ITAT Ranchi Quashes Section 263 Revision: PCIT Cannot Direct Re-verification of Issues Already Examined by Assessing Officer

Case Background

Case Name: Kosi Consultants Private Limited Vs ACIT/DICT (ITAT Ranchi)
Assessment Year: 2021-22
Forum: Income Tax Appellate Tribunal, Ranchi Bench

Overview of the Dispute

The Income Tax Appellate Tribunal, Ranchi, delivered a significant ruling in favour of the assessee — Kosi Consultants Private Limited — by quashing a revision order passed by the Principal Commissioner of Income Tax (Central), Patna at Ranchi, under Section 263 of the Income-tax Act, 1961, pertaining to Assessment Year 2021-22.

The case revolved around a fundamental question of revisionary jurisdiction: Can the Principal CIT invoke Section 263 to direct re-examination of issues that the Assessing Officer had already examined during assessment proceedings? The Tribunal answered firmly in the negative.

Background and Facts of the Case

Search and Seizure Operation

The proceedings in this matter arose following a search and seizure operation conducted on the assessee's group on 28.07.2021. Subsequent to the search, the assessee filed its return of income for Assessment Year 2021-22, and the case was taken up for assessment.

Transaction Under Scrutiny

During the course of assessment, the Assessing Officer (AO) discovered that the assessee had disclosed the sale of five flats owned by it to its sister concern, at a total sale consideration of Rs. 2,69,40,000/-. After deducting the cost of purchase from this consideration, the assessee had declared long-term capital gains of Rs. 1,06,06,667/- in its return.

AO's Examination and Acceptance

The AO did not accept the declared figures without scrutiny. Rather, the AO undertook a detailed examination of the transaction, which included:

  • Reviewing the details concerning the purchase of the five flats
  • Examining the details pertaining to the sale of the five flats
  • Questioning the valuation of the flats sold to the sister concern
  • Referring the flats for independent valuation by the District Valuation Officer (DVO)
  • Considering the DVO's valuation report before arriving at a conclusion

Only after completing all of the above steps did the AO accept the long-term capital gains as disclosed by the assessee. The relevant findings and details were duly recorded on page 6 of the assessment order, making the entire inquiry trail visible and documented.

PCIT's Revision Under Section 263

Grounds Invoked by PCIT

Despite the thoroughness of the AO's assessment, the Principal Commissioner of Income Tax (Central) exercised revisionary jurisdiction under Section 263 of the Income-tax Act, 1961, and passed an order dated 31.03.2026, holding the assessment order to be erroneous and prejudicial to the interests of Revenue.

The PCIT took the following positions: