PCIT Vs Jayesh V. Sheth (Bombay High Court)
Bombay High Court addressed an appeal filed by the Principal Commissioner of Income Tax (PCIT) against Jayesh V. Sheth, challenging an Income Tax Appellate Tribunal (ITAT) order for the assessment years 2010-11, 2011-12, and 2012-13. A related appeal for AY 2012-13 (ITXA No. 2172 of 2018) had already been withdrawn due to a lower tax effect as per the CBDT circular dated September 17, 2024. The key issue in the present appeal (ITXA No. 1906 of 2018 for AY 2011-12) was whether the Commissioner of Income Tax (CIT) could direct the assessing officer to initiate a concealment penalty under Section 263 of the Income Tax Act when it had not been originally levied. The revenue’s counsel relied on an Allahabad High Court ruling (CIT Vs. Surendra Prasad Agrawal) to support the contention that such a direction was valid. However, the respondent’s counsel referred to a Gujarat High Court decision (PCIT Vs. Vinodbhai Parekh), which held that the CBDT circular on tax effect also applied to orders under Section 263.
The court, assuming the Allahabad High Court’s interpretation was correct, noted that the potential penalty on the surrendered income of ₹1.3 crore could range from ₹42.9 lakh to ₹1.28 crore, which was below the ₹2 crore threshold prescribed in the CBDT circular. Given this, the court determined that adjudication was unnecessary and declined to admit the appeal, keeping the substantial question of law open. Consequently, another appeal (ITXA No. 2713 of 2018 for AY 2010-11) was also disposed of. The judgment reaffirmed the applicability of CBDT circulars on tax effect in deciding whether appeals should proceed.
