Brief facts are that a search action u/s 132 was carried out on 06.01.2021 in Hans Group of cases. The AO having jurisdiction over Hans Group observed that certain incriminating documents / data, found and seized during the course of search, pertained to the assessee, and therefore a satisfaction note was recorded u/s 153C on 08.09.2022, in the case of the assessee for A.Ys. 2015-16 to 2020-21. The seized documents were handed over to the AO of the assessee and notice u/s 153C was issued on 31.12.2022 directing the assessee to file its return of income. In response to notice u/s 153C return was filed on 13.01.2023 declaring Nil income. Original return was filed by the assessee on 31.10.2019 declaring Nil income for A.Y. 2019-20. The assessee is a partnership firm engaged in the business of running a hotel named JP Hotels and Resorts.
Based on incriminating material found and seized from the premises of Sh. Sanjay Agarwal, the AO made the following additions after considering the assessee’s submissions in response to notices issued during the course of assessment proceedings:
Addition u/s 69A on account of unaccounted cash paid in lieu of RTGS / loan recd. [on substantive basis in assessee’s hands and an protective basis in the hands of Shri Sanjay Agarwal] - 1,76,00,000/-
Addition u/s 68 on account of undisclosed cash receipts from customers against bookings of parties / functions at the Banquet / Hotel - Rs. 1,60,16,945/-
Assessment was completed u/s 153C vide order dated 25.03.2024, at an assessed income of Rs. 3,36,16,945/-.
Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), which was dismissed vide order dated 25.03.2024. Further aggrieved, the assessee is in appeal before the Tribunal.
Besides challenging the additions on merits, the assessee has raised two additional legal grounds vide letter dated 01.05.2026. These grounds being purely legal are being admitted in view of settled legal position in this regard and are taken up first for adjudication.
The assessee has challenged the validity of notice u/s 153C dated 31.12.2022 and the consequent assessment. It is submitted that the satisfaction u/s 153C r.w.s. 153A was recorded on 25.11.2022 by the DCIT, Central Circle 31, New Delhi , who is the AO for the assessee as well as the searched entity, Shri Sanjay Agarwal. This was based on the satisfaction recorded on 08.09.2022 by him in the capacity of AO of the searched person after considering incriminating seized assets / documents belonging to the assessee found in possession (of the search person).
Before us, Ld. AR has contended that the proceedings initiated u/s 153C after 01.04.2021 were invalid in term of clear provisions of section 153C(3) of the Act. It has been explained that in the present case, the jurisdiction of the assessee was transferred from PCIT-20, Delhi to the Central Circle, vide order u/s 127 dated 23.11.2022 of the PCIT-20, Delhi. Thereafter, the DCIT (Central Circle -31), became the AO of both the assessee and the searched person and he recorded the satisfaction to initiate proceedings u/s 153C r.w.s. 153A in the case of the assessee on 25.11.2022.
Accordingly, a notice u/s 153C was issued on 31.12.2022 to the assessee to file its return. Ld. AR has drawn our attention to the relevant provisions of section 153C. As per the proviso to section 153C(1), the date of search in the case of such ‘other person’ is the date on which seized incriminating material is handed over to its AO. Here, the jurisdiction of the assessee was transferred to DCIT, Central Circle-31, on 23.11.2022, therefore the relevant date has to be taken on 23.11.2022 and therefore, the notice u/s 153C dated 25.11.2022 is invalid in the light of cut off date of 1.4.21 prescribed and is liable to be quashed.
Ld. AR has further placed reliance on a number of decisions, including that the Hon’ble Madras High Court in the case of Harigovind v. ACIT {2025] 180 taxmann.com 197, wherein it has been held that the date of handing over of seized material to the assessee’s JAO is the date of initiation of search in his case, as is apparent from the reading of section 153C(1) of the Act. Reliance has also been placed on several decisions of the co-ordinate benches taking the same view.
Ld. DR, on the other hand, strongly relied on the orders of the lower authorities and argued that the Ld. CIT(A) has rightly upheld that order of the AO.
We have heard the rival submissions and perused the material available on record. Admittedly, the search was conducted on 06.01.2021 in the case of Shri Sanjay Aggarwal and the incriminating material related to the assessee was found and seized from his premises. Thereafter, the jurisdiction over the case of the assessee was transferred from PCIT-20, Delhi to the Central Circle, vide order u/s 127 dated 23.11.2022. Thus, the AO of the searched person i.e. DCIT, Central Circle-31, Delhi also became the AO of the assessee on this date. Satisfaction note u/s 153C r.w.s. 153A was recorded by him in assessee’s case on 25.11.2022 based on the satisfaction recorded (as AO of the searched person) on 08.09.2022, copies of which have been placed before us. Thus, we are of the view that for the purposes of handing over of seized material, the relevant date cannot be before 23.11.2022, that is when the DCIT, Central Circle-31, Delhi, became the AO for the assessee. Hence, the date of search in the case of assessee being subsequent to 01.04.2021, no notice u/s 153C could have been issued in this case in view of clear provisions of section 153C(3) of the Act. Thus, we hold that the notice u/s 153C dated 25.11.2022 and the consequential assessment order are invalid and are hereby quashed.
As the legal ground has been allowed and the order u/s 153C is quashed, remaining grounds are rendered infructuous and need no adjudication.
ITA No.- 3437/Del/2025 pertains to A.Y. 2019-20 pertains to the proceedings initiated u/s 263 of the Act by the PCIT in respect of assessment made u/s 153C.
Ld. AR has argued that since the underlying order u/s 153C is void ab initio, therefore, order u/s 263 could not be sustained. Even on merits, Ld. AR has submitted that the PCIT has merely substituted his opinion in place of the plausible and legally permissible view taken by the AO. After due scrutiny, Ld. AO treated the impugned amount as unaccounted business receipts u/s 28 of the Act. However, PCIT has sought to exercise the revisionary jurisdiction u/s 263 on the sole ground that the addition should have been made u/s 69A instead of section 28 of the Act.
Ld. DR, on the other hand, has strongly relied on the order of the Ld. PCIT and argued that since the view taken by the AO was erroneous as well as prejudicial to the Revenue, the PCIT was justified in invoking the provisions of section 263 of the Act.
We have heard the rival submissions and perused the material available on record. We note that the order which is the subject matter of section 263 proceedings has been quashed hereinbefore hence the proceedings u/s 263 cannot be sustained in view of settled legal position that once the underlying order is invalid it cannot be subject to revision u/s 263 of the Act. We, accordingly, quash the order u/s 263 of the Act.
ITA No. 5285/Del/2025
In this appeal, for A.Y. 2020-21, the assessee has challenged the order of Ld. CIT(A) on merits and has also raised an addition legal ground on the validity of 153C proceedings.
We have heard the rival submissions and perused the material available on record. We note that on identical issue and legal ground raised in A.Y. 2019-20 and under similar facts and circumstances, we have quashed the order u/s 153C hereinbefore. Accordingly, the same decision will apply mutatis mutandis to this appeal also.
In the result, order u/s 153C is hereby quashed and appeal of the assessee is allowed.
ITA No.- 3438/Del/2025 (A.Y. 2021-22)
The assessee has challenged the order u/s 263 passed by Ld. PCIT on two grounds. Firstly, it has been claimed that the order u/s 143(3) of the Act was itself void ab initio and erroneous in the eyes of law. Since the assessment was framed on the basis of seized material unearthed during the course of search in the case of third party, the same should have been considered by way of reassessment in accordance with the scheme contemplated u/s 147 read with Explanation 2(iv) to section 148. Secondly, it has been asserted that the sole ground for exercise of revisionary jurisdiction by PCIT is that the impugned addition of Rs. 69,31,090/- should have been made u/s 69A instead of section 28 of the Act made by the assessee, which is not permissible.
We first take up the second issue regarding exercise of jurisdiction u/s 263 being unsustainable for the reasons that the PCIT had substituted his opinion in place of the plausible and legally permissible view taken by AO on the same transaction.
Before us, the Ld. AR has submitted that during the assessment proceedings, the AO had examined the material available on record relating to receipts arising out of the banquet and hotel business carried on by the assessee and had taken a considered view to treat the impugned amount as unaccounted business receipts and consequently assessed the same as business income u/s 28 of the Act. Subsequently, the Ld. PCIT initiated proceedings u/s 263 of the Act, on the ground that the impugned receipts should have been treated as unexplained money u/s 69A of the Act. Ld. AR has also made written submissions and placed reliance on the several judicial pronouncements in this regard, which are reproduced as under:
Written submissions
“4.5In the present case, the order passed by the Assessing Officer cannot be regarded as erroneous merely because the Ld. PCIT prefers another possible view. It is a settled proposition of law that where two views are possible and the Assessing Officer has adopted one of the legally sustainable views, the revisionary authority cannot invoke section 263 merely to substitute its own opinion.
4.6It may be appreciated that the receipts in question admittedly arose from the banquet and hotel business carried on by the appellant. The source and business nexus of the receipts were therefore identifiable and directly connected with the regular business activities of the appellant. Once the source of income stands explained as arising from business operations, the same falls within the ambit of business income assessable u/s 28 and cannot automatically be treated as unexplained money u/s 69A.
4.7It is settled law that revisionary jurisdiction u/s 263 cannot be initiated based on mere change of opinion or for substituting charging section with higher rate of tax. Further, such substitution of opinion falls outside the limited scope of section 263. In fact, the revisionary jurisdiction u/s 263 cannot be exercised to merely enhance tax incidence by re-characterising business receipts as deemed income without demonstrating any error in the factual findings recorded by the Assessing Officer. The legal position to this effect is supported from following judicial precedents:
(i)Prahlad Singh vs. PCIT (ITA No. 3563/Del/25) (ITAT Delhi)
(ii)Gandhi Ram v. PCIT [2022] 197 ITD 677 (Chandigarh- Trib.)
(iii)Nabeel Construction (P.) Ltd. v. PCIT [2025] 179 taxmann.com 417 (Mumbai-Trib.) In all these cases , it has been held that once the AO has taken a plausible view of the facts of the case, the PCIT cannot hold the same to be erroneous and, therefore, one of the twin conditions i.e. the order passed by the AO is erroneous as well as prejudicial to the interest of revenue, fails. Accordingly, the revision order passed by PCIT u/s 263 was quashed.
On the other hand, the Ld. DR strongly relied upon the order of the Ld. PCIT and argued that the Ld. PCIT had rightly invoked the revisionary jurisdiction under section 263 of the Act, as the addition ought to have been made under section 69A of the Act and taxed at the higher rate prescribed under section 115BBE.
We have heard the rival submissions and perused the material available on record. Admittedly, the assessee is engaged in the business of running a hotel and banquet. The AO examined the incriminating material and arrived at the conclusion that the undisclosed receipts were related to the business of the assessee. Accordingly, he made the addition of the impugned amount by treating the same as undisclosed business income under section 28 of the Act. Ld. PCIT was therefore, not justified in invoking the revisionary jurisdiction u/s 263 of the Act solely for the reason that, in his view, impugned addition should have been made u/s 69A r.w.s. 115BBE of the Act without pointing out the error in the order of the AO. Considering the judicial citations relied upon by the Ld. AR and respectfully following the same, we hold that the exercise of revisionary jurisdiction u/s 263 in view of the factual matrix of the case was not justified. The twin conditions of the order being erroneous and prejudicial to the revenue have to be satisfied for revision of the order u/s 263 of the Act. Since, the condition regarding the order being erroneous is not satisfied in this case, we hereby quash the order u/s 263 of the Act.
In the result, appeal of the assessee is allowed.
ITA No.- 5285/Del/2025 (A.Y. 2020-21)
The assessee challenges the legality of order u/s 153C for A.Y. 2020-21 by way of additional legal grounds raised subsequently. Since, the issue involved and facts and circumstances are identical as in A.Y. 2019-20, the order in ITA No. 5284/Del/2025 will apply mutatis mutandis to this case also. Hence, the order u/s 153C being invalid is hereby quashed.
Appeal of the assessee is allowed.
ITA No.- 5284/Del/2025 (for A.Y. 2019-20)
In this appeal, the assessee has challenged the levy of penalty of Rs. 1,60,16,945/- u/s 271DA of the Act on account of alleged receipts of money from customers for booking of banquet / hotel, in violation of provisions of section 269ST of the Act.
Brief facts of the case are that for the assessment year 2019-20, based on the incriminating material found during the course of search, assessment u/s 153C was framed making an addition of Rs. 1,60,16,945/- on account of undisclosed cash receipts from customers for booking of banquet / hotel. Penalty proceedings u/s 271DA were separately initiated for violation of provisions of section 269ST of the Act. Vide order dated 30.09.2024, the JCIT held assessee in default for receiving cash of Rs. 1,60,16,945/- in violation of provisions of section 269ST and levied penalty @ 100% on the total amount u/s 271DA of the Act.
Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). Vide order dated 30.06.2025, the Ld. CIT(A) has dismissed the appeal of the assessee as following observations:
“12.1The penalty under Section 271DA is independent of tax liability or assessment outcomes. Section 271DA targets the act of receiving cash in violation of Section 269ST, regardless of whether the income is taxable. The rectification order might have adjusted the tax liability but does not negate the fact of the violation-receipt of Rs. 1,60,16,945/-in cash. The Supreme Court in Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277 (SC) clarified that penalties address statutory breaches, not just tax evasion. This ground is dismissed.
13. Ground 8: Principle of Consistency - Penalty Dropped for AY 2021-22
Appellant's Contention is that the AO dropped penalty proceedings under Section 271DA for AY 2021-22, and the same approach should apply to AY 2019-20.”
Further aggrieved, the assessee has filed present appeal before the Tribunal. Challenging the levy of penalty on the ground that the order u/s 153C is invalid.
Before us, it has been contended by the Ld. AR that since the assessment order u/s 153C is null and void, the penalty u/s 271DA and order u/s 263 are devoid of valid foundation and as such the same ceases to survive in the absence of underlying assessment order. Accordingly, he has submitted that the penalty order u/s 271DA is liable to be quashed.
On the other hand, the Ld. DR has argued that the penalty under section 271DA is independent of the assessment order and, therefore, deserves to be considered independently, as held by the Ld. CIT(A) in the appellate order.
We have heard the rival submissions and perused the material available on record. We note that based on the incriminating material found during the course of search in the case of third party, it was found that undisclosed cash receipts against booking of banquet hotel have been taken by the assessee from its customers during the year, thereby violating the provisions of section 269ST of the Act. He has therefore levied the penalty u/s 271DA on the entire amount of Rs. 1,60,16,945/-received in cash during the year. We are of the view that penalty u/s 271DA is independent of the fate of assessment order and has to be considered in view of the condition prescribed u/s 269ST of the Act. We further note that the order under section 153C has been set aside hereinbefore on legal grounds and not on merits. Under these circumstances, fate of the order u/s 153C has no bearing on the penalty leviable u/s 271DA. Moreover, the penalty u/s 271DA is to be levied in case of violation of provisions of sec 269ST. Thus, it is independent of the taxability of the impugned amounts and the assessment made. In fact, even if no scrutiny assessment is undertaken, even then, for the violation of provisions of sec 269ST, penalty u/s 271DA can be independently initiated. In this regard, we consider it necessary to reproduce the relevant provisions of section 269ST and 271DA of the Act:
“Mode of undertaking transactions.
269ST. No person shall receive an amount of two lakh rupees or more—
(a)in aggregate from a person in a day; or
(b)in respect of a single transaction; or
(c)in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed:
Provided that the provisions of this section shall not apply to—
(i)any receipt by—
(a)Government;
(b)any banking company, post office savings bank or co-operative bank;
(ii)transactions of the nature referred to in section 269SS;
(iii)such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.
Explanation.—For the purposes of this section,—
(a)"banking company" shall have the same meaning as assigned to it in clause (i) of the Explanation to section 269SS;
(b)"co-operative bank" shall have the same meaning as assigned to it in clause (ii) of the Explanation to section 269SS.”
“Penalty for failure to comply with provisions of secƟon 269ST.
271DA. (1) If a person receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay, by way of penalty, a sum equal to the amount of such receipt:
Provided that no penalty shall be imposable if such person proves that there were good and sufficient reasons for the contravention.
(2)Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner:
13[Provided that any penalty under sub-section (1), on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer.]”
From a plain reading of section 269ST, it is clear that the penalty can only be levied if the assessee has received in one day cash exceeding Rs. 2 lakhs from a person, in one day, or in respect of a single transaction or in respect of transactions related to one event / occasion from a person. However, in the order of penalty, there is no such bifurcation of the total cash receipts to demonstrate whether any of these conditions is violated in respect of the impugned cash transactions. The JCIT, in our considered view was required to examine date wise details of the cash receipts and identify the transactions that violated the provisions of section 269ST as reproduced above. Since the basic facts have not been brought on record by the JCIT while leying the penalty, we deem it appropriate to restore the matter to the file of the JCIT for fresh consideration in view of the provisions of section 269ST r.w.s. 271DA of the Act. Needless to add, the assessee shall be given reasonable opportunity of being heard.
In the result, appeal of the assessee is allowed for statistical purposes.
In the result, all the four appeals of the assessee are allowed and ITA No.-5284/Del/2025 of the appeal is allowed for statistical purposes.