- Anshul Jain Vs PCIT (ITAT Agra Bench)
- A recalled appeal returns for complete adjudication
- PCIT finds two alleged errors
- Assessee challenges jurisdiction & natural justice
- An enquiry was made & a possible view was taken
- PCIT found no defect in the wife’s affidavit
- The supposedly missing penalty had actually been initiated
- Revision quashed; procedural grounds left open
Anshul Jain Vs PCIT (ITAT Agra Bench)
PCIT Cannot Revise a Plausible View or Invent a Missing Penalty-Section 263 Order Quashed in Demonetisation Deposit Case
Summary:
A recalled appeal returns for complete adjudication
The assessee, Anshul Jain, challenged the PCIT’s order dated 31.03.2022 u/s 263 for AY 2017-18, whereby the assessment completed u/s 143(3) on 26.11.2019 was cancelled with a direction to frame a fresh assessment de novo.
The appeal had earlier been disposed of by the Tribunal on 24.06.2025 by restoring the matter to the PCIT for fresh adjudication. However, on a miscellaneous application filed by the assessee, the Tribunal recalled that order in its entirety on 29.04.2026 u/s 254(2).
The recall was necessitated because the earlier order had not considered the assessee’s reliance on the jurisdictional Allahabad High Court decision in ML Chains v. PCIT, 461 ITR 457, or adjudicated the specific objections challenging the validity of the revision proceedings. The entire appeal was therefore reheard afresh.
PCIT finds two alleged errors
The PCIT invoked section 263 on two counts. First, the assessee had deposited old currency notes aggregating to approximately Rs.2.06 lakh during the demonetisation period. He explained that Rs.98,000 represented business receipts, while the balance Rs.1,08,000 belonged to his wife & children, constituting their personal savings accumulated over several years.
According to the PCIT, the assessee had changed his stand regarding the source of the deposits & the AO accepted the explanation without proper enquiry. The assessment order was therefore considered erroneous & prejudicial to Revenue.
Second, the AO had made an addition of Rs.97,327 towards commission income but allegedly failed to initiate penalty proceedings u/s 270A. This omission was also treated as an error warranting revision.
Assessee challenges jurisdiction & natural justice
The assessee contended that both the show-cause notice dated 28.03.2022 & the revision order were sent to an unknown email address—[[email protected]](mailto:[email protected])—whereas the registered email address on the e-filing portal was [[email protected]](mailto:[email protected]).
It was argued that the notice was not digitally signed, no effective opportunity of hearing was provided & the revision order was not uploaded on the portal within the prescribed limitation. The proceedings were therefore alleged to violate natural justice & be time-barred.
On merits, the assessee submitted that he was engaged in the wholesale purchase & sale of recharge coupons of Bharti Airtel Ltd. The AO had specifically enquired into the demonetisation deposits, examined the explanation & accepted the wife’s claim after taking her affidavit on record.
Regarding penalty, the assessee produced documentary evidence demonstrating that proceedings u/s 270A had actually been initiated. Consequently, the PCIT’s assumption that no penalty proceedings were initiated was factually incorrect.
An enquiry was made & a possible view was taken
The ITAT examined the original assessment order & found that the AO had specifically called for details of cash deposited during demonetisation. The assessee explained that Rs.98,000 comprised business receipts, while Rs.1,08,000 was deposited by his wife, Smt. Poonam Jain, in his bank account because she did not maintain an independent bank account.
The amount represented her savings & those of the children, kept at home over several years. An affidavit from the wife supporting this explanation was furnished & placed on the assessment record.
Thus, this was not a case where the AO had remained silent or completed the assessment without enquiry. He had raised a query, considered the response, examined the affidavit & consciously accepted the explanation.
The Tribunal held that, considering the assessee’s background & surrounding circumstances, the AO’s conclusion was at least a plausible view. Section 263 does not permit the PCIT to substitute his preferred opinion merely because another inference is possible.
PCIT found no defect in the wife’s affidavit
Crucially, the PCIT did not identify any discrepancy, deficiency or false statement in the wife’s affidavit. Nor did he bring any adverse material demonstrating that the family savings explanation was inherently impossible or contradicted by evidence.
Following ML Chains v. PCIT, the Tribunal observed that the revision order did not record any finding within the scope of Explanation 2 to section 263 showing why the assessment was prejudicial to Revenue. Applying Malabar Industrial Co. Ltd. v. CIT, 243 ITR 83 (SC), both statutory requirements—an erroneous order & prejudice to Revenue—had to coexist. Mere disagreement with the AO’s evaluated conclusion could not satisfy that twin test.
The supposedly missing penalty had actually been initiated
The second foundation of revision also collapsed on verification. The order available in the paper book expressly recorded that penalty proceedings u/s 270A had been initiated in respect of the addition of Rs.97,327.
Those proceedings were subsequently dropped only because the underlying assessment order had been cancelled by the PCIT’s own order u/s 263. Therefore, the PCIT’s conclusion that the AO failed to initiate penalty proceedings was demonstrably contrary to the record.
An assessment cannot be branded erroneous for failure to initiate something that was, in fact, initiated.
Revision quashed; procedural grounds left open
The ITAT consequently quashed the PCIT’s order dated 31.03.2022 u/s 263 & restored the original assessment. Grounds challenging the assessment as neither erroneous nor prejudicial were allowed. Since the appeal succeeded on merits, objections concerning service of notice, email address, digital signature & limitation became academic & were left open.
The ruling delivers a neat section 263 lesson: revision cannot be built on an enquiry that supposedly never occurred or a penalty that supposedly never began—when the assessment record proves both did.
Cases Discussed
- ML Chains v. PCIT, 461 ITR 457 (Allahabad)
- Malabar Industrial Co. Ltd. v. CIT, 243 ITR 83 (SC)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, AGRA BENCH
This appeal is filed by the assessee against the order dated 31.03.2022 passed by the ld. Pr. Commissioner of Income Tax/ NFAC(Delhi) (hereinafter referred to as the “PCIT”) u/s. 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2017-18, wherein ld. PCIT has cancelled the assessment order dated 26.11.2019 passed u/s 143(3) of the Act with the directions to the assessing officer( hereinafter to referred as AO) to pass a fresh order, de novo, after affording reasonable opportunity of being heard to the assessee.
2. This appeal was earlier disposed by the coordinate bench of this Tribunal by an order dated 24.06.2025 setting aside the above impugned order passed and restoring it to the file of the Ld. PCIT and directing him to pass a fresh order after providing the assessee a reasonable opportunity to present his case before him. However, this order was recalled by this Tribunal in its entirety by an order dated 29.04.2026 in MA No. 07/Agr/2026 in ITA No 129/Agr/2023 in pursuance to a miscellaneous application filed by assessee on 18.02.2026.
3. In the aforesaid recalled order, the Tribunal observed that the assessee had placed reliance on the decision of the Hon’ble jurisdictional Allahabad High Court in the case of ML Chains vs. PCIT reported in 461 ITR 457 (ALL) in support of his contentions. The Tribunal also observed that the assessee had also raised certain objections challenging the validity of the revision proceeding, which was not addressed by this Tribunal in its order dated 24.06.2025. In this regard, the relevant findings of the Tribunal in para no. 4 recalling its order are reproduced as under:
“4. We have given our thoughtful consideration to the arguments by both the sides. On perusal of the paper book filed by the assessee, we find that assessee had indeed relied on the case laws and had also raised certain objections challenging the validity of the revision proceedings. These aspects had not been addressed by this Tribunal in the order. Hence, in the interest of justice and fair play, we deem it fit to recall the Tribunal order dated 24-6-2025 in its entirety under section 254(2) of the Act. The main appeal is fixed for hearing on 18th May 2026. Since the date of hearing is informed in the open court in the presence of both the parties, no fresh notice would follow. Further paper books, if any, need to be filed with an advance copy to the Learned DR as per ITAT Rules. With these observations, the miscellaneous application of the assessee is allowed”
(emphasis supplied by us )
3.1 In view of the above order, the entire appeal was heard and is being adjudicated afresh by us.
4. Against the impugned order dated 31.03.2022 of the Ld. PCIT, the assessee has filed the following grounds of appeal.
“1. That, the notice under section 263 dated 28-03-2022, was not served upon the appellant, as it was neither served on person, nor on the registered e-mail as shown on his e-filing portal.
2. That, the order under section 263 dated 31-03-2022, was not served upon the appellant, as it was neither served on person, nor on the registered e-mail as shown on his e-filing portal.
3. That the appellant was denied opportunity of being heard or to file his submission, as he had no occasion to submit his written submissions.
4. That, the order under section 263 dated 31-03-2022, was not passed on 31-03-2023, as it was not uploaded on the e-filing portal of the appellant on 31-03-2023. Thus, the proceedings under section 263, were barred by limitation.
5. That, under facts of the case and in law, the Pr. Commissioner of Income Tax-1, Agra wrongly invoked the provisions of section 263 on the ground of no enquiry by AO in respect of cash deposits in Bank Account during demonetisation period out of cash available at Rs.1,08,000 with his wife
6. That, under facts and circumstances of the case and in law, the assessment order dated 26-11-2019 passed u/s 143(3) was not erroneous therefore, it was beyond the scope of section 263 of the Act.
7. That, under facts and circumstances of the case and in law, the order dated 31-03-2022 passed u/s 263, is without jurisdiction and as such, it deserves to be set-aside.
8. That the appellant craves your honour’s leave to alter, amend, add or delete any ground of appeal.”
5. At the time of hearing the Ld. Sr. AR submitted that the Ld. PCIT had set aside the assessment order dated 26.11.2019 on two counts namely that the AO had accepted the explanation of the assessee regarding the cash deposit of Rs. 2,08,000/- by the assessee during the demonetization period in the denomination of Rs. 1000/- and Rs 500/- old currency notes. The Ld. AR further submitted that the Ld. PCIT held the order to be ground that in respect of additions amounting to Rs. 97,327/- the AO had not initiated penalty proceedings as per the provisions of section 270A (1) of the Act.
5.1 In this regard, the Ld. AR submitted that the assessee during the year was engaged in the sale at purchase of recharge coupons of Bharti Airtel Limited on wholesale basis. The Ld. AR submitted that the impugned order passed by the Ld. PCIT was is bad in law as it lacked jurisdiction and was passed in violation of natural justice. The Ld. AR further referring to page No. 34-35 of the paper book submitted both the show cause notice dated 28.03.2022 and the order u/s 263 of the passed by the Ld. PCIT vide order dated 31.03.2022 were sent on an unknown address i.e. [[email protected]](mailto:[email protected]) whereas the registered e-mail ID on e-filing portal is [[email protected]](mailto:[email protected]). The Ld. AR further submitted that the impugned order u/s 263 of the Act was not uploaded on 31.03.2022 and therefore the impugned order was barred by limitation. The Ld. AR also submitted that the show cause notice dated 28.03.2022 was not digitally signed. The Ld. AR also submitted that in this case penalty notice was initiated and referred to page No. 33 of the paper book wherein the penalty proceeding u/s 270A of the Act was dropped. The Ld. AR also relied upon the decision of the Hon’ble Allahabad High Court in the case of ML Chains vs. PCIT (supra) which on similar facts held that the impugned order does not refer any finding as enumerated in Explanation 2 of section 263 of the Income-tax Act to suggest that the impugned assessment order passed was prejudicial to the interest of the Revenue in view of the judgment of the Apex Court in Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83 and therefore, on this count also, the impugned order cannot be sustained in the eyes of law.
5.2 In view of the above fact the Ld. AR submitted that the impugned order of the Ld. PCIT may be quashed and set aside.
6. On the other hand, the Ld. CIT DR supported the order of the Ld. PCIT and also the earlier order of the Tribunal, wherein the impugned order was set aside to the file of the Ld. PCIT for passing a fresh order.
7. We have heard both the parties and perused the material on record. in this case the Ld. PCIT invoked the provisions of section 263 of the Act on two issues namely that the assessee had deposited 2,06,000/- during the demonetisation period in the denomination of Rs. 1000/- and Rs. 500/- (Old Currency). The Ld. PCIT noted that the assessee during the assessment proceedings had submitted that he had deposited only Rs. 98,000/- in his bank account in the denomination of Rs. 1000/- and Rs. 500/-. The Ld. PCIT noted that the when the AO asked the assessee about the balance amount of cash deposit of Rs. 1,08,000/- in his bank account in the denomination of Rs. 1000/- and Rs. 500/-, the assessee submitted that the cash amounting to Rs. 1,08,000/- (Rs. 2,06,000 – Rs. 98,000) was deposited by his wife in his bank account. Taking note of the fact that the assessee was changing his stance regarding the source of deposit and the AO accepting the same without conducting proper enquiry during the course of assessment proceedings made the assessment order erroneous as well as prejudicial of the revenue. Secondly, the Ld. PCIT noted that the AO had made an addition of Rs. 97,327/- in the assessment order but the AO had not initiated penalty proceedings u/s 270A(i) of the Act, which made the assessment order erroneous as well as prejudicial of the revenue.
7.1. On perusal of the original assessment order dated 26.11.2019 the AO accepted the explanation of the assessee regarding the cash deposit of Rs. 1,08,000/- after accepting the explanation of the assessee on the ground that his wife had no bank account and the said amount represented her money as well as children’s personal savings for many years kept in their house. In support the assessee also furnished an affidavit of his wife which were placed on record. The relevant finding of the AO in this regard is reproduced as under:
“During the course of assessment proceeding assessee was asked to furnish details of cash deposit during the demonization period during the year under consideration. In this regard assessee stated that Rs.98,000/- has been deposited by me in Old Currency “No Legal Tender” as on 08.11.2016 were his business receipt and Rs. 1,08,000/- has been deposited by my wife Smt Poonam Jain in my account also because she has no any bank account and this amount was herself as well as children’s personal savings for many years kept in this house. In support assessee has furnished affidavit of his wife, placed on file.”
7.2 On perusal of the above facts we are of the considered view that considering the facts of this case and the background of the assessee the view taken by the AO is plausible view. Further, the AO accepted the above claim after making query and taking on record an affidavit filed by the wife of the assessee. In this regard, the Ld. PCIT has not brought on record any discrepancy or any deficiency in the said affidavit or any adverse findings regarding the explanation filed by the assessee which was accepted by the AO. Therefore, it cannot be said that the impugned order passed by the AO was erroneous as well as prejudicial of the revenue. In this regard, the findings of the Hon’ble Allahabad High Court in the case of ML Chains vs. PCIT (supra) in para no. 20 are reproduced as under:
“Further, the impugned order does not refer any finding as enumerated in Explanation II of section 263 of the Income-tax Act to suggest that the assessment order was prejudicial to the interest of the Revenue in view of the judgment of the Apex Court in Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83 and therefore, on this count also, the impugned order cannot be sustained in the eyes of law.”
7.3 Therefore, in absence of any adverse finding by the Ld. PCIT about the acceptance of the claim made by the AO as discussed above, the above findings of the Hon’ble Allahabad High Court will be applicable to the facts of the case of the present assessee and thus the order of the Ld. PCIT in setting aside the assessment order on this issue cannot be sustained.
7.4. Further, on perusal of page No. 33 of the paper book (which is reproduced as under) it is seen that the AO had dropped the proceeding u/s 270A of the Act.
“Order under section 270A of the Income Tax Act, 1961
In this case, the assessment was completed u/s 143(3) of the Income-tax Act on 26.11.2019 for A.Y. 2017-18 and addition of Rs. 97,327/- was made on account of commission received by the assessee. Further, penalty proceedings u/s 270A of the I. T. Act. 1961 was initiated.
Further, due to the audit objection raised by the IAP, Aligarh, the proposal for revision of assessment order dated 26.11.2019, prejudicial to revenue u/s 263 of the I.T. Act, 1961 was sent to the Chief Commissioner of Income Tax (OSD)/Principal Commissioner of Income Tax-1, Agra on 08.03.2022.
The Chief Commissioner of Income Tax (OSD)/Principal Commissioner of Income Tax-1, Agra vide order u/s 263 of the I.T. Act, 1961 dated 31.03.2022 having DIN ITBA/REV/S/91/2021-22/1042380538(1) cancelled the assessment order passed u/s 143(3) of the I.T. Act, 1961 dated 26.11.2019 with the direction to pass a fresh order, de-novo.
In view of the above facts and circumstances as the assessment order passed u/s 143(3) of the I.T. Act, 1961 dated 26.11.2019 has been cancelled by the Chief Commissioner of Income Tax (OSD)/Principal Commissioner of Income Tax-1, Agra vide order u/s 263 of the I.T. Act, 1961 dated 31.03.2022. The penalty proceeding which was initiated under section 270A is hereby dropped.
ASHOK KUMAR BHARTI
WARD 4(2)(4), MAINPURI
7.5 Therefore, in view of this fact the order of the Ld. PCIT in setting aside the assessment order on this issue is also not sustainable.
8. Accordingly, we quash and set aside the impugned order dated 31.03.2022 passed u/s 263 of the Act by the Ld. PCIT in this case.
9. Accordingly, ground number 6 & 7 appeal are allowed. In view of ground nos. 6 & 7 being allowed, the other grounds of appeal become academic and are left open in this case.
10. in the result the appeal of the assessee is allowed.
Order pronounced in the Open Court on- 31.08.2026
