Holding

The Court held that the assessment order was not erroneous or prejudicial and the Commissioner could not validly invoke Section 263, thereby quashing the revision notice.

Summary

The petitioner, Dilip Patel, filed a return for AY 2019‑20 and was later subjected to a search where a Memorandum of Understanding (MoU) for a land sale at Rs 39.32 crore was seized. The Assessing Officer, relying on a Departmental Valuation Officer’s report, assessed the land value at Rs 28.50 crore and added Rs 8.25 crore to the petitioner’s income, issuing an assessment under Section 153C. The petitioner appealed, and the Commissioner later issued a notice under Section 263 seeking revision, alleging the AO erred by using the valuation report, ignored the MoU, and failed to record penalty under Section 271D. The High Court held that the AO had made a plausible inquiry, that the assessment was not erroneous or prejudicial, and that the AO lacked jurisdiction to impose a penalty under Section 271D at the time of the assessment. Consequently, the court quashed the Section 263 notice and dismissed the revision proceedings, allowing the writ petition.

Issues considered

The Commissioner’s jurisdiction to invoke Section 263 of the Income‑Tax Act to revise the assessment order.
Whether the assessment order under Section 153C was erroneous or prejudicial to the revenue.
Whether the Assessing Officer should have recorded and imposed penalty under Section 271D for alleged violation of Section 269SS.
Whether reliance on the Departmental Valuation Officer’s report, ignoring the MoU, constituted a material error.

Legislation cited

Income Tax Act, 1961s. 143(3), s. 153C, s. 263, s. 269SS, s. 271D

Subjects

Income TaxSection 263 revisionassessment ordervaluation reportpenalty under Section 271DSection 269SSsearch and seizurejurisdictionHigh Court of Gujarat

Judgment

C/SCA/4314/2026 CAV JUDGMENT DATED: 01/05/2026

Reserved On : 27/04/2026
Pronounced On : 01/05/2026

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 4314 of 2026
With
R/SPECIAL CIVIL APPLICATION NO. 4316 of 2026

FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.S. SUPEHIA

and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
==========================================================

Approved for Reporting Yes No
✔
==============================================================
DILIP PATEL
Versus
THE PRINCIPAL COMMISSIONER OF INCOME TAX
(CENTRAL),AHMEDABAD
===============================================================
Appearance:
MR B S SOPARKAR(6851) for the Petitioner(s) No. 1
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1
===============================================================
CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI

COMMON CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)

1. The petitioner, by way of present petitions under Article
226 of the Constitution of India, challenges the notices dated
28.02.2026 issued by the respondent under Section 263 of the
Income Tax Act, 1961 (herein after referred to as 'the Act')
wherein the respondent has sought to revise completed
assessment under Section 143(3) of the Act for the
Assessment Year (AY) 2019-20.

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2. BRIEF FACTS:

2.1 Since facts and issue are common, Special Civil
Application no.4314 is taken up as lead matter. The Petitioner
filed return of income for AY 2019-20 on 03.10.2019 reporting
total income at Rs.2,36,22,720/-.

2.2 A search and seizure action under Section 132 of the Act
was carried out on 15.10.2019 in the case of "Land Broker &
Financier Group" and one of the searched party was Mr.
Dhaval Teli. From the mobile phone of Shri Teli, images of one
Memorandum of Understanding (for short ‘MoU’) was found
and seized. The said MoU was between the Dilip Atmaram
Patel, Ashok Atmaram Patel (proposed Sellers) and Dhiren R
Bharwad (proposed purchaser) for sale of land at Survey
No.329 for Rs.39.32 crores. On being asked, Mr.Teli explained
that although he was the broker for the said transaction but it
eventually did not go through due to Title Disputes. The
Officer thereafter investigated the data in public domain and
gathered information that the said land at Survey No.329 is
eventually sold to the Sandhya Maulik Patel and Maulik
Jayantibhai Patel for Rs.12 crores on 12.04.2018. Satisfaction
note, noting the said facts, was recorded to initiate
proceedings under Section 153C of the Act.

2.3 The Assessing Officer, thereafter, issued notice under
Section 153C of the Act to the petitioner, on 13.10.2021, to
carry out assessment. In the said Assessment Proceedings, the
Assessing Officer referred the matter to Departmental
Valuation Officer (for short ‘DVO’) to determine the market

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Price of the land sold. As per the letter of DVO dated
08.05.2023, the value of the land was determined at Rs.28.50
crores. Therefore, the Assessing officer held that the sale
consideration for the sale of land was Rs.28.50 crores and not
Rs.12 crores as per the registered sale deed. The Assessing
Officer passed assessment order under Section 153C dated
19.06.2023. The petitioner has filed appeal against the
assessment order, and the said appeal is pending. The
respondent has, thereafter, issued the impugned notice under
Section 263 of the Act, on 28.02.2026. The petitioner, vide
letter dated 05.03.2026, sought for adjournment. One more
notice under Section 263 of the Act, dated 10.03.2026, is
issued by the respondent.

3. SUBMISSIONS ON BEHALF OF THE ASSESSEE :

3.1 Mr. B.S.Soparkar, learned advocate appearing for the
petitioner submitted that the impugned notice is also ex facie
without jurisdiction in as much as the very assessment under
Section 153C of the Act was undertaken due to satisfaction
being recorded based upon purported incriminating material
found in the search. Once the Assessing Officer has
undertaken the complete exercise of assessment of income
taking into consideration the entire material available before
him then it is not open for the respondent to peruse the very
same material to revise the assessment under Section 263 of
the Act. It is therefore submitted that the Assessing Officer
has made thorough inquiry into the facts of the case and took
a plausible decision to such facts. It is therefore submitted
that there is no error as such in the order that can be

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prejudicial to the interest of the revenue and hence, the notice
under Section 263 of the Act is bad and illegal at very
threshold. It is further submitted that the respondent has also
not brought any new facts that were not available before the
Assessing Officer. There is not even a whisper on failure on
the part of the Assessing Officer to carry out sufficient inquiry
in the matter. The impugned notice on the face of it notes that
the respondent has examined the available case records and
details. It is submitted that the respondent has sought to
substitute his opinion in law against the opinion of the
Assessing Officer without there being any error in the opinion
of the Assessing Officer. It is submitted that such review of
order of the Assessing Officer is not permissible. The learned
advocate for the petitioner has placed reliance on the
following decisions:

a. Aryan arcade Ltd. vs.Commissioner of Income-tax I,
[2017] 84 taxmann.com 293 (Gujarat)

b. JMC Projects (India) Limited vs. Principal
Commissioner of Income-tax (Central), [2016] 67
taxmann.com 258 (Gujarat)

c. Abhijit Bhandari vs. Principal Commissioner of
Income-tax-5, Chennai, [2017] 396 ITR 499
(Madras)

3.2 It is further submitted by learned advocate Mr. Soparkar
that the respondent has issued the impugned notice on the
ground that the Assessing Officer completed the assessment
under Section 143(3) of the Act alleging three errors as
below:

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a. The Action of the Assessing Officer in completing the
Assessment on the basis of the Valuation Report by DVO,
ignoring the incriminating material found during search
was not correct.

b. In the case of the purchaser, the assessing officer
issued notices under Section 153C of the Act based upon
the amount mentioned in the MoU i.e. Rs.39.32 crores.
Thus, two divergent views have been taken by the then
assessing officer of the same transaction pertaining to
the same property between the buyers and the sellers.

c. The Assessing Officer did not record the satisfaction in
respect of the penalty proceedings under Section 271D
of the Act.

3.3 It is further submitted by learned advocate Mr. Soparkar
that the respondent has erred in assuming jurisdiction in as
much as the order of the Assessing Officer is not erroneous in
so far as it is prejudicial to the interest of revenue.

a) In relation to first issue, it is submitted that as a
matter of fact there is no incriminating material found at
the time of search that would indicate that the ultimate
transaction that took place between the petitioner and
the buyer was at any price different than the registered
sale deed. It is submitted that all the incriminating
material shows is the negotiation between the petitioner
and the proposed buyer with who the transaction was
not succeed to be entered into. It is therefore submitted

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that the attempt of the respondent to take the amount
mentioned in the MoU i.e. Rs.39.32 crores is without any
basis.

b) In relation to second issue, it is submitted that the
reliance on the notice issued in case of buyer by the
respondent is completely baseless on two reasons.

i. First reason is that the satisfaction note in the
case of buyer as well as the petitioner (as
reproduced in the assessment order at Paragraph
Nos. 5 to 5.9), both show the satisfaction recorded
for the full amount of Rs.39.32 crores only. It was
only during the assessment, the Assessing Officer
has called for the report of the DVO to take the
amount of Rs. 28.50 crores. Therefore, it is
incorrect to hold that the Assessing Officer has
erred in not taking the amount of Rs.39.32 crores.

ii. Secondly, in case of the buyers, the assessment
was never undertaken. The buyers had challenged
the notices under Section 153C of the Act before
this Court and vide order dated 24.11.2025, this
Court was pleased to allow the petition and hold
that the very proceedings under Section 153C of
the Act were bad and illegal.

iii) Thirdly, the Assessing Officer has no jurisdiction
under the provisions of section 271D of the Act to
initiate proceedings.

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3.4 It is, therefore, submitted that there is no error in the
Assessment Order passed by the then Assessing Officer. It is
submitted that on issues that are now sought to be raised by
the respondent were correctly examined by the then
Assessing Officer and inference drawn while passing
assessment order under Section 143(3) of the Act cannot be
taken into revision under Section 263 of the Act. It is
therefore submitted that the impugned assessment order not
being erroneous, the assumption of jurisdiction by the
respondent is bad and illegal. It is therefore submitted that
there is no error in the Assessment Order passed by the then
Assessing Officer. It is submitted that on issues that are now
sought to be raised by the respondent were correctly
examined by the then Assessing Officer and inference drawn
while passing assessment order under Section 143(3) of the
Act cannot be taken into revision under Section 263 of the
Act. It is therefore submitted that the impugned assessment
order not being erroneous, the assumption of jurisdiction by
the respondent is bad and illegal.

4. SUBMISSIONS ON BEHALF OF REVENUE:

4.1 Learned Senior Standing Counsel Mr. Varun Patel, at the
outset, has submitted that since the draft order under Section
263 of the Act is already passed, the same may be allowed to
be finalised. It is submitted that the respondent Principal
Commissioner of Income-tax, on the analysis of the order
passed by the Assessing Officer, realised that his approach of
completing the assessment on the Valuation Report prepared
by DVO was inappropriate and hence, the notice under

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Section 263 of the Act was issued on 28.02.2026. It is
submitted that the Assessing Officer has ignored the
incriminating material found during the search, which
reflected the amount of Rs.39.32 crores mentioned in the
MoU and hence, the Assessing Officer could have proceeded
on preparing the Assessment Order on the basis of such
amount instead of directing the DVO to carry out the valuation
of the land in question. It is submitted that the DVO assessed
the value of the land at Rs.28.50 crores ignoring the
incriminating material mentioning about the value of the land
at Rs.39.32 crores. Thus, it is submitted that since the interest
of the revenue was jeopardised, the Assessment proceedings
were undertaken under revision by exercising power under
Section 263 of the Act.

4.2 It is submitted that the Assessing Officer has also erred
in not recording his satisfaction in respect of the penalty
proceedings under Section 271D of the Act, which are
attracted in the present case and since he failed to initiate any
proceedings relating to the violation of the provision of
Section 269SS of the Act, the revision proceedings under
Section 263 of the Act are initiated by the respondent. It is
submitted that, at this stage, the petitioner has an alternative
remedy of responding to the aforesaid notices and hence, the
writ petition may not be entertained.

ANALYSIS AND OPINION:

5. We have heard learned advocate Mr. B.S. Soparkar for
the petitioner and learned Senior Standing Counsel Mr. Varun

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Patel for the respondent at length. The facts which are
established from the record are that a search in case of “Land
Broker & Financier Group” was carried on 15.10.2019 at the
premises of Mr. Dhaval Arvin Teli. An MoU dated 01.03.2016
entered between the petitioner Assessee and one Shri
Ashokbhai Atmaram Patel and Shri Dhirenbhai Rambhai
Bharwad for sale of land situated at Makarba at the rate of
Rs.25,000/- per square yard for total consideration of
Rs.39,32,25,000/-, was seized. However, ultimately the land
was sold by the assessee to one Ms. Sandhya Maulik Patel and
Shri Maulik J. Patel, on 12.04.2018, at the documented price
of Rs.12 crores only.

5.1 The petitioner had filed return at Rs. 2.36 crores on
26.10.2019 and based on the search and MoU, he was issued
notice under Section 153C of the Act on 13.10.2021. The
Assessment Order was passed on 19.06.2023, assessing the
income at Rs.9.84 crores making addition of Rs.8.25 crores.
During the Assessment proceedings, the Assessing Officer
called for the fair market value of the property in question and
accordingly, the DVO prepared his return valuing the property
at Rs.28.50 crores. The petitioner has filed the appeal before
Commissioner of Income-tax (Appeal) on 13.07.2023, which is
pending.

5.2 A notice under Section 263 of the Act was issued by the
respondent seeking revision of the Assessment Order, which
has been challenged by the petitioner. He has filed the
objection on 27.03.2026 and thereafter, a Draft Assessment
Order has been passed on 28.03.2026 pursuant to the order

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passed by us, directing the petitioner to fully cooperate with
the same. The same has been tendered to this Court and was
taken on record by order dated 21.04.2026.

5.3 The issue which falls for deliberation before this Court is
as to whether, at this stage, this Court can set aside the notice
issued by the respondent initiating the revisional proceedings
on the order passed by the Assessing Officer.

5.4 The respondent, while exercising the power under
Section 263 of the Act, has sought revision of the order
passed by the Assessing Officer dated 19.06.2023 primarily on
two grounds:

i) that the Assessing Officer has erred in using the Valuation
Report by the DVO, assessing the value of the land at Rs.28.50
crores, ignoring the incriminating material found during the
search i.e. MoU mentioning the value of the land at Rs.39.32
crores; and

ii) that the Assessing Officer has erred in not recording his
satisfaction in respect of the proceedings under Section 271D
of the Act and he did not initiate such proceedings in the
Assessment Order since the Assessee has violated the
provisions of Section 269SS of the Act by accepting cash.
Thus, it is recorded in the show-cause notice dated
28.02.2026 that “penalty proceedings under Section 271D of
the Act should have been initiated by the Assessing Officer,
however, he failed to do so.”

5.5 With regard to the observations recorded by the

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Commissioner in the impugned notice regarding failure of the
Assessing Officer to initiate proceedings in the Assessment
Order in view of the violation of provision of Section 269SS of
the Act is concerned, we find that the Assessing Officer had no
jurisdiction to initiate the proceedings against the petitioner
in view of the provision of Section 271D of the Act, which
mentions about the imposition of penalty for failure to comply
with the provision of Section 269SS of the Act. The same
reads as under:

“Penalty for failure to comply with the provisions of Section
269SS:
271D. [(1)] If a person takes or accepts any loan or deposit [or
specified sum] in contravention of the provisions of Section 269SS,
he shall be liable to pay, by way of penalty, a sum equal to the
amount of the loan or deposit [or specified sum] so taken or
accepted.

(2) Any penalty imposable under sub-section (1) shall be imposed
by the Joint Commissioner.”

Provided that any penalty under sub-section(1) , on or after 1 st day
of April, 2025, shall be imposed by the Assessing Officer. ”

5.6 A perusal of the provision of Section 271D of the Act
reveals that the Assessing Officer is authorized or has the
jurisdiction to impose the penalty only on or after 1 st Day of
April, 2025 and hence, when the Assessment Order was
passed on 19.06.2023, the Assessing Officer could not have
passed any order or to even initiate proceedings against the
assessee for violation of provision of Section 269SS of the Act
and thereby imposing the penalty under Section 271D of the
Act. Thus, the respondent has manifestly erred in not
examining the provision of Section 269SS read with Section

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271D of the Act and, hence, the issuance of the notice for
alleged inaction of the Assessing Officer to initiate and impose
the penalty under Section 271D of the Act is erroneous and
illegal. Hence, the revision proceedings under Section 263 of
the Act become vulnerable.

5.7 So far as other aspect of which the respondent was
impressed in invoking the power under Section 263 of the Act,
is relating to the approach of the Assessing Officer for palcing
reliance on the Valuation Report by the DVO in assessing the
value of land at Rs.28.50 crores, thereby ignoring the value of
the land at Rs.39.32 crores as mentioned in the MoU, is
concerned, we find that the respondent has also committed
error in invoking his revisional powers. We may mention, at
this stage, that the MoU, which was recovered during the
search proceedings, mentions the name of a person being Shri
Dhirenbhai Rambhai Bharwad. It is true that the land deed
with Shri Dhirenbhai Rambhai Bharwad ultimately did not
fructify. Ultimately it was sold to one Ms. Sandhya Maulik
Patel after a period of 2 years. We may, at this stage,
incorporate the observations of the Assessing Officer, which
are as under:

“5.14 In the light of aforesaid discussions, considering the
circumstantial evidence available on record, sworn statement of
Shri Dhaval A Teli, judicial pronouncements discussed above and
bearing in mind the DVO's report, it is abundantly clear that the
assessee along with other co-owner has sold the underlying land
parcel bearing survey no. 329 situated at Makarba at least for a
consideration of Rs.28,50,00,000/-as determined by DVO as against
the documented price of Rs. 12,00,00,000/- and the differential
sum of Rs. 16,50,00,000/- being over and above the documented
price has been received by the sellers including the assessee as
'on-money' in cash which partakes the character of 'on-money'
which has not been offered for taxation. Since the share of the

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assessee in the underlying land parcel is 50%, therefore the
proportionate on-money received by the assessee in cash against
the sale of the underlying land parcel is computed at
Rs.8,25,00,000/- (50%of Rs. 16,50,00,000/-) which warrants
taxation in the hands of the assessee.”

6. We do not find that that the Assessing Officer has
perfunctorily referred the valuation of the land to DVO who
has considered the entire material on record, which include
circumstantial evidence, sworn statement of Shri Dhaval A.
Teli and the DVO’s report. The Assessing Officer was
conscious of the fact that the value of the land shown in the
MoU was Rs.39.32 crores whereas the sale deed dated
12.04.2018 with one Ms. Sandhya Patel and Maulik Patel
mentions about the valuation of the land as Rs. 12 crores. It is
not the case of the respondent that Assessing Officer has
blindly put faith on the statement of the petitioner made
before the Assessing Officer. On the contrary, by examining
the facts and on the comparison of value of land from MoU
and the sale-deed, the Assessing Officer called for the report
from the DVO who ultimately valued the land at Rs.28.50
crores and thereby, the Assessing Officer made an addition of
Rs.8.25 crores at the ends of the petitioner and one Shri
Ashok Patel.

7. We may now refer to the decision of this Court in case
of Aryan Arcade Ltd. (supra) wherein the Co-ordinate Bench
after examining the scope of provision of Section 263 of the
Act in context of the show-cause notice issued by the
Commissioner has held thus:

“10. The Division Bench of this Court in case of Rayon Silk Mills v.
Commissioner of Income-tax reported in (1996) 221 ITR 155 was

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examining the challenge of the assessee to an order by the
Commissioner in which in exercise of revisional powers, he had
directed the Income Tax officer to hold certain inquiry on an issue
which according to the Commissioner, the Income Tax officer had
not examined. The assessee argued that merely because the order
of assessment does not discuss the issue at length, would not mean
that no inquiry was made. The Court accepted the contention and
held that the Assessing Officer having made the inquiry but
without detail reference in order, the Commissioner was not
correct in directing fresh inquiry. It was however, clarified that the
Court did not mean to lay down the law that whenever an inquiry
into any aspect of the assessment has been made, that cannot be
the subject matter of proceedings under section 263 of the Act.
Even in such a case, if the Commissioner is of the opinion that the
Income Tax officer has passed an order which is erroneous and
prejudicial to the interest of the Revenue, he can certainly have
recourse to powers under section 263 of the Act.

11. In case of CIT v. Nirma Chemicals Works (P.) Ltd. reported in
(2009) 309 ITR 67 (Guj), the Division Bench had observed as
under:

“22. The contention on behalf of the revenue that the
assessment order does not reflect any application of mind as
to eligibility or otherwise u/s. 80I of the Act requires to be
noted to be rejected. An assessment order cannot
incorporate reasons for making/granting a claim of
deduction. If it does so, an assessment order would cease to
be an order and become an epic tome. The reasons are not
far to seek. Firstly, it would cast an almost impossible
burden on the Assessing Officer, considering the workload
that he carries and the period of limitation within which an
order is required to be made; and, Secondly, the order is an
appealable order. An appeal lies, would be filed, only against
disallowances which an assessee feels aggrieved with.”

12. Thus when the Assessing Officer had made proper inquiry and
taken a definite view, it would be open for the Commissioner to
exercise revisional powers only if it is found that the order is
erroneous and prejudicial to the interest of the Revenue. If the
view adopted by the Assessing Officer is a plausible view, the
Commissioner would not substitute his opinion with that of
Assessing Officer. In case of Malabar Industrial Co. Ltd. v.
Commissioner of Income Tax reported in (2000) 243 ITR 83, the
Supreme Court observed as under :

“A bare reading of this provision makes it clear that the
prerequisite to the exercise of jurisdiction by the
Commissioner suo motu under it, is that the order of the
Income-tax Officer is erroneous in so far as it is prejudicial to
the interests of the Revenue. The Commissioner has to be

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satisfied of twin conditions namely (i) the order of the
Assessing Officer sought to be revised is erroneous; and (ii)
it is prejudicial to the interests of the Revenue. If one of
them is absent – if the order of the Income Tax Officer is
erroneous but is not prejudicial to the Revenue or if it is not
erroneous but is prejudicial to the Revenue recourse cannot
be had to section 263(1) of the Act.

There can be no doubt that the provision cannot be invoked
to correct each and every type of mistake or error committed
by the Assessing Officer, it is only when an order is
erroneous that the section will be attracted. An incorrect
assumption of facts or an incorrect application of law will
satisfy the requirement of order being erroneous. In the
same category fall orders passed without applying the
principles of natural justice or without application of mind.

The phrase “prejudicial to the interests of the Revenue” is
not an expression of art and is not defined in the Act.
Understood in its ordinary meaning it is of wide import and
is not confined to loss of tax.”

8. Thus, it is settled precedent that though the
Commissioner can certainly invoke the powers under Section
263 of the Act, if he or she is of the opinion that the Assessing
Officer has passed an order which is erroneous and prejudicial
to the interest of the revenue, however such powers are to be
exercised sparingly in those case where the Assessing Officer
had perfunctorily made the inquiry bereft of any discussion
and in case though the inquiry is made, the view taken by the
Assessing Officer is erroneous, however, in case it is found
that the view adopted by the Assessing Officer is a plausible
view taken after considering the relevant material on record,
the Commissioner would not substitute his opinion with that
of the Assessing Officer. In the present case, it cannot be said
that the view expressed by the Assessing Officer by referring
the valuation of land to DVO and thereby considering the
valuation of land on the Valuation Report of the DVO, and

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making the additions is erroneous. We find that the Assessing
Officer has taken a plausible view looking to the facts which
were before him and hence, in such circumstances, the
Commissioner ought not have to invoke the power under
Section 263 of the Act. A similar view has been reiterated by
the Coordinate Bench of this Court in case of JMC Projects
(India) Ltd. (supra), which is as under:

“10. In the case of CIT v. Jawahar Bhattacharjee, reported in
(2012) 341 ITR 434, Full Bench of Gauhati High Court held that not
holding such inquiry as is normal and not applying the mind to
relevant material in making an assessment would be an erroneous
assessment.

11. In the case of ITO vs. DG Housing Projects Ltd., (2012) 343
ITR 329, Division Bench of Delhi High Court held that, a finding
that the order is erroneous is a condition or requirement which
must be satisfied for exercise of jurisdiction under section 263 of
the Act. The matter cannot be remanded for a fresh decision to the
the assessing officer to conduct further inquiries without a finding
that the order is erroneous.

12. As noted, Division Bench of this Court in case of Smt.Minalben
S. Parikh (supra) held and observed that, if income in question has
been taxed and legitimate revenue due in respect of that income
had been realized, though as a result of order having been made in
that respect, the Commissioner cannot exercise powers for revising
the order under section 263 of the Act merely on the basis that the
order under consideration is erroneous.

13. In view of such legal position, we are afraid, the Commissioner
could not have issued the impugned notice seeking to revise the
order of assessment on the premise that the assessing officer did
not apply the correct parameters and though taxed the same
income, by applying wrong methodology. We may recall, in the
impugned order the Commissioner expressed prima facie opinion
that the entire expenditure of Rs.105.36 crore was liable to be
disallowed and added to the total income of the assessee. The
assesssing officer, instead of making specific addition, rejected the
books of accounts by invoking section 145 (3) of the Act and
estimated the G.P. for different years.
14. As noted, when tax additions were made which resulted into
orders of assessment being framed levying tax on the same income,
the orders of assessment cannot be stated to be prejudicial to the
interests of the revenue. To the factual aspect, even the Revenue is
unable to raise any contest. The apprehension of the revenue

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appears to be that if the logic adopted by the assessing officer is
not accepted in appeal, the entire additions would be deleted.
Under the circumstances, if the correct methodology, as suggested
by the Commissioner in the impugned notice, is adopted, the
additions would stand the test of law. In other words, the
Commissioner desires that the order of assessment should be
better written and flaws, if any, be ironed out. In our opinion,
powers under section 263 of the Act are not meant for improving
an order of assessment. As long as the income is assessed and tax
as per the law levied, the order cannot be stated to be prejudicial
to the interests of the revenue and, therefore, not revisable.”

8. It is trite that the existence of an alternative remedy, as
is articulated time and again by the Court, is not an absolute
bar, as declared by the Supreme Court in numerous decisions.
It is settled legal precedent that the writ Court has
jurisdiction to entertain a petition, even involving disputed
questions of fact, notwithstanding the fact that they arise out
of any contractual obligation. Hence, since the show-cause
notice issued under the provisions of Section 263 of the Act by
the respondent is illegal and does not reconcile with the
statutory provisions, the writ petition assailing the same is
maintainable. The petitioner cannot be relegated to an
alternative remedy.

9. Thus, in view of the settled legal precedent, both the
impugned show-cause notices are required to be quashed and
set aside, and accordingly, the same are hereby quashed and
set aside. Thus, the writ petitions succeed.

(A. S. SUPEHIA, J)

(PRANAV TRIVEDI,J)
SAJ GEORGE

Original copy of this order has been signed by the Hon'ble Judges.
Digitally signed by: SAJ PULICKAL GEORGE(HC01069), PRIVATE SECRETARY, at High Court of Gujarat on 01/05/2026 13:40:28

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