Invalid Assumption of Jurisdiction and Notional ALV: ITAT Delhi Quashes Section 263 Order in Mukul Rohatgi Case
The boundaries of revisional jurisdiction and the taxation of notional Annual Letting Value (ALV) for properties used in a profession were recently scrutinized by the Delhi Bench of the Income Tax Appellate Tribunal (ITAT). In the landmark judicial pronouncement of Mukul Rohatgi Vs ACIT (ITA No. 3714/Del/2026), delivered on 28 August 2026, the Tribunal dismantled a revisional order passed under Section 263 of the Income Tax Act 1961.
The ITAT struck down the order on two distinct fronts: a fatal jurisdictional flaw involving an officer who had already been promoted out of the relevant post, and a substantive failure on merits regarding the assessment of notional ALV for properties utilized for professional purposes. This comprehensive summary delves into the factual matrix, the legal arguments, and the Tribunal's definitive findings.
Factual Matrix of the Assessment
The assessee, a highly distinguished Senior Advocate practicing before the Supreme Court of India and various High Courts, filed his return of income for the Assessment Year 2022-23 on 07.11.2022. The return declared a substantial total income of Rs 1,62,94,36,268/-.
The case was selected for scrutiny, triggering a rigorous assessment process. The Assessing Officer (AO) at the National Faceless Assessment Centre (NFAC) issued multiple notices under Section 142(1) on various dates, including 13.06.2023, 20.09.2023, 03.01.2024, 05.03.2024, and 22.03.2024. The assessee provided detailed responses, submitting extensive documentation regarding his immovable properties, their ownership status, and the treatment of their ALV.
The original assessment was finalized on 28.03.2024 under Section 143(3) read with Section 144B of the Income Tax Act 1961. During this process, the AO made a specific disallowance amounting to Rs. 1,76,30,842 under Section 14A read with Rule 8D, which was subsequently overturned by the CIT(A). The AO, after examining the property details, accepted the assessee's stance that no notional ALV was taxable for certain properties.
The Revisional Intervention Under Section 263
Following the completion of the assessment, the Principal Commissioner of Income Tax (PCIT) sought to invoke revisional powers. A show-cause notice under Section 263 was issued on 27.02.2026, alleging that the assessment order was erroneous and prejudicial to the interests of the Revenue. The core of the PCIT's objection was that the AO had failed to adequately examine and tax the notional ALV of multiple properties located in London, Goa, Mukteshwar, Dubai, Jor Bagh, Golf Links, Noida, and Sunder Nagar. The revisional order was subsequently passed on 27.03.2026.