ITAT Upholds PCIT’s Section 263 Revision Despite Pending CIT(A) Appeal: Jurisdictional Bar Not Applicable

The assessee engaged in the fabric and garment trade, filed his return for AY 2015-16, declaring an income of Rs. 24.93 lakh. The case was reopened under Section 147 based on information from the Investigation Wing alleging bogus long-term capital gains (LTCG) from shares of IndusInd Bank amounting to Rs. 3.31 crore. The AO treated Rs. 1.57 crore as unexplained credit under Section 68, after allowing the purchase cost of Rs. 7.78 lakh, and added 2% (Rs. 3.30 lakh) as unexplained expenditure under Section 69C.

Thereafter, the PCIT revised the reassessment order under Section 263, holding that the AO erred in granting any cost benefit despite treating the transaction as bogus. The PCIT enhanced the income to Rs. 1.65 crore (entire sale consideration) as unexplained credit, observing the assessment was erroneous and prejudicial to revenue.

The assessee challenged the PCIT’s jurisdiction before the ITAT, arguing that since the issue of LTCG was already pending before the CIT(A), revision under Section 263 was invalid.

Core Issue: Whether the PCIT can exercise revisionary powers under Section 263 when the issue (bogus capital gains) is already pending adjudication before the CIT(A).

ITAT Held: The ITAT dismissed the appeal, holding that Section 263(1) Explanation 1(c) expressly empowers the PCIT to revise matters “not considered and decided” in appeal before the CIT(A). Since the CIT(A) had not yet adjudicated the issue of bogus LTCG, the PCIT’s assumption of jurisdiction under Section 263 was valid. The Tribunal relied on the Supreme Court’s rulings in CIT v. Shri Arbuda Mills Ltd. and Eimco KCP Ltd. v. CIT, reaffirming that revision is permissible on issues pending but undecided before the appellate authority.

The assessee’s reliance on Renuka Phillip and Corporate International Financial Services was rejected since those decisions did not consider the binding Supreme Court precedents. The Tribunal clarified that the validity of the reassessment under Section 147/144B was not within its scope in this proceeding, as it was already under appeal before the CIT(A).

Therefore, the ITAT held that the PCIT rightly assumed jurisdiction under Section 263, and the order was neither invalid nor beyond statutory authority.

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