Vandana Jain Vs PCIT (ITAT Delhi)
263 Invalid When Issue Already Pending Before CIT(A) – Statutory Bar under Explanation 1(c) Applies; PCIT’s Revision on Bogus Sales Quashed
The Assessee challenged three revision orders passed u/s 263 for AYs 2017-18 to 2019-20. The PCIT invoked revision on the ground that the AO should have taxed the alleged accommodation-entry transactions as unexplained cash credits u/s 68, instead of estimating 0.5% commission income. The Assessee argued that the very same transactions—sales/purchases routed through Sumit Jindal group—were already under appeal before the CIT(A) (Form 35 and grounds reproduced at pages 100–107 of the paper book), where the Assessee had contested the AO’s estimation of commission. Therefore, the PCIT could not assume revisionary jurisdiction in view of the statutory bar under Explanation 1(c) to section 263(1).
The Assessee demonstrated from assessment-stage documents (pages 39–79 of the PB, including replies dated 05.12.2022 and 16.12.2022) that the AO had examined the impugned transactions extensively—issuing notices u/s 142(1), questioning the bank statements, and recording statements of the Assessee and her husband (page 44 & 45). The AO, after considering the Assessee’s explanation that bogus purchase bills were taken to obtain loans and that she was not involved in Aditya Overseas’ business, consciously chose to estimate commission rather than treat the entire turnover as bogus.
The PCIT nonetheless issued a 263 show-cause notice dated 13.12.2024 (page 107) proposing to convert the same transactions into bogus sales taxable u/s 68, effectively substituting the AO’s opinion. The ITAT held that this was impermissible, as the issue of these transactions—quantum and nature of income—was already “subject matter of appeal” before CIT(A) on the date of the 263 notice.
Relying on the binding rulings of Madras High Court in Renuka Philip (409 ITR 567) and Allahabad High Court in Vam Resorts & Hotels (418 ITR 723), the Tribunal reiterated that when an issue is pending before CIT(A), PCIT is barred from revising that very issue under Explanation 1(c) to section 263(1). The ITAT also noted (pg. 7–9 of the order) that the PCIT’s attempt to re-characterise commission income into bogus sales was nothing but substituting the AO’s view, which is not permissible unless the assessment is both erroneous and prejudicial, which was not demonstrated.
The Tribunal held that all three 263 orders suffer from jurisdictional defect and therefore quashed them in full.
Result
Assessee’s appeals allowed; all three 263 revision orders quashed for AYs 2017-18 to 2019-20.
FULL TEXT OF THE ORDER OF ITAT DELHI
