February 17, 2026 : In a significant ruling on the limits of revisional jurisdiction, the Delhi Bench of the Income Tax Appellate Tribunal has set aside a revision order passed against Senior Advocate Mukul Rohatgi, holding that the Principal Commissioner of Income Tax had no material to justify reopening his completed assessment for Assessment Year 2020–21.
The Bench, comprising Mahavir Singh (Vice President) and Manish Agarwal (Accountant Member), allowed the appeal in ITA No. 2427/Del/2025, titled Shri Mukul Rohatgi v. Principal Commissioner of Income Tax, and quashed the order passed under Section 263 of the Income Tax Act.
Background: Scrutiny Assessment Completed at ₹133.46 Crore
Rohatgi’s return for AY 2020–21 had been selected for scrutiny. The Assessing Officer completed the assessment determining total income at ₹133,46,92,080, after making certain disallowances, including under Sections 24(b) and 14A.
Subsequently, in March 2025, the Principal Commissioner issued a show cause notice proposing revision of the completed assessment on three broad grounds: Alleged incorrect tax treatment of capital gains from mutual fund investments, Alleged understatement of annual letting value of multiple properties, including properties in London and Failure to initiate penalty proceedings for alleged non deduction of tax at source
Invoking Section 263, the Principal Commissioner held the assessment order to be erroneous and prejudicial to the interests of the Revenue.
Mutual Fund Gains: AO Had Taken a Plausible View
Before the Tribunal, Rohatgi argued that full details of the mutual fund investments had been furnished during scrutiny and examined by the Assessing Officer. The Tribunal noted that the Assessing Officer had considered the nature of the funds and accepted them as equity oriented.
It held that once the Assessing Officer adopts one of the possible views after examining the record, the assessment cannot be revised merely because the Commissioner prefers a different view. The Bench emphasized that Section 263 does not permit substitution of opinion where the Assessing Officer has already applied his mind to the issue.
London Properties and Annual Letting Value
On the issue of annual letting value, the Tribunal recorded that: One London property had been sold in March 2019, and the capital gains were offered to tax in the relevant earlier assessment year and Another London property was used for professional purposes as an office
The Tribunal found that the Principal Commissioner relied on a general rental yield overview without demonstrating how the declared annual letting value was incorrect. There was no concrete material to show that the assessment order was erroneous. Accordingly, the Bench held that the twin conditions under Section 263, namely that the order must be both erroneous and prejudicial to the interests of the Revenue, were not satisfied.
No Direction for Penalty in Section 263 Proceedings
With respect to the direction to initiate penalty proceedings for alleged non deduction of TDS, the Tribunal held that such directions could not be issued in revisional proceedings under Section 263.
Strong Observations on Revisional Jurisdiction
The Tribunal made clear that revisional powers are not meant to conduct fresh or roving enquiries. It observed that there must be material on record enabling the Principal Commissioner to form a prima facie opinion that the assessment order is both erroneous and prejudicial to the interests of the Revenue. In the absence of such material, the invocation of Section 263 was held to be unsustainable. Allowing the appeal, the Bench quashed the revision order in its entirety.
Cause Title: Shri Mukul Rohatgi v. Principal Commissioner of Income Tax
Case No.: ITA No. 2427/Del/2025
Coram: Mahavir Singh (Vice President) and Manish Agarwal (Accountant Member)
