Section 263 revision invalid if AO conducted due inquiries and adopted one reasonable view on cash deposits; PCIT cannot substitute opinion or invoke on mere difference preferring higher tax treatment.

ORDER 

PER SUCHITRA KAMBLE, JUDICIAL MEMBER:-

These three appeals filed by three different assessees against the separate orders all dated 22-07-2025 passed under Section 263 of Income Tax Act, 1961 (in short ‘the Act’) by the Principal Commissioner of Income Tax, Valsad (in short ‘the Pr.CIT’) for assessment year 2017-18.

2. The grounds of appeal raised by all three assessees are as under:

Grounds of appeal in ITA No.851/SRT/2025 in case of Dayaram Brijbhukhandas

“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 was made by assesse 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 assesse 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 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.

4. On the facts and in the circumstances of the case as well as law on the subject, in any event, 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 learned PCIT, valsad 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.

5. The learned PCIT, valsad 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 learned PCIT failed to appreciate that the assesse had no legal obligation to collect PAN or KYC for transactions below 2 lakhs as per Rule 114B, and therefore the non-availability of PAN for retail cash sales below the threshold cannot be construed as lack of enquiry or non-application of mind.

6. The learned PCIT, valsad has erred in stating that AO did not verify the opening stock and purchases, despite the fact that the AO had specifically raised queries on these issues and the assesse had submitted audited financials, stock register, monthly stock statements, purchase details, and ledger accounts, which were on record and verified.

7. The learned PCIT,