ITAT Raipur Quashes Section 263 Revision: Reaffirms That Inadequate Inquiry Does Not Justify Roving Enquiries

Introduction & Background

The boundaries of revisionary jurisdiction under the Income-tax Act, 1961, have once again been clarified by the Income Tax Appellate Tribunal (ITAT). In a significant ruling, the ITAT Raipur Bench adjudicated on the limits of a Principal Commissioner of Income Tax (Pr. CIT) to invoke revisionary powers when an Assessing Officer (AO) has already conducted inquiries during the original assessment.

The legal dispute in Ganesh Prasad Khetan Vs. PCIT centered around the fundamental difference between a complete "lack of inquiry" and an "inadequate inquiry." The tribunal's decision underscores that a mere difference of opinion or a desire to conduct deeper investigations cannot serve as the foundation for invoking Section 263 of the Income-tax Act, 1961.

Important Note: The power of revision under Section 263 is not an unbridled authority to initiate fishing expeditions. It requires the satisfaction of twin conditions: the assessment order must be both erroneous and prejudicial to the interests of the Revenue.

The Factual Matrix of the Case

The assessee, M/s. Ganesh Prasad Khetan, submitted its income tax return for the Assessment Year (A.Y.) 2022-23 on 17.10.2022, declaring a total income of Rs.6,10,41,300/-.

The return was subsequently flagged for scrutiny under the Computer Assisted Scrutiny Selection (CASS) system. The parameters triggering the scrutiny included a substantial year-on-year increase in capital, significant interest expenditure, and large advances that exceeded the total funds of the proprietors or partners. Following the scrutiny proceedings, the AO finalized the assessment under Section 143(3) read with Section 144B of the Income-tax Act, 1961, on 21.03.2024, accepting the income exactly as returned by the assessee.

Invocation of Revisionary Powers

Nearly two years later, on 19.03.2026, the Pr. CIT, Raipur-1, assumed revisionary jurisdiction under Section 263, alleging that the original assessment order was erroneous and prejudicial to the Revenue's interests. The Pr. CIT pinpointed two primary areas of concern that allegedly resulted in an under-assessment totaling Rs.32,30,57,661/-.

Issue 1: Alleged Suppression of Business Receipts

The first contention raised by the Pr. CIT revolved around a mismatch between the assessee's books of account and the Form 26AS data.

• The 26AS statement indicated that the assessee had received business receipts amounting to Rs.1,03,42,28,914/- from two major deductors.
• However, the assessee’s financial books reflected business receipts of only Rs.1,00,18,40,156/-.
• This resulted in an apparent discrepancy of Rs.3,23,88,758/-.

The Pr. CIT noted that the assessee had claimed a TDS credit of Rs.2,06,84,591/-. Relying on the provisions of Section 199(1), the Pr. CIT argued that since the tax was deducted on the higher amount, the assessee was obligated to account for the entire Rs.1,03,42,28,914/- as income. Consequently, the difference was categorized as suppressed business receipts.