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2025 Supreme(Guj) 1588
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, D.N. RAY, JJ.
Dayaram Brijbhukhandas - Appellant
Versus
The Principal Commissioner of Income Tax, Valsad - Respondent
Special Civil Application Nos. 6332, 6334, 6335, 6377, 6376 of 2022
Decided On : 20-06-2025
Advocate Appeared:
For the Appellants : S.N. Soparkar, B.S. Soparkar, Tushar Hemani, Vaibhavi K. Parikh
For the Respondent: Nikunt Raval
The Principal Commissioner of Income Tax cannot exercise revisional powers under Section 263 of the Income Tax Act without demonstrating that the previous assessment was erroneous and prejudicial to the Revenue.
Headnote:(A) Income Tax Act, 1961 - Section 263 - Jurisdiction of Principal Commissioner to issue notice - Petitioners challenged notices issued on grounds of cash deposits post-demonetization; the court found no basis for revising already verified assessments - Specific instructions by CBDT were not followed, leading to the assessment being deemed erroneous. (Paras 1, 10, 37)
(B) Revisional powers - The Commissioner lacks jurisdiction to revise assessments where the Assessing Officer has conducted proper inquiries; merely being dissatisfied with methodology used does not suffice for revision. (Paras 10, 36, 39)
(C) Fundamental Rights - The issuance of notice under Section 263 was argued to violate Articles 14 and 19(1)(g) of the Constitution; the court ruled appropriate remedies available to address such grievances. (Paras 12, 41)
(D) Findings and conclusions - Petitions dismissed as not maintainable at this stage; petitioners given opportunity to present objections. (Paras 48, 49)
| Table of Content |
|---|
| 1. factual background related to income tax returns and scrutiny (Para 4 , 5 , 6 , 7 , 8 , 10) |
| 2. arguments against the validity of notice under section 263 (Para 12 , 13 , 14 , 16) |
| 3. legal precedents about exercise of revisional powers (Para 19 , 20 , 21 , 22) |
| 4. context of scrutiny under operation clean money (Para 24 , 25 , 26 , 27) |
| 5. alternative remedy and jurisdictional issues (Para 30 , 31) |
| 6. clarification of pcit's powers under section 263 (Para 36 , 37 , 38 , 39) |
| 7. final conclusion on petitions and dismissal (Para 48 , 49) |
JUDGMENT :
BHARGAV D. KARIA, J.
1. Heard learned Senior Advocate Mr. S.N. Soparkar with learned advocate Mr. B.S. Soparkar for the petitioner in Special Civil Application No.6332/2022 and Special Civil Application No.6334/2022 and Special Civil Application No.6335/2022, learned Senior Advocate Mr. Tushar Hemani with learned advocate Ms. Vaibhavi Parikh for the petitioner in Special Civil Application No.6376/2022 and Special Civil Application No.6377/2022 and learned Senior Standing Counsel Mr. Nikunt Raval for the respondent.
2. These petitions were heard together as common issue challenging the notice under section 263 of the INCOME TAX ACT , 1961 (For short “the Act”) on the issue of cash deposited in the bank accounts of the petitioners after demonetization relevant to Assessment Year 2017-2018 were raised.
3. For the sake of convenience Special Civil Application No. 6332/2022 is treated as the lead matter.
4. Facts of Special Civil Application No.6332/2022 are that the petitioner, a partnership firm, is engaged in the business of manufacturing and trading of gold and silver ornaments and gold bullion.
5. The petitioner filed the return of income declaring total income at Rs. 20,42,019/- on 30.10.2017 for Assessment Year 2017-2018.
6. Case of the petitioner was taken up for scrutiny under Compulsory Manual Selection on the issue of cash deposit during demonetization period. Notices under section 142(1) of the Act were issued to examine the various issues including the issue of nature and income treatment of cash deposited during the demonetization period which were replied by the petitioner from time to time providing all the information called for by the Assessing Officer.
7. The assessment order under section 143(3) of the Act was passed on 31.12.2019 rejecting the books of accounts of the petitioner by making addition of Rs.13,21,500/- and total income of the petitioner was assessed at Rs.33,63,520/-.
8. The respondent Principal Commissioner of Income Tax, Valsad (PCIT) thereafter issued the impugned notice dated 19.03.2022 under section 263 of the Act.
9. Being aggrieved, the petitioner has preferred this petition with a prayer to quash and set aside the impugned notice dated 19.03.2022.
10. So far as Special Civil Application No. 6334/2022 and Special Civil Application No.6335/2022 are concerned, notice under section 263 of the Act pertains to alleged abnormal deposit of cash during the demonetization period after the assessment orders are passed under section 143(3) of the Act conducting complete scrutiny. Similarly in facts of Special Civil Application No.6376/2022 and Special Civil Application No. 6377/2022 are concerned, notice under section 263 of the Act is issued, after proper inquiry made by the Assessing Officer who passed order under section 143(3) of the Act.
11. This Court while issuing the notice has granted interim stay qua implementation and operation of the impugned notice.
12. Learned Senior Advocate Mr. S.N. Soparkar for the petitioner submitted that the impugned notice under section 263 of the Act is without jurisdiction and is in gross violation of the fundamental rights guaranteed Articles 14 and 19(1)(g) of the Constitution of India.
13. It was submitted that the impugned notice was issued on the ground that the Assessing Officer completed the assessment under section 143(3) of the Act without carrying out proper verification on various issues namely:
1) difference in val
