The Karnataka High Court has set aside a revision notice issued by the Income Tax Department against Mukesh Bansal, ruling that the tax department cannot invoke its revisionary powers under Section 263 of the Income Tax Act against a mere intimation that carries no adjustment. Justice S Sunil Dutt Yadav delivered the verdict on September 18, 2026, allowing the writ petition filed by Bansal.
Background
Bansal had filed his income tax return for Assessment Year 2019-2020, declaring income of over Rs 231 crore. His original return treated compensation received from Flipkart for repurchase of his unexercised Employee Stock Options (ESOPs) as salary income. Later, after getting condonation of delay from the CBDT, he filed a revised return reclassifying this ESOP compensation as Capital Gains instead of Salary. This revised return was processed under Section 143(1), and the tax department accepted it without any changes, resulting in a refund of over Rs 27 crore along with interest.
The Income Tax Department subsequently initiated revision proceedings under Section 263, arguing that this refund order was erroneous and prejudicial to Revenue's interest. A notice for hearing was issued on January 13, 2026, prompting Bansal to challenge it before the High Court, arguing the department had no jurisdiction to invoke Section 263 against something that was never really an "order" in the first place.
The court examined whether an intimation under Section 143(1) can be equated with an "order" for the purposes of Section 263. Relying heavily on the Supreme Court's ruling in Rajesh Jhaveri Stock Brokers, the bench noted that Section 143(1) processing is largely automated, with only narrow, limited adjustments permitted, unlike scrutiny under Section 143(2) which culminates in a proper assessment order.
The court rejected the Revenue's argument that an intimation should be treated as an order merely because it functions as a notice of demand. It also disagreed with the Bombay High Court's view in Anderson Marine that quantification under Section 143(1) presumes a prior assessment order.
Importantly, the bench observed that only where an intimation under Section 143(1) involves an actual adjustment does it acquire the character of an appealable "order" under Sections 246 and 246A. In Bansal's case, the intimation dated February 12, 2025 was issued without any adjustment - the department had simply accepted the revised return as filed.
Since the intimation lacked any adjustment, the court held it could not be treated as an order, and therefore proceedings under Section 263 could not have been initiated against it at all. The court clarified it was not ruling on whether the ESOP compensation should be taxed as salary or capital gains, keeping that question open for appropriate proceedings.
The impugned notice dated January 13, 2026 was quashed, and the writ petition was allowed.
Case Details:
Case Title: Mukesh Bansal v. Principal Commissioner of Income Tax, Bengaluru-2
Case Number: Writ Petition No. 5330 of 2026 (T-IT)
Judge: Hon'ble Mr. Justice S Sunil Dutt Yadav
Decision Date: September 18, 2026
