The Principal Commissioner has revised my client's assessment under s.263 and directed the officer to tax his cash deposits under s.68, although he filed under s.44AD and keeps no books. Can that order stand?
The Delhi Bench quashed it. Once an assessee has surrendered himself to a particular statute he becomes entitled to all its attending benefits; an assessee under s.44AD computes income as a percentage of turnover and is not required to maintain books of account, so the Principal Commissioner's direction to make a s.68 addition was questionable and the revision order suffered from a lack of requisite jurisdiction. The Bench recorded that it has consistently held that invocation of s.263 is not permissible in cases where the assessee files his return under s.44AD.
Decided by the ITAT (Shri Yogesh Kumar U.S., Judicial Member and Shri Amitabh Shukla, Accountant Member (Income Tax Appellate Tribunal, Delhi Bench 'E', New Delhi)) on 2026-03-20, reported as ITA Nos. 938 and 939/DEL/2025, Assessment Year 2012-13. It bears on section 44AD, section 44AD(5), section 263, section 68, section 144, section 44AA of the Income Tax Act 1961, in Presumptive Taxation & Audit, Revision & Rectification and Cash Credits & Unexplained Money matters.
This goes to the heart of whether the department may go behind a s.44AD return, and it is the strongest recent statement of the taxpayer's side. The engine of the reasoning is the link between s.68 and books: s.68 operates on a sum found credited 'in the books of an assessee maintained for any previous year', and an assessee who computes under s.44AD is not obliged to maintain books, so on this line the section has nothing to operate on. That is the argument to run against a s.68 addition on a presumptive assessee's bank credits, and this library already carries the Chandigarh Bench's decision in Nand Lal Popli to similar effect. But the entry must be read with two cautions. The first is the breadth of the proposition as recorded at paragraph 10 — that s.263 is 'not permissible in cases where the assessee files Return of Income u/s 44AD' — which is put far wider than the reasoning supports; s.263 is a general revisional power over an erroneous and prejudicial order, and nothing in s.44AD ousts it. Read at its highest the order decides that where the officer did make enquiry and the assessee's income was properly computed under s.44AD, the Commissioner cannot substitute his own view. The second is that the contrary line exists: on 10 April 2024 the Rajkot Bench in Prakashbhai Ishwarbhai Changela upheld a s.263 revision where the officer had taxed only three per cent of cash deposits of over Rs 24 crore without enquiry. A practitioner relying on the present order should expect the department to cite that one. Note also that a s.68 addition is not the same as a s.69A addition, and s.69A does not depend on books at all.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee carried on the business of trading in cloth and filed his return of income under s.44AD for AY 2012-13. The Principal Commissioner of Income Tax, Faridabad, passed an order under s.263 dated 25 March 2022 setting aside the assessment, and a consequential assessment was made on 21 March 2023 under s.144 read with s.263, in which the Assessing Officer himself recorded at page 7 that the return had been filed under s.44AD. An appellate order followed from the CIT(A), NFAC, on 26 December 2024. Two appeals came before the Tribunal: ITA No. 939/Del/2025 against the s.263 order and ITA No. 938/Del/2025 against the consequential appellate order. The assessee's case was that s.263 could not be invoked where the return was filed under s.44AD, that there is no requirement to maintain books of account under s.44AD so that invocation of s.68 was void ab initio, and that s.44AD(5) as substituted by the Finance Act 2016 with effect from 1 April 2017 did not apply to the year in issue. The Departmental Representative relied on the Principal Commissioner's order.
ITA No. 939/Del/2025 was allowed and the order of the Principal Commissioner under s.263 dated 25 March 2022 quashed and set aside as suffering from a defect of lack of requisite jurisdiction; ITA No. 938/Del/2025 was consequently dismissed as infructuous. Once an assessee has surrendered himself to a particular statute he gets entitled to all the attending benefits; an assessee under s.44AD computes income on a percentage basis of turnover and is not required to maintain books of account, which makes the Principal Commissioner's directions under s.263 questionable, and the Revenue had not doubted that the assessee was filing under s.44AD (paragraphs 8, 10, 11 and 12).
The Bench identified the solitary issue as the correctness of the assumption of jurisdiction under s.263 in a case where the return was filed under s.44AD, and noted that the issue had been conveyed to the lower authorities and ignored by them, and that the fact of the s.44AD filing had been recorded by the Assessing Officer himself on page 7 of the consequential order. It held it to be trite law that once an assessee has surrendered himself to a particular statute he becomes entitled to all its attending benefits, and that an assessee under s.44AD is required to calculate income on a percentage basis of turnover and is not required to maintain books of account — from which it followed that the Principal Commissioner's directions became questionable. It then set out its own earlier orders in Rattan Singh, where a revisional authority had gone behind an assessment in which the officer had raised specific queries about bank deposits and the assessee had taken the shelter of s.44AD, and in Ashok Kumar, where a revision directing a s.68 addition on cash deposits of Rs 44,72,000 against a s.44AD return was quashed on the reasoning that there is no requirement of maintenance of books under s.44AD and that the amendment bringing curbs on cash deposits was not in force in the year concerned. Observing that the Tribunal had consistently so held, and in respectful compliance and for consistency, it quashed the revision order.
It is trite law that once an assessee has surrendered itself to a particular statute, it gets entitled to all the attending benefits.
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Handle my notice → Ask a CA on WhatsAppThe Delhi Bench quashed it. Once an assessee has surrendered himself to a particular statute he becomes entitled to all its attending benefits; an assessee under s.44AD computes income as a percentage of turnover and is not required to maintain books of account, so the Principal Commissioner's direction to make a s.68 addition was questionable and the revision order suffered from a lack of requisite jurisdiction. The Bench recorded that it has consistently held that invocation of s.263 is not permissible in cases where the assessee files his return under s.44AD. This was decided by the ITAT (Shri Yogesh Kumar U.S., Judicial Member and Shri Amitabh Shukla, Accountant Member (Income Tax Appellate Tribunal, Delhi Bench 'E', New Delhi)) and bears on section 44AD, section 44AD(5), section 263, section 68, section 144, section 44AA of the Income Tax Act 1961. It is reported as ITA Nos. 938 and 939/DEL/2025, Assessment Year 2012-13. This goes to the heart of whether the department may go behind a s.44AD return, and it is the strongest recent statement of the taxpayer's side. The engine of the reasoning is the link between s.68 and books: s.68 operates on a sum found credited 'in the books of an assessee maintained for any previous year', and an assessee who computes under s.44AD is not obliged to maintain books, so on this line the section has nothing to operate on. That is the argument to run against a s.68 addition on a presumptive assessee's bank credits, and this library already carries the Chandigarh Bench's decision in Nand Lal Popli to similar effect. But the entry must be read with two cautions. The first is the breadth of the proposition as recorded at paragraph 10 — that s.263 is 'not permissible in cases where the assessee files Return of Income u/s 44AD' — which is put far wider than the reasoning supports; s.263 is a general revisional power over an erroneous and prejudicial order, and nothing in s.44AD ousts it. Read at its highest the order decides that where the officer did make enquiry and the assessee's income was properly computed under s.44AD, the Commissioner cannot substitute his own view. The second is that the contrary line exists: on 10 April 2024 the Rajkot Bench in Prakashbhai Ishwarbhai Changela upheld a s.263 revision where the officer had taxed only three per cent of cash deposits of over Rs 24 crore without enquiry. A practitioner relying on the present order should expect the department to cite that one. Note also that a s.68 addition is not the same as a s.69A addition, and s.69A does not depend on books at all. If it applies to you, the first step is this: Where a s.263 notice or a s.68 addition is raised against a s.44AD assessee, put the statutory link in the reply: s.68 requires a sum credited in books maintained for the previous year, and a s.44AD assessee is not required to maintain books.
The assessee carried on the business of trading in cloth and filed his return of income under s.44AD for AY 2012-13. The Principal Commissioner of Income Tax, Faridabad, passed an order under s.263 dated 25 March 2022 setting aside the assessment, and a consequential assessment was made on 21 March 2023 under s.144 read with s.263, in which the Assessing Officer himself recorded at page 7 that the return had been filed under s.44AD. An appellate order followed from the CIT(A), NFAC, on 26 December 2024. Two appeals came before the Tribunal: ITA No. 939/Del/2025 against the s.263 order and ITA No. 938/Del/2025 against the consequential appellate order. The assessee's case was that s.263 could not be invoked where the return was filed under s.44AD, that there is no requirement to maintain books of account under s.44AD so that invocation of s.68 was void ab initio, and that s.44AD(5) as substituted by the Finance Act 2016 with effect from 1 April 2017 did not apply to the year in issue. The Departmental Representative relied on the Principal Commissioner's order. The matter was decided on 2026-03-20 by the ITAT (Shri Yogesh Kumar U.S., Judicial Member and Shri Amitabh Shukla, Accountant Member (Income Tax Appellate Tribunal, Delhi Bench 'E', New Delhi)). On those facts the ITAT held as follows. ITA No. 939/Del/2025 was allowed and the order of the Principal Commissioner under s.263 dated 25 March 2022 quashed and set aside as suffering from a defect of lack of requisite jurisdiction; ITA No. 938/Del/2025 was consequently dismissed as infructuous. Once an assessee has surrendered himself to a particular statute he gets entitled to all the attending benefits; an assessee under s.44AD computes income on a percentage basis of turnover and is not required to maintain books of account, which makes the Principal Commissioner's directions under s.263 questionable, and the Revenue had not doubted that the assessee was filing under s.44AD (paragraphs 8, 10, 11 and 12).
The Bench identified the solitary issue as the correctness of the assumption of jurisdiction under s.263 in a case where the return was filed under s.44AD, and noted that the issue had been conveyed to the lower authorities and ignored by them, and that the fact of the s.44AD filing had been recorded by the Assessing Officer himself on page 7 of the consequential order. It held it to be trite law that once an assessee has surrendered himself to a particular statute he becomes entitled to all its attending benefits, and that an assessee under s.44AD is required to calculate income on a percentage basis of turnover and is not required to maintain books of account — from which it followed that the Principal Commissioner's directions became questionable. It then set out its own earlier orders in Rattan Singh, where a revisional authority had gone behind an assessment in which the officer had raised specific queries about bank deposits and the assessee had taken the shelter of s.44AD, and in Ashok Kumar, where a revision directing a s.68 addition on cash deposits of Rs 44,72,000 against a s.44AD return was quashed on the reasoning that there is no requirement of maintenance of books under s.44AD and that the amendment bringing curbs on cash deposits was not in force in the year concerned. Observing that the Tribunal had consistently so held, and in respectful compliance and for consistency, it quashed the revision order. In the words reproduced by the source cited on this page: "It is trite law that once an assessee has surrendered itself to a particular statute, it gets entitled to all the attending benefits." The decision followed or applied Rattan Singh, ITA No. 1373/Del/2016 (ITAT Delhi, 22 December 2022) — followed; Ashok Kumar v. Pr. CIT, Faridabad, ITA No. 500/Del/2022 (ITAT Delhi, 19 November 2024) — followed.
It was decided by the ITAT on 2026-03-20 and is reported as ITA Nos. 938 and 939/DEL/2025, Assessment Year 2012-13. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 44AD, section 44AD(5), section 263, section 68, section 144, section 44AA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. ITA No. 939/Del/2025 was allowed and the order of the Principal Commissioner under s.263 dated 25 March 2022 quashed and set aside as suffering from a defect of lack of requisite jurisdiction; ITA No. 938/Del/2025 was consequently dismissed as infructuous. Once an assessee has surrendered himself to a particular statute he gets entitled to all the attending benefits; an assessee under s.44AD computes income on a percentage basis of turnover and is not required to maintain books of account, which makes the Principal Commissioner's directions under s.263 questionable, and the Revenue had not doubted that the assessee was filing under s.44AD (paragraphs 8, 10, 11 and 12). It arises in Presumptive Taxation & Audit, Revision & Rectification and Cash Credits & Unexplained Money matters, on section 44AD, section 44AD(5), section 263, section 68, section 144, section 44AA of the Income Tax Act 1961, and was decided by Shri Yogesh Kumar U.S., Judicial Member and Shri Amitabh Shukla, Accountant Member (Income Tax Appellate Tribunal, Delhi Bench 'E', New Delhi). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Establish that enquiry was in fact made — here the Bench relied on the enquiry being reflected in the assessment proceedings and on the officer having recorded the s.44AD filing on the face of his order — because the answer to a s.263 notice is that the officer did apply his mind. Do not plead the wide proposition that s.263 can never be invoked against a s.44AD return; plead the narrow one, that no error prejudicial to revenue arises where the income was computed under a section the assessee was entitled to use and the officer enquired. Expect the department to answer with the s.69A line rather than s.68, because s.69A applies to money not recorded in books and does not depend on books being maintained at all; prepare the source of the deposits regardless. Check the assessment year against the amendment history — the argument accepted here included that s.44AD(5) as substituted by the Finance Act 2016 with effect from 1 April 2017 did not apply to the year in question, which was AY 2012-13.
Validity check could not be completed. Validity check could not be completed. I did not check whether this order has been appealed, followed or doubted; it was pronounced on 20 March 2026. It is a Tribunal order and binds no other Bench. The proposition recorded at paragraph 10, that invocation of s.263 is not permissible in cases where the assessee files a return under s.44AD, is stated more widely than the reasoning supports and should not be advanced in that form. A contrary Tribunal line exists: the Rajkot Bench in Prakashbhai Ishwarbhai Changela v. PCIT (ITA Nos. 46 and 47/Rjt/2022, order dated 10 April 2024) upheld a s.263 revision where the Assessing Officer had taxed only three per cent of very large cash deposits without enquiry; I read only the header and disposal of that order and not its reasoning, so it is identified here for the reader to check and is not relied on. The Supreme Court decision of 4 April 2025 cited in argument at paragraph 6 was not retrieved. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order runs to twelve numbered paragraphs and ends with the disposal. A structural warning that matters a great deal here: paragraph 8 ends 'held as under:-' and is followed by paragraphs 8 and 9 of the Delhi Bench's order in Rattan Singh (ITA No. 1373/Del/2016, 22 December 2022), and paragraph 9 is followed by the whole of the Delhi Bench's order in Ashok Kumar (ITA No. 500/Del/2022, 19 November 2024), reproduced with its own paragraphs 1 to 9 inside it. None of those numbered passages is this Bench speaking. The Bench speaks for itself at the opening of paragraph 8 and at paragraphs 10, 11 and 12, and the quote used here is taken from the opening of paragraph 8. Paragraph 6 records that the assessee relied on a decision of the Supreme Court dated 4 April 2025 in Pr. CIT-1, Chandigarh v. M/s. V-CON Integrated Solutions Pvt. Ltd. in IA No. 79463/2025; I did not retrieve that decision and cannot say what it holds, and it is not referred to again in the Bench's own reasoning. Two appeals were disposed of together: ITA No. 939/Del/2025 against the s.263 order was allowed, and ITA No. 938/Del/2025 against the consequential appellate order was dismissed as infructuous; the header on the indiankanoon copy gives both numbers and the assessment year as 2012-13. Paragraph 6 also records counsel's submission that s.44AD(5) was substituted by the Finance Act 2016 with effect from 1 April 2017, which independently corroborates the commencement date used in the companion statutory entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
ITA No. 939/Del/2025 was allowed and the order of the Principal Commissioner under s.263 dated 25 March 2022 quashed and set aside as suffering from a defect of lack of requisite jurisdiction; ITA No. 938/Del/2025 was consequently dismissed as infructuous. Once an assessee has surrendered himself to a particular statute he gets entitled to all the attending benefits; an assessee under s.44AD computes income on a percentage basis of turnover and is not required to maintain books of account, which makes the Principal Commissioner's directions under s.263 questionable, and the Revenue had not doubted that the assessee was filing under s.44AD (paragraphs 8, 10, 11 and 12).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
A reassessment was done in between. Does the two-year clock for s.263 restart from it?
Can the Commissioner revise on a ground that was not in the show cause notice?
You have a document that says so. Does that settle it?
If the department doubts my shareholders, can it add the money to my income?