TaxTMI 
TaxTMI 
2026 (4) TMI 486
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Valsad has erred in invoking provisions of Section 263 of the Act without satisfying the twin conditions of the order being both "Erroneous" and "Prejudicial to the interest of Revenue". The impugned order is bad in law, void ab initio, and liable to be quashed. 2. The Learned PCIT, Valsad has erred in assuming jurisdiction under section 263 even though assessment order was passed after making detailed inquiries and examination by AO. In the present case, AO issued a detailed questionnaire on the issue of cash deposit made by the appellant firm during the year under consideration and proper submission was made by assessee including providing books of accounts, stock records, cash book, bank statements, sales data and VAT returns during assessment proceedings. And the assessment order was passed after having examined the replies of the assessee with due application of mind so it is not a case of lack of enquiry and the assessment order cannot be treated as "erroneous". 3. On the facts and in the circumstances of the case as well as law on the subject, the learned PCIT, Valsad has erred in assuming that in the absence of detailed discussion, there was a lack of inq....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., citing the abnormality in cash sales and deposits during the demonetization period, estimated an additional profit at the rate of 10% on Rs.1,32,15,000/-, amounting to Rs.13,21,500/-, as income earned over and above the book profits. Accordingly, an addition of Rs.13,21,500/- was made to the total income of the assessee on an estimated basis. Whereas the learned PCIT, valsad is of the view that three types of outcome is possible in inquiry on cash deposits: Fully Explained, Partly Explained and Fully unexplained. And that any unexplained sales is required to be assessed under section 68 of the Act and taxed at higher rate under 115BBE of the Act, which resulted into loss of revenue. But the learned PCIT, valsad has overlooked the fact that if the AO adopts one of the possible legal views after inquiry, the order cannot be termed as "Erroneous". 9. The Learned PCIT, Valsad has erred in placing reliance on non-compliance of CBDT Instructions No. 03/2017 and 04/2017 relating to demonetization scrutiny cases. As these instructions and SOPs are discretionary and internal in nature and do not override the discretion and statutory authority of the AO u/s 143(3) of the Act, it i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd facts of the case, the revisionary order u/s 263 of the Act is bad in law and liable to be quashed. 15. The above grounds of appeal are without prejudice to and are independent of each other. 16. The Appellant craved leave to add, alter, delete, amend or rescind any of the above grounds of appeal as and when necessary with the permission of Honorable ITAT, Surat." Grounds of appeal in ITA No.852/SRT/2025 in case of Ranjitbhai Ambubhai Patel "1. On the facts and in the circumstances of the case as well as law on the subject, the learned PCIT, Valsad has erred in invoking provisions of Section 263 of the Act without satisfying the twin conditions of the order being both "Erroneous" and "Prejudicial to the interest of Revenue". The impugned order is bad in law, void ab initio, and liable to be quashed. 2. The Learned PCIT, Valsad has erred in assuming jurisdiction under section 263 even though assessment order was passed after making detailed inquiries and examination by AO. In the present case, AO issued a detailed questionnaire on the issue of cash deposit made by the appellant firm during the year under consideration and proper submission w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad has erred in invoking the provisions of section 263 of the Act by overlooking the fact that a mere difference of opinion between the AO and the Learned PCIT does not empower him to invoke section 263 of the Act. In the present case, the AO, citing the abnormality in cash sales and deposits during the demonetization period, out of total cash deposit of Rs. 1,05,50,000/- made during the demonetization period, cash deposit of Rs. 59,72,471/- was treated as sales in regular course of business and remaining amount of Rs. 45,77,529/- was treated as inflated sales not in line with regular course of business of the assessee on which average rate of GP @ 9.25% was proposed and added of Rs. 4,23,421/- (45,77,529 @ 9.25%) to the total income of the assessee. Whereas the learned PCIT, valsad is of the view that three types of outcome is possible in inquiry on cash deposits: Fully Explained, Partly Explained and Fully unexplained. And that any unexplained sales is required to be assessed under section 68 of the Act and taxed at higher rate under 115BBE of the Act, which resulted into loss of revenue. But the learned PCIT, valsad has overlooked the fact that if the AO adopts one of the possib....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... [243 ITR 83 (SC)] without appreciating that the facts and issues involved in the present case, pertaining to a jeweller, are neither identical nor comparable to those in the cited decision, which related to a different industry and a distinct set of facts. 14. In light of various judicial precedents and facts of the case, the revisionary order u/s 263 of the Act is bad in law and liable to be quashed. 15. The above grounds of appeal are without prejudice to and are independent of each other. 16. The Appellant craved leave to add, alter, delete, amend or rescind any of the above grounds of appeal as and when necessary with the permission of Honorable ITAT, Surat." Grounds of appeal in ITA No.853/SRT/2025 in case of Ranjanben Ajitendra Parikh "1. On the facts and in the circumstances of the case as well as law on the subject, the learned PCIT, Valsad has erred in invoking provisions of Section 263 of the Act without satisfying the twin conditions of the order being both "Erroneous" and "Prejudicial to the interest of Revenue". The impugned order is bad in law, void ab initio, and liable to be quashed. 2. The Learned PCIT, Valsad has er....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fically raised queries on these issues and the assessee had submitted audited financials, stock register, monthly stock statements, purchase details, and ledger accounts, which were on record and verified. 7. The learned PCIT exceeded the scope of section 263 by introducing vague and generalized grounds like "Several Instances" and subsequently narrowing down the revision to only certain issues, thereby making the earlier "specific 8 issues" in the show cause notice redundant and infructuous. 8. The learned PCIT has failed to appreciate that the income of 225,00,000/- had already been voluntarily disclosed under the Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY), and appropriate taxes and deposits had been made in full compliance with the scheme. And has erred in treating the cash deposit made during the demonetization period as an "eye-catching event" requiring revision, despite the fact that the source of such deposit had already been declared and immunized under a statutory compliance window provided by the Government. 9. On the facts and in the circumstances of the case as well as law on the subject, the Learned PCIT, Valsad has erred in invoking th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....placed, as the actions taken and queries raised were entirely in consonance with the framework laid down by the CBDT for handling cases relating to cash deposits post-demonetisation. Therefore, the impugned observations/findings are bad in law and liable to be quashed. 12. The Learned PCIT, Valsad has erred in substituting his own opinion with that of the AO which is not permissible under the provisions of section 263 of the Act. Revisionary procedures under section 263 is not a tool to re-do or re-examine the assessment merely because the PCIT has a different view or opinion. 13. The learned PCIT has failed to consider recent judicial pronouncements of the Hon'ble Income Tax Appellate Tribunal (ITAT), Surat (Jurisdictional) on identical or similar issues, which clearly support the stand taken by the assessee and upheld by the AO. The revisionary order passed under section 263 is therefore bad in law as it disregards the settled judicial position and the principle that if two views are possible and the AO adopts one of them, the same cannot be termed as erroneous merely because the PCIT prefers another view. 14. The learned PCIT has erred in placing r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made by the assessee remained unexplained which should have been brought to tax u/s. 68 of the Act by applying tax rate u/s. 115BBE of the Act. Accordingly, Pr.CIT invoked provision of Section 263 of the Act and issued show cause notice to the assessee on 19.03.2022. The assessee filed his objection dated 25.03.2022 and also filed Special Civil Application before the Hon'ble Gujarat High Court against the same show cause notice. The Hon'ble Gujarat High Court has given direction and disposed the petition/application of the assessee vide order dated 01.12.2017. In pursuance to the direction of the Hon'ble High Court, the Pr.CIT issued letter dated 24.06.2025 granting fresh opportunity of being heard to the assessee to submit objections, if any, against the show cause notice issued on 19.03.2022 for which the assessee filed objection 30.06.2025, which was an addition to the earlier objection. After taking cognizance of the same, the Pr.CIT held that in the present case, the AO failed to carry out relevant enquiry as per the Instruction issued by the CBDT and the single addition of estimated extra profit has been made is sufficient to establish the enquiry has not been made in the pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cannot be treated as "erroneous". The Ld. AR submitted that the PCIT has erred in assuming that in the absence of detailed discussion, there was a lack of inquiry. There is no legal requirement for AO to mention each and every detail of the case in the body of Assessment Order. Once the record establishes that due inquiry was made, the revisionary powers u/s 263 of the Act cannot be exercised. The Ld. AR further submitted that in response to the notice under section 263, the appellant had made detailed submissions on the issue that had been taken up in the notice under section 263 and for the reason that the Pr.CIT has failed to carry out his statutory obligation to deal with and decide such issue, the order under section 263 stands wholly vitiated and the same deserves to be quashed. Ld. AR submitted that the PCIT has erred in stating that there was no proper inquiry on the issue of cash deposits during demonetization, despite the fact that the AO had called for, and was provided with, full details including names, addresses, PAN (where applicable), and justification in accordance with Rule 114B of the Income Tax Rules. The PCIT failed to appreciate that the assessee had no legal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ducted in accordance with CBDT Instructions No. 03/2017 and 04/2017 and the Standard Operating Procedures (SOPs) for cash deposit verification, despite the fact that the information sought in the questionnaire issued during assessment proceedings was in line with the specific directions contained in the said Instructions and SOPs, and the assessee had duly furnished the required information in accordance with Para 2.1, 2.2, 4, and 5.6 of the Annexure to CBDT Instruction No. 03/2017. The AO's reliance on CBDT Instructions to contend procedural irregularity is misplaced, as the actions taken and queries raised were entirely in consonance with the framework laid down by the CBDT for handling cases relating to cash deposits post-demonetisation. Therefore, the impugned observations/findings are bad in law and liable to be quashed. Ld. AR submitted that the PCIT has erred in substituting his own opinion with that of the AO which is not permissible under the provisions of section 263 of the Act. Revisionary procedures under section 263 is not a tool to re-do or re-examine the assessment merely because the PCIT has a different view or opinion. The PCIT has failed to consider recent jud....