ITAT Delhi Quashes Revision Against Sr. Advocate Mukul Rohatgi For CCIT's Unauthorised PCIT Notice

The Delhi Income Tax Appellate Tribunal (ITAT) on 28 August quashed the revisionary order passed against Senior Advocate Mukul Rohatgi for Assessment Year 2022-23, holding that the Section 263 notice issued by the officer after his promotion to CCIT was without jurisdiction.

A Bench comprising Vice President Mahavir Singh and Accountant Member Sanjay Awasthi held that an officer promoted as Chief Commissioner of Income Tax (CCIT) cannot exercise the powers of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act without an express authorisation under Section 120(2). It observed:

“In view of the above, factual matrix, the impugned notice was without jurisdiction. There is no doubt that section 263 of the Act empowers the CC to exercise the powers under this section. However, in that case the notice must be issued by the authority in the capacity of CCIT and not in the capacity of PCIT.”

Rohatgi had filed his return for Assessment Year 2022-23 declaring income of Rs. 162.94 crore. The case was subsequently selected for scrutiny. The Assessing Officer issued notices under Sections 142(1) and 143(2), sought details on the relevant issues and completed the assessment under Section 143(3) on 28 March 2024.

The officer who later initiated the revision proceedings was promoted as CCIT under CBDT Office Order No. 35 of 2026 dated 26 February 2026. The following day, on 27 February 2026, he issued a show-cause notice under Section 263, which empowers the PCIT or Commissioner to revise an assessment order that is considered erroneous and prejudicial to the interests of the Revenue. The notice bore the officer's designation and signature as PCIT-12.

Rohatgi subsequently obtained information from the Central Board of Direct Taxes (CBDT) under the Right to Information mechanism indicating that the officer had already joined his new posting as CCIT.

The Tribunal noted that Section 120(2) permits an income-tax authority to exercise the powers and perform the functions of another authority where the CBDT expressly directs it to do so. In the present case, however, no express CBDT order authorising the officer to continue exercising the powers of the PCIT after his promotion to CCIT was produced.

The Bench held that although Section 263 empowers the CCIT to exercise revisionary powers, the officer had issued the notice in his capacity as PCIT rather than as CCIT. His promotion to CCIT did not, by itself, permit him to continue exercising the PCIT's statutory powers.

It relied on the Delhi High Court's decision in CIT v. SPL's Siddhartha Ltd. and the Supreme Court's judgment in Anirudh Sinhji Karan Sinhji Jadeja v. State of Gujarat for the principle that where a statute prescribes a particular authority to exercise a power, that power must be exercised by the authority in the manner prescribed by law.

Further, the Tribunal added that the statutory jurisdiction or satisfaction of one authority cannot be substituted by that of another merely because the latter occupies a higher position in the administrative hierarchy. It concluded:

“In terms of above factual matrix and keeping in view the aforesaid legal position explained, the impugned notice is without jurisdiction and thus bad in law and also its consequent revisional order of the PCIT is not sustainable in the eyes of law, hence, the same is quashed on this legal issue.”

The Bench also considered the revision proceedings on merits. The PCIT had questioned the treatment of the annual letting value of several properties belonging to Rohatgi.

It found that the Assessing Officer had made specific inquiries into the properties, their use and their treatment for tax purposes. Rohatgi had furnished details and supporting material in response to those inquiries. Several of the properties had also been examined by the Tribunal in earlier years.

It noted that Rohatgi, a designated Senior Advocate primarily practising before the Supreme Court and various High Courts, used several of the properties for his professional work, including as offices and for conducting virtual hearings during the COVID-19 period.

Some properties had also been transferred to family members and were no longer owned by Rohatgi. The Tribunal found that the PCIT had not conducted any independent inquiry to establish that the Assessing Officer's view was erroneous.

It held that the Assessing Officer had made adequate inquiries and adopted a plausible view, and that the PCIT could not invoke Section 263 merely because he disagreed with that view.

Accordingly, the ITAT held that the revisionary proceedings were unsustainable on both jurisdictional and merits grounds, allowed Rohatgi's appeal and quashed the revisionary order.

Counsel for the Assessee: P.C. Yadav, Subhash Acharya, R.K. Vashishth, Mayank Sharma and Vaidik Rao, Advocates

Counsel for the Revenue: Sharvan Kumar, CIT-DR