The Delhi bench of the Income Tax Appellate Tribunal quashed a revision against senior advocate Mukul Rohatgi for AY 2020–21, holding that reopening his Rs 133.46 crore assessment lacked legal basis and could not rest on mere re-inquiry alone.
NEW DELHI: The Income Tax Appellate Tribunal (ITAT) in Delhi has set aside a revision order made against Senior Advocate Mukul Rohatgi, determining that the tax authorities lacked sufficient grounds to reopen his income assessment of Rs 133.46 crore for the Assessment Year 2020–21.
A coram consisting of Vice President Mahavir Singh and Accountant Member Manish Agarwal ruled in favor of Rohatgi, annulling the revision order from the Principal Commissioner of Income Tax (PCIT). The Tribunal asserted that the authority to revise an assessment cannot be exercised simply to conduct new inquiries or adopt a different standpoint.
The Tribunal stated,
“…there is no material available with the learned PCIT for revision of assessment order under Section 263 of the Act, which enabled him to form a prima-facie opinion that the assessment order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the Revenue,”
Rohatgi’s income was scrutinized for the Assessment Year 2020–21, ultimately assessed at Rs 133,46,92,080 after disallowances of Rs 44.77 lakh under Section 24(b) (home loan interest deduction) and Rs 40.10 lakh under Section 14A (expenses linked to exempt income).
In March 2025, the PCIT issued a notice proposing to revise the completed assessment based on three main issues: the tax treatment of capital gains from mutual fund investments, the annual letting value (ALV) declared for various properties both in India and abroad, and the non-initiation of penalty proceedings for alleged failure to deduct tax at source.
The PCIT contended that some mutual funds classified as equity-oriented and thus taxed as long-term capital gains should instead be subject to normal tax rates. The PCIT also questioned the ALV reported for multiple properties, including those in London, Goa, and Delhi, and suggested recomputing rental income.
Furthermore, the Commissioner called for penalty proceedings to be initiated for the non-deduction of TDS on payments totaling Rs 9.20 lakh.
In the Tribunal, Rohatgi argued that the mutual fund details had already been provided during the original assessment and that one London property had been sold in March 2019, with the resultant capital gains previously offered for taxation. He mentioned that another London property was used for professional purposes and emphasized that rental values for other properties had consistently been declared and accepted in prior assessments.
Among the key issues raised by the PCIT was the tax treatment of gains from certain mutual funds. The PCIT alleged that these funds were not equity-oriented and should be taxed at normal rates rather than the concessional rates applicable to long-term capital gains.
The Tribunal disagreed with the PCIT, citing that the Assessing Officer had already examined these details in the original assessment and made a reasonable determination that the funds were indeed equity-oriented. The Tribunal stated that once the Assessing Officer had taken one plausible position after reviewing the material, the assessment could not be altered merely because the PCIT preferred a different view.
The ITAT remarked,
“We also noted that these details were filed by the assessee before the Assessing Officer during the course of scrutiny assessment and the Assessing Officer, after examining all these details, reached a conclusion that these are equity-oriented funds and he formed an opinion,”
The Tribunal also dismissed the PCIT’s revision concerning the ALV of properties. It noted that one London property had already been sold and taxed in a prior year, while another was utilized as a professional office, thus not attracting ALV. Additionally, it observed that the PCIT had relied on a generic “rental yield overview” to estimate rental income for a London property, which was insufficient to justify a revision of the assessment.
The ITAT concluded,
“We have gone through the case records including the revision order and could not find any observation by the PCIT that what should be the basis for ALV and how the ALV declared by the assessee is not correct and without that, the order of the Assessing Officer cannot be treated as erroneous insofar as prejudicial to the interest of the Revenue,”
The PCIT also initiated penalty proceedings for an alleged failure to deduct tax at source on certain payments. The Tribunal ruled that such directions could not be issued during revision proceedings.
The Tribunal made strong remarks regarding the constraints on the tax department’s revision powers, asserting that completed assessments cannot be reopened merely for fresh inquiries.
It said,
“The revisional power under Section 263 of the Act is not meant to be exercised to correct every error of fact, but the error must be of such a nature that it is erroneous and prejudicial to the interest of the Revenue.”
The coram stressed that revision cannot serve as a tool for unsubstantiated inquiries or new investigations in the absence of material indicating an error in the original assessment.
It said,
“The PCIT, in revisional proceedings under Section 263 of the Act, has no jurisdiction to set aside the order of assessment merely to conduct another investigation without finding the basis or without any material that the order is erroneous one and also prejudicial to the interest of the Revenue.”
Rohatgi was represented by Senior Advocate Sachit Jolly and Advocate Mansha Anand.
Case Title: Mukul Rohatgi v. Principal Commissioner of Income Tax.
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