Assumption of Jurisdiction by PCIT Invalid u/s 263: ITAT Allows Appeal filed against Revision order [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, recently affirmed that the Principal Commissioner of Income-tax (PCIT) cannot assume jurisdiction under Section 263 of the IncomeTax Act, 1961 and accordingly allowed an appeal against the Revision order passed by the PCIT.

The facts of the case are that information is received from the department that the appellant-assessee, Jignasa Atulkumar Shah, is one of the beneficiaries of bogus accommodation entries operated and managed by entry operator Naresh Jain. The information also suggests that the assessee is one of the beneficiaries in manipulation of share of M/s. Oasis Tradelink Ltd. and the assessee claimed Long Term Capital Gain exemption under Section 10(38) of the Act.

The show cause notice (SCN) issued on 29.03.2022 was replied to on 12.04.2022 by filing the return of income. However, since the return of income was electronically not verified, the same was treated as invalid. The notices issued on 02.03.2023 resulted in the addition of sale of shares of Oasis Trade Link Ltd as penny stock and assessed to tax.

The assessee then filed an appeal before the CIT(A), which is pending. In the meantime, PCIT issued SCN dated 29.10.2024 and stated that when the assessee has not maintained books of account and source of unaccounted income has not been explained, the Assessing Officer should have disallowed assessee’s claim of exemption under Section 69.

The assessee gave a detailed reply to this SCNusing summary of sale of shares in the relevant assessment year. The PCIT considered this and held that the reassessment order is erroneous and directed the AO to pass a fresh assessment.

The counsel for the assessee-appellant submitted that the PCIT has erred in law and on facts in assuming jurisdiction under Section 263 when the issue is pending before the CIT(A). It was also submitted that the assumption of jurisdiction was on incorrect facts.

The tribunal observed the provision in Explanation 1(c) of Sub-section (1) of Section 263 and held that the PCIT is incorrect in invoking S.263 on the very same issue pending before the CIT(A). The bench relied on case laws and ordered for the Revision order to be quashed, allowing the appeal on 24.02.2026.

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