Commissioner Can’t Invoke Revisionary Power Where AO Takes Plausible View Based on DVO Valuation: Gujarat High Court

The Gujarat High Court has held that the revisionary power under Section 263 of the Income Tax Act, 1961 cannot be invoked where AO takes a plausible view based on Valuation of Departmental Valuation Officer (DVO). The bench of Justice A.S. Supehia and Justice Pranav Trivedi has relied on its decision in case of JMC Projects (India) Ltd. in which it was held that the Commissioner desires that the order of assessment should be better written and flaws, if any, be ironed out. The 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.” The petitioner had filed his return of income for Assessment Year 2019–20 declaring income of approximately ₹2.36 crore. The case arose from a search conducted under Section 132 in the case of a “Land Broker & Financier Group,” where an unexecuted Memorandum of Understanding (MoU) indicating a proposed land transaction worth ₹39.32 crore was found. Subsequently, proceedings were initiated under Section 153C against the petitioner. During assessment, the Assessing Officer (AO) referred the matter to the Departmental Valuation Officer (DVO), who determined the fair market value of the land at ₹28.50 crore, as against the registered sale consideration of ₹12 crore. Based on this, the AO made additions treating the differential amount as unaccounted “on-money.” Despite the detailed assessment, the Principal Commissioner later issued notices under Section 263 seeking revision of the completed assessment on grounds that the AO ignored incriminating material (MoU value of ₹39.32 crore); divergent views were taken in related proceedings; and the AO failed to initiate penalty proceedings under Section 271D. The central question before the Court was whether the Commissioner could invoke Section 263 to revise an assessment order when the AO had already conducted a detailed inquiry and taken a plausible view based on available material. The Court categorically held that the power under Section 263 is not meant to act as an appellate mechanism to correct or improve an assessment order. It reiterated the settled principle that two conditions must be satisfied for invoking Section 263 the order must be erroneous, and it must be prejudicial to the interests of the revenue. If either condition is absent, revision is not permissible. On facts, the Court found that the AO had examined the seized MoU; considered the actual sale transaction; referred the matter to the DVO; and made additions after applying his mind to the material on record. Thus, the AO had taken a plausible and reasoned view, which could not be substituted by the Commissioner merely because another view (i.e., adopting the MoU value) was possible. The Court noted that the MoU represented a proposed transaction that never materialised, whereas the actual sale took place later at a different price. The AO’s reliance on the DVO’s valuation, after considering all circumstances including statements and evidence, was held to be a valid exercise of judgment. The Court observed that the AO did not act mechanically but undertook a thorough inquiry, and therefore, the assessment could not be termed erroneous. The Court also rejected the Commissioner’s contention regarding failure to initiate penalty proceedings. It held that at the relevant time (assessment order dated June 19, 2023), the AO did not have jurisdiction to impose penalty under Section 271D, as such power was vested with the Joint Commissioner prior to amendments effective April 1, 2025. Accordingly, the very basis for invoking revision on this ground was held to be legally flawed. Reinforcing established jurisprudence, the Court held that Section 263 cannot be invoked for conducting a “fresh inquiry” or improving the quality of an assessment order. Where the AO has conducted inquiries and adopted a permissible view, the Commissioner cannot interfere. Mere disagreement with the AO’s methodology does not render the order erroneous. Holding the revisionary proceedings to be unsustainable, the Court quashed the show-cause notices issued under Section 263 and allowed the writ petitions. It also clarified that the existence of an alternative remedy does not bar writ jurisdiction where the notice itself is without jurisdiction. Case Details Case Title: Dilip Patel Versus The Principal Commissioner Of Income Tax (Central), Ahmedabad Citation: JURISHOUR-1054-HC-2026(GUJ) Case No.: R/Special Civil Application No. 4314 Of 2026 Date: 01/05/2026 Counsel For Petitioner: B S Soparkar Counsel For Respondent: Varun K.Patel Click Here To Read Order Read More: JURISHOUR | TAX LAW DAILY BULLETIN : May 1, 2026

Commissioner Can’t Invoke Revisionary Power Where AO Takes Plausible View Based on DVO Valuation: Gujarat High Court

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