Revision under Section 263 quashed as premature with assessee's appeal pending before CIT(A)

ITAT Rajkot allowed the assessee's appeal and quashed the revision order passed under section 263. The case involved unexplained income from cash transactions where AO added 2.5% of cash transactions as unexplained income after reopening under section 148. PCIT revised the order claiming it was erroneous and prejudicial to revenue interest, arguing entire cash transactions should be added. ITAT held the revision was premature since assessee's appeal against AO's order was pending before CIT(A), and AO had examined all aspects after analyzing documents. The revision order was found unsustainable and quashed.

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Issues:
1. Reopening of assessment under Section 148 of the Income Tax Act.
2. Allegation of unexplained income due to cash transactions.
3. Jurisdiction of Principal Commissioner of Income Tax under Section 263.
4. Pending appeal before Commissioner of Appeal and its impact on Section 263 proceedings.
5. Interpretation of statutory bar under Section 263 during the pendency of appeal.
6. Consideration of judgments by the High Courts in similar cases.

Analysis:

The judgment pertains to an appeal filed by the assessee against the order passed by the Principal Commissioner of Income Tax-1, Rajkot under Section 263 of the Income Tax Act, 1961. The case involves the reopening of the assessment under Section 148 based on financial transactions, where the assessee's total income was initially declared at Rs. 2,89,450 and later revised to Rs. 3,74,870. The allegation of unexplained income of Rs. 1,70,27,660 due to cash transactions led to the addition of Rs. 4,25,691 by the Assessing Officer (AO). The Principal Commissioner of Income Tax (PCIT) initiated proceedings under Section 263, contending that the entire cash transaction amount should have been added to the total income, which was not examined by the AO, rendering the order erroneous and prejudicial to revenue.

During the appeal hearing, the assessee argued that a larger issue was pending before the Commissioner of Appeal, and therefore, the PCIT could not invoke jurisdiction under Section 263. The assessee relied on judgments by the Madras High Court and Allahabad High Court to support this argument. The Departmental Representative (DR) supported the orders passed by the authorities below.

The Appellate Tribunal noted that the AO had examined all aspects after analyzing documents submitted by the assessee. The Tribunal found the PCIT's order premature as the appeal before the Commissioner of Appeal was pending. The Tribunal referenced the judgments cited by the assessee, emphasizing the statutory bar under Section 263 during the pendency of an appeal. The Tribunal highlighted the importance of considering the available record at the time of examination by the Commissioner of Income Tax.

Ultimately, the Tribunal found the PCIT's proceedings under Section 263 unsustainable and quashed them, allowing the assessee's appeal. The decision was based on the statutory bar during the pendency of the appeal before the Commissioner of Appeal, as supported by the judgments cited during the proceedings.

In conclusion, the appeal filed by the assessee was allowed, and the Tribunal pronounced the order in open court on 31/08/2022.

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