BONDWELL IRP PRIVATE LIMITED,MUMBAI vs. PCIT (CENTRAL) MUMBAI-1, MUMBAI

The common grounds of all the appeals are as under:

Facts in brief as culled out from the impugned order reveals that the assessee filed its Return declaring total income of Rs. 3,37,23,930/-. Later, it filed return in response to notice under Section 153C of the Act declaring the same income. The assessee‟s case was found to be a constituent part of the cases of the Group of assessees headed by Shri Shashikant Damodar (“Shashi”) Khandelwal, Mumbai. The Assessing Officer passed the assessment order u/s 143(3) r.w.s 153C of the Act accepting the returned income. 4.On going through assessment records, it was found by the ld. Pr.CIT that search and seizure action was conducted on the Alankit group of cases on 18.10.2019. During the course of assessment proceedings u/s.153A of the Act, certain materials/documents related to case of the assessee, Bondwell Corporate Advisors Pvt Ltd. and other group concerns was found. Ledgers of Shri Balveer Singh Choudhary &

Before us, the ld.AR has contested the action of the ld.PCIT, claiming that records clearly suggested that necessary enquiries were conducted by the AO during assessment proceedings. A paper book has P a g e | 8 also been submitting pointing out that the AO made specific queries in this respect as evident from the notices issued u/s 143(2)/142(1) of the Act. Copies of notices issues u/s 143(2)/142(1) of the Act dated have been submitted in support of the contention that the AO conducted necessary enquires. It was also argued that the order u/s 263 of the Act was also not legally tenable as the assessment order having been passed after due approval of the Range Head u/s 153D of the Act, could not be revised on the allegation of no /inadequate enquiry. He also placed reliance on orders of various courts of law including coordinate benches of ITAT wherein on similar ground, the revision orders have been quashed.

The ld.DR however, relied on the revision order claiming that the provisions of Explanation 2 to section 263 of the Act were clearly applicable to the facts and the circumstances of the case.

We have carefully considered all the relevant factual matrix of the case, have perused the materials on record and also heard rival contentions. We have also gone through the judicial precedents in this regard. We find merit in the argument that ld. PCIT erred in assuming jurisdiction u/s 263 of the Act by revising order u/s 153A r.w.s. 143(3) of the Act without considering that prior approval already accorded to P a g e | 9 AO u/s 153D of the Act and also when orders u/s 153A of the Act had been passed after receiving approval u/s 153D of the Act, ld. PCIT erred in revising order u/s 153A of the Act without first revising the order u/s 153D of the Act as which meant that no defect had been observed by ld. PCIT in approval u/s 153D of the Act. Thus, assuming jurisdiction u/s 263 of the Act could not be held to be tenable and the impugned proceedings deserves to be quashed on this grounds itself.

1 As per the provisions of section 153D of the Act, prior approval is necessary for assessment in case of assessment search or requisition and it is specifically mentioned that no order of assessment or re-assessment shall be passed by an Assessing Officer below the rank of JCIT except with the prior approval of the Joint Commissioner. Only after receiving such approval u/s 153D of the Act, the AO passes the final assessment order u/s 153A r.w.s. 143(3) of the Act. In short, the assessment order u/s 153A of the Act is incomplete without the approval u/s 153D of the Act. Now, the moot question is whether action of the ld. PCIT of assuming jurisdiction u/s 263 of the Act holding only the order u/s 153A of the Act is erroneous so far as prejudicial to the interest of the revenue and not the order u/s 153D of the Act, as P a g e | 10 erroneous insofar as prejudicial to the interest of the revenue, can be held to be justified.

2 Moreover, the Hon'ble Apex Court in the land mark case of Malabar Industrial Company Ltd. has held that every loss of revenue as a consequent of an order of the AO cannot be treated as prejudicial to the interest of revenue unless the AO do not adopt one of the courses permissible in law. In the given set of appeals, we find that the seized materials had been examined by the AO with reference to the detailed replies filed by the assessee and after he being convinced that certain additions as called for, were made them accordingly. Thus, we find that AO after carrying out adequate enquiry has completed the assessments which are neither prejudicial to the interest of the revenue nor are they erroneous in nature. The correctness of the assessment order is further supported by the approval granted by ld. JCIT u/s. 153D of the Act which still remains intact as ld. PCIT has not revised the said order. Now, once adequate enquiry has been conducted and a permissible view has been taken by the AO no room is left for the ld. PCIT to give direction to re-conduct the enquiry in the manner he deems fit. The revisionary powers cannot be extended to direct the AO to again

3 In this regard, it would be pertinent to note that the coordinate bench of ITAT ,Mumbai had occasion to consider identical matter involving similar transactions in sister concerns of the assessee wherein revision order have been quashed. Relevant parts of the order in the case of SWD Industries, Mumbai vs Pcit (Central), Mumbai dated 12 March, 2026 in ITA No. 9007 to 9112/Mum/2025 are extracted as under wherein identical issue has been adjudicated in favour of the assessee after duly taking into account a plethora of other decisions involving similar issue: “These appeals are filed by the assessee against the separate orders passed by the learned Principal Commissioner of Income Tax (Central), Mumbai- 1 [hereinafter referred to as "PCIT"] under section 263 of the Income Tax Act, 1961[hereinafter referred to as "the Act"] for different assessment years. Since the facts, issues and grounds involved in all the appeals are identical and arise out of a common set of proceedings initiated pursuant to search in the Alankit group cases, these appeals were heard together and are disposed of by this consolidated order for the sake of convenience and brevity.

The assessee filed its returns of income for the respective assessment years declaring income as per details placed on record. A search and seizure action under section 132 of the Act was conducted on 18.10.2019 in the cases of the Alankit Group. During the course of post search investigation in the said group, certain documents and electronic data were allegedly found and seized from the premises of Shri Sunil Kumar Gupta, who was stated to be associated with Shri Alok Agarwal of Alankit Group. On the basis of the said material, the Assessing Officer recorded satisfaction that certain documents allegedly pertained to the assessee and accordingly proceedings under section 153C of the Act were initiated against the assessee. Pursuant thereto, the Assessing Officer completed assessments for the relevant assessment years under section 143(3) read

Subsequently, the learned PCIT examined the assessment records and formed a prima facie opinion that the assessment orders passed by the Assessing Officer were erroneous in so far as they were prejudicial to the interest of the revenue. According to the learned PCIT, the seized material found during the search in the Alankit group cases allegedly indicated that certain unaccounted cash transactions had been undertaken by Shri Shashikant Damodar Khandelwal with entities controlled by Shri Alok Agarwal and that accommodation entries were allegedly routed to the assessee through certain entities. It was the view of the learned PCIT that the Assessing Officer had not examined these aspects in the course of assessment proceedings.

Aggrieved by the revisionary orders passed under section 263 of the Act, the assessee has preferred the present appeals before us raising following grounds of appeal which are common in case of all the appeals:

During the course of hearing before us the learned Authorised Representative (AR), addressing the preliminary legal grounds raised in Ground No. 4, submitted that the assumption of jurisdiction by the learned PCIT under section 263 of the Act is without authority of law and the impugned revisionary orders deserve to be quashed. It was contended that the assessments in the present case were completed under section 143(3) read with section 153C of the Act after due examination of the records and after obtaining the mandatory approval under section 153D of the Act from the competent authority. It was contended that once the assessment orders have been passed after such statutory approval, the learned PCIT could not have invoked section 263 of the Act without first demonstrating that the statutory approval granted under section 153D suffered from any infirmity. According to the AR, the impugned revisionary orders have been passed without setting aside or invalidating the approval granted under section 153D, which formed the foundation of the assessments. Therefore, the assumption of jurisdiction under section 263 is legally unsustainable.

In this regard, the AR placed reliance on the decision of the Delhi Bench of the Tribunal in the case of Devender Kumar Gupta v. PCIT reported at [2024] 166 taxmann.com 95, wherein it was held that where an assessment order passed under section 153A read with section 143(3) had P a g e | 14 been framed after obtaining approval under section 153D, the revisional authority while exercising jurisdiction under section 263 must examine not only the assessment record but also the record of approval granted under section 153D, and without recording a finding that such approval was vitiated, the assessment order cannot be held to be erroneous and prejudicial to the interest of the revenue. The AR further relied on the judgment of the Hon'ble Madhya Pradesh High Court in the case of Principal Commissioner of Income Tax v. Prakhar Developers (P.) Ltd.reported at [2024] 299 taxman 252, wherein it was held that once an assessment order under section 143(3) read with section 153A has been passed after obtaining prior approval under section 153D, the jurisdiction under section 263 cannot be invoked to revise such order. Reliance was also placed on the decision of the Pune Bench of the Tribunal in the case of Tapadia Constructions Ltd. v. PCIT(ITA No. 650/PUN/2024), wherein it was held that where the assessment order has been passed under section 153A after obtaining approval under section 153D, the Principal Commissioner cannot exercise revisionary jurisdiction under section 263 unless the approval under section 153D is itself examined and found to be erroneous. The AR also placed reliance on the decision of the Mumbai Bench of the Tribunal in the case of Shri Surendra L. Hiranandani v. PCIT(ITA No.3226/MUM/2017), wherein it was held that where the assessment order has been passed under section 143(3) read with section 153A after obtaining approval of the competent authority, the same cannot be revised under section 263 without first dealing with the approval granted by the higher authority.

On the strength of the aforesaid judicial precedents, the AR submitted that the impugned revisionary orders have been passed without examining or setting aside the approval granted under section 153D, which forms the statutory foundation of the assessment orders. Therefore, according to the AR, the learned PCIT could not have assumed jurisdiction under section 263 of the Act and the impugned orders are liable to be quashed.

The learned Departmental Representative (DR), on the other hand, supported the revisionary orders passed by the learned PCIT under section 263 of the Act.

We have carefully considered the rival submissions of the parties, perused the assessment orders passed under section 143(3) read with section 153C of the Act, the impugned revisionary orders passed under section 263 of the Act and the judicial precedents relied upon by the assessee. The core issue for our consideration is whether the learned Principal Commissioner of Income Tax was justified in invoking the revisionary jurisdiction under section 263 of the Act in respect of the assessment orders passed under section 143(3) read with section 153C of the Act.

In order to adjudicate the controversy, it is necessary to first examine the statutory framework governing search assessments and the requirement of approval under section 153D of the Act. Section 153D of the Act mandates that no order of assessment or reassessment shall be passed by the Assessing Officer under section 153A or section 153C except with P a g e | 15 the prior approval of the Joint Commissioner. The requirement of approval under section 153D is therefore not a mere procedural formality or administrative endorsement. The statutory scheme envisages that the competent authority must examine the draft assessment order and the material on record and grant approval only after due application of mind. The approval under section 153D thus constitutes an important statutory safeguard intended to ensure proper scrutiny of search assessments by a higher authority before the assessment order is finalised.

In the present case, it is an undisputed fact that the assessments for all the relevant assessment years were framed under section 143(3) read with section 153C of the Act only after obtaining the mandatory approval under section 153D from the competent authority i.e. the Addl. Commissioner of Income-tax, Central Range-1, Mumbai. Once such statutory approval has been granted by the competent authority after application of mind, the approval becomes an integral part of the assessment proceedings and forms part of the record of the assessment.

Having noted the statutory scheme under section 153D, we now proceed to examine the scope of revisionary jurisdiction under section 263 of the Act.

Section 263 empowers the Principal Commissioner or Commissioner to revise an order passed by the Assessing Officer if he considers that such order is erroneous in so far as it is prejudicial to the interest of the revenue. The exercise of such jurisdiction is subject to the satisfaction of the well settled twin conditions, namely that the order must be erroneous and it must be prejudicial to the interest of the revenue. However, where an assessment order is passed under section 143(3) read with section 153A or section 153C after obtaining mandatory approval under section 153D of the Act, the approval granted by the competent authority cannot be ignored while examining the validity of the assessment order in revision proceedings. In such a situation, the approval granted under section 153D becomes part of the assessment record and therefore the revisional authority, while invoking jurisdiction under section 263, is required to examine not only the assessment order passed by the Assessing Officer but also the approval granted by the competent authority under section 153D.Unless the revisional authority records a finding that the approval granted under section 153D itself suffers from infirmity or is vitiated in law, the assessment order passed pursuant to such approval cannot be independently treated as erroneous and prejudicial to the interest of the revenue.

This principle has been consistently recognised in judicial precedents relied upon by the assessee. In Devender Kumar Gupta v. Principal Commissioner of Income-tax (supra) the Delhi Bench of the Tribunal, while examining an identical issue, observed as under:

The assessment orders make it categorical that the same are passed with statutory approval of Addl. Commissioner of Income-tax, Central Range, Gurgaon communicated vide his office letter F. No. Addl.CIT(CR)/GGM/2021-22/664 dated 24.09.2021 in accordance with section 153D of the Income Tax Act.

We find that in the impugned order the ld. PCIT has not taken account of the fact that the assessments were completed after prior approval of the competent authority. Thus, we are of the considered view that at the time of examining the issue as to if the assessment order is erroneous so far as prejudicial to the interest of the Revenue, the ld. revisional authority is not only supposed to see the assessment record of AO, but also the record of the approval which as far as the revisional authority is concerned becomes "record" of the quasi-judicial authority whose order is being examined by invoking the revisional jurisdiction. Therefore, without giving a finding that the prior approval u/s 153D was vitiated and was also erroneous so far as prejudicial to the interest of the Revenue, the assessment order independently cannot be held to be erroneous so far as prejudicial to the interest of the Revenue.

The Hon'ble Madhya Pradesh High Court in Principal Commissioner of Income-tax v. Prakhar Developers (P.) Ltd.(supra)after referring various judicial precedents such as the Pune Bench of Tribunal in the case of Dhariwal Industries Ltd. v. CIT [IT Appeal Nos.1108to 1113/PUN/2014], Lucknow Bench in the case of Mehtab Alam v. ACIT [IT Appeal Nos.288 to294/Lkw/2014], Hyderabad Bench of the Tribunal in the case of CH. Krishna Murthy v. ACIT [IT AppealNo.766/Hyd/2012] and one of the judgment passed by the High Court of Judicature at Allahabad in the caseof CIT v. Dr. Ashok Kumar [IT Appeal No.192 of 2000] and Hyderabad Bench of Tribunal in the case of Trinity Infra Ventures Ltd. v. DCIT [IT Appeal No.584/H/2015]has observed as under: ...and consistently held that once the order under Section 143(3) r/w section 153A of the Act has been passed after taking prior approval of the ACIT under section 153D of the Act, then the jurisdiction under section 263 of the Act cannot be invoked. (para 6-7)

The Hon'ble High Court further observed:

Even otherwise, as per section 263 of the Act, the Principal Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Assessing Officer, is erroneous in so far as it is prejudicial to the interests of the Revenue, he may make enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. For passing any order under sections 143(3) & 153A of the Act, prior approval of Joint Commissioner is required under section 153A of the Act, or Principal Commissioner or Commissioner as the case may be. Therefore, once prior approval had already been taken by the Assessing Officer and accepted the return submitted by the assessee, then the same authority cannot exercise the power under Section 263 of the Act to reverse the order of Assessing Officer.

Similar view has also been taken by the Pune Bench of the Tribunal in Tapadia Constructions Ltd. v. PCIT (supra), wherein it was noted that once the assessment order has been passed under section 153A after obtaining the approval under section 153D, the revisional authority cannot invoke section 263 without examining the validity of such approval and P a g e | 17 without demonstrating how the assessment order is erroneous and prejudicial to the interest of the revenue. Likewise, the Mumbai Bench of the Tribunal in Shri Surendra L. Hiranandani v. PCIT (supra) has held that where the assessment order has been passed under section 143(3) read with section 153A after obtaining approval from the competent authority, the same cannot be revised under section 263 without first examining the approval granted under section 153D.

In the present case, it is an admitted position that the assessment orders were passed by the Assessing Officer under section 143(3) read with section 153C of the Act after obtaining the mandatory approval under section 153D of the Act from the competent authority. However, in the impugned revisionary orders passed under section 263, the learned PCIT has not examined the approval granted under section 153D nor has he recorded any finding that the approval itself was granted without application of mind or was otherwise vitiated in law. The learned PCIT has proceeded to hold that the Assessing Officer did not make proper enquiries on certain issues and therefore the assessment orders were erroneous and prejudicial to the interest of the revenue.

In our considered view, once the statute requires that search assessments must be framed only after obtaining approval of the competent authority under section 153D, the approval so granted cannot be ignored while exercising revisionary jurisdiction under section 263. The revisional authority must necessarily examine the validity of such approval and record a finding that the approval itself is vitiated before holding that the assessment order is erroneous and prejudicial to the interest of the revenue. In the absence of any such finding, the assumption of jurisdiction under section 263 cannot be sustained.

In view of the foregoing discussion and respectfully following the judicial precedents referred to above, we hold that the learned PCIT was not justified in invoking the revisionary jurisdiction under section 263 of the Act in the present case. Consequently, the impugned orders passed under section 263 of the Act are liable to be quashed.

Since the appeals are being allowed on the preliminary legal issue itself, the other grounds raised by the assessee do not require adjudication.

In the result, all the appeals filed by the assessee for the respective assessment years are allowed, and the impugned orders passed by the learned PCIT under section 263 of the Act are set aside.”

Since in the instant case also, the AO has passed the order after obtaining necessary approval from Addl.CIT u/s 153D of the Act, therefore, respectfully following the above-mentioned decision of the Coordinate Bench of the Tribunal, we are of the considered opinion that the ld.PCIT had no power to revise the order u/s.263 of the Act in the P a g e | 18 instant case since the same had been passed with the approval of the Addl. CIT u/s 153D of the Act. Accordingly, the revision order passed u/s 263 of the Act is hereby set aside. Since the appeal is allowed on the preliminary legal issue itself, the other grounds raised by the assessee do not require adjudication.

Consequently, the appeal of the assessee in ITA No.8780/Mum/2025 is allowed.

The above decision applies mutatis mutandis to all other above mentioned appeals in the group cases of Bondwell Corps Solutions Private Limited and Bondwell IRP Private Limited, both of which involve exactly identical grounds of appeal barring some figurative difference, are also allowed.

In the final summing up, ITA Nos. 8780/8781/8782 and 9005/Mum/2025 are allowed.