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Facts
The assessee's appeal stemmed from a revision order under Section 263 of the Income-tax Act, 1961. The Principal Commissioner of Income-tax initiated revision proceedings against an assessment order passed under Section 153C, primarily concerning the disallowance of depreciation on goodwill.
Held
The Tribunal held that the revision order passed by the Principal Commissioner under Section 263 was not sustainable. It found that the Assessing Officer had not erred by not disallowing depreciation on goodwill as the assessment order for A.Y. 2017-18 had already dealt with this issue and that no incriminating material was found during the search relevant to the assessment year in question.
Key Issues
Whether the revisionary powers under Section 263 of the Income-tax Act were validly exercised when the assessment order under Section 153C was passed without any incriminating material and the issue of depreciation had been addressed in a prior assessment year?
Sections Cited
263, 153C, 153A, 143(3), 115JA, 80HHC, 2(22)(e), 68, 132, 132A
AI-generated summary — verify with the full judgment below
Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR
Date of Hearing 02.07.2025 Date of Pronouncement 21.07.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal filed by the assessee emanates from the Revision order passed u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 31.03.2025 by the Pr. Commissioner of Income-tax, PCIT(Central), Mumbai – 3 [hereinafter referred to as “PCIT(A)”] pertaining to assessment order passed u/s. 153C of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 30.03.2023 for the Assessment Year [A.Y.] 2019-20. P a g e | 2 A.Y. 2019-20 Infinity Cars Private Limited 2. The grounds of appeal are as under:
1. In the facts of the case and in Law, the learned PCIT erred in invoking Section 263 to the case of the Appellant only by way of change of opinion, without pointing out any error in the order of the A.O. and also by disregarding detailed submissions made to him from time to time and even though no incriminating documents are found.
2. In the facts of the case and in Law, the Show Cause Notice & or order u/s 263 alleging errors and prejudice, itself is erroneous on many counts as follows: a. In the facts of the case and in Law, the learned PCIT erred in invoking the provision of sec. 263 merely because he wants to take a view different from the one taken by the Assessing Officer and thereby changing the opinion of the Assessing Officer by his opinion. b. In the facts of the case and in Law, the learned PCIT erred in holding that Assessing Officer failed to verify the claim of depreciation on Goodwill which needs to be examined de novo.
3. In the facts of the case and in Law, the learned PCIT has erred in passing the order u/s 263 by disregarding exhaustive details cited in the reply to show cause notice and thereby passing the order not tenable in law.
3. Facts in brief are that in this case,assessment order was passed u/s. 153C assessing total income at Rs.5,95,41,030/- making addition of Rs.1,30,220/-. The ld.PCIT observed that in the order, depreciation on Goodwill amounting to Rs.2,96,25,164/- was not disallowed by the AO while completing the assessment u/s 153C, whereas that depreciation had already been disallowed in the assessment order dated 30.12.2019 for A.Y. 2017-18, which had cascading effect on similar disallowances in the case of the assessee for the year under consideration. A notice was accordingly issued u/s 263 of the Act asking the assessee to show cause as to why the order u/s 153C dated 30.03.2023 be not revised in view of the order being erroneous in so far as it was prejudicial to the interest of P a g e | 3 A.Y. 2019-20 Infinity Cars Private Limited the revenue, on the issue of depreciation on Goodwill of Rs.2,96,25,164/- which had to be disallowed in view of the decision taken in the assessment order for A.Y. 2017-18.In response, the assessee submitted that in view of judicial pronouncements of the Hon’ble Apex Court in the cases of Abhisar Builwell Pvt. Ltd., Continental Warehousing Corporation (Nhava Sheva) Ltd. (64 Taxmann.com 34), Kabul Chawla etc. no addition could be made in respect of assessments which have became final if no incriminating material is found during search or during 153A proceedings. The assessee also contented that where there was nothing on record to suggest that any material was unearthed during search or proceedings u/s 153A, the PCIT could not invoke jurisdiction u/s 263 of the Act. The assessee has also submitted that if addition u/s 153C could not be made, revisionary jurisdiction u/s 263 of the Act does not lie. It was also contented that to assume jurisdiction twin conditions i.e. assessment order being erroneous as well as prejudicial to the interest of revenue or to be fulfilled; that an order cannot be said to be erroneous if A.O. has adopted one of possible views, that necessary details were called for by the A.O. which were duly furnished by the assessee and the inference was drawn thereon and returned income accepted would not permit the him to exercise powers under section 263 of the Act merely because there is no discussion on P a g e | 4 A.Y. 2019-20 Infinity Cars Private Limited the said issue in the assessment order. The assessee has further contented that proceeding is not meant for fishing and roving enquiries nor are revisional powers to be exercised to hold another round of investigation.
The ld.PCIT observed that notice u/s 153C was issued after receipt of information along with satisfaction from the A.O. that there was an incriminating material pertaining to the information of the assessee, after following due procedure as laid down by law. The assessment proceedings were concluded by an order dated 30.03.2023 and if at all the assessee had any grievance against the invoking of provisions u/s 153C, the assessee ought to have challenged that order. Unless the order u/s 153C dated 30.03.2023 is nullified, powers u/s 263 of the Act could be invoked subject to fulfilment of above stated twin conditions. In the instant case, a detailed finding had been given in the assessment order for A.Y. 2017-18 that the assessee was not entitled to depreciation on Goodwill. The said issue had not been examined at all in the assessment proceedings pertaining to the year under consideration. Section 263 of the Act requires fulfilment of twin conditions namely error in an order and the consequent prejudice to the interest of revenue. In the instant case, both these conditions are fulfilled in as much as that the non seeking of details regarding allowability of the P a g e | 5 A.Y. 2019-20 Infinity Cars Private Limited claim of depreciation on Goodwill, more so where the issue has been discussed in great details and disallowed in the assessment order for A.Y. 2017-18. Reliance was placed on the decision of Hon’ble Gauhati High Court rendered in the case of CIT vs Jawahar Bhattacharjee [2012] 341 ITR 434 (Gauhati),CIT Vs. Bhagwan Das [2005] 272 ITR 367, Pratap Footwear Vs ACIT [2003] SOT 638 etc. It is stated that in the present case, assessment order passed u/s 153 of the Act is an order passed by the A.O. and therefore, the aforesaid issues, which had not been considered by him in the said reassessment order, could be brought to life in exercise of powers under Section 263 of the Act. Reliance was placed in this regard the decision of New Jagat Textile Mills (P.) Ltd. Vs CIT [2006] 282 ITR 399.As regard the other objections raised by the assessee namely that powers cannot be used where (i) A.O. has taken one of the possible views or (ii) where an issue has been examined and accepted by the A.O. but no discussion is made in the assessment order or (iii)proceedings under this section is not meant for making fishing and roving enquiries or to order a second round of investigation it is stated that in the assessment proceedings, the issue of depreciation on Goodwill claimed by the assessee of Rs.2,96,25,164/- had been accepted without any question being asked or without any examination. Hence, it was clear that the A.O. has neither formed an P a g e | 6 A.Y. 2019-20 Infinity Cars Private Limited opinion or view on the issue nor has he examined leave alone accepting the claim of depreciation on Goodwill. As regards, the objection on the grounds of making fishing and roving enquiries or to order a second round of investigation, it is already brought out herein above that in respect of A.Y. 2017-18, the issue has been discussed in greater details in the assessment order passed u/s 143(3) of the Act and it was only logical that the A.O. ought to have examined this issue, which as evident from the records he has not. Therefore, by exercise of powers vested u/s 263 of the Act, neither is any fishing or roving enquiries intended nor is a second round of investigation directed since the issue of claim of depreciation on Goodwill has already been decided in the assessment order for A.Y. 2017-18 as being not allowable expenditure. The objections raised by the assessee were rejected and the assessment order was set aside.
Before us, the ld.CIT(DR) has supported the revision order while the ld.AR has reiterated the contentions made before the ld.PCIT in revision proceedings. It is further contented that the disallowance f Goodwill could not be made in the assessment order passed u/s 153C of the Act as the search action did not bring out any incriminating material which is not disputed. Therefore, the AO did not commit any error in terms of section 263 of the Act. He took one of the plausible views which P a g e | 7 A.Y. 2019-20 Infinity Cars Private Limited could not be reviewed by the ld.PCIT. He relied upon landmark judgements of hon’ble Supreme Court in Abhishar Bulidwell etc.
We have carefully gone through the contents of the revision order, rival submissions and legal position in the matter. We find sufficient force in the contentions of the ld.AR. The issue of incriminating materials is no more res integra as existence thereof is sin qua non for making assessment of search cases covered by the provisions of section 153C of the Act as held by the hon’ble Apex Court in Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399.CIT v. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi)etc. No routine additions or disallowances can be made in such assessments. In the instant case, the AO could not have made such disallowance of Goodwill by following the preceding assessment order. In such a situation, the assessment order passed u/s 153C of the Act could not be revised for making such disallowance. Thus, the assessment order cannot be considered erroneous as it is in accordance with the framework of law and in consonance with legal precedents. Therefore, the ld.PCIT could not have revised the said order u/s 263 of the Act. As such, he assumed jurisdiction which is not permissible. We find that similar issue has been P a g e | 8 A.Y. 2019-20 Infinity Cars Private Limited deliberated in several coordinate benches of ITAT, a few of which are narrated in the succeeding paras.
6.1 Relevant paras of the order on identical issues in the case of 363/Kol/2015in M/s. Tanuj Holdings Pvt. Ltdare reproduced as under:
5.5. We also find that no incriminating materials were found during the search in respect of the issue of deemed dividend. Hence it cannot be the subject matter of addition in 153C proceedings in respect of completed assessments. We hold that when an addition could not be made as per law in section 153C proceedings, then the said order cannot be construed as erroneous warranting revision jurisdiction u/s 263 of the Act. This addition was made based on audited accounts already available with the revenue. Hence on this count also, the addition contemplated by the Learned CIT in section 263 proceedings is not in accordance with law. Reliance in this regard placed by the Learned AR on the decision of the Bombay High Court in the case of CIT vs Murli Agro Products Ltd (ITA NO. 36 of 2009 dated 29.10.2010- Bombay HC) is very well placed. The question before their Lordships and decision rendered thereon is as under:- Question: 2) Although several questions are framed by the revenue, the basic question raised in this appeal is, whether the Income Tax Appellate Tribunal is justified in cancelling the order of Commissioner of Income Tax passed under Section 263 of the Income Tax Act, 1961 ? Held:
6. Challenging the order of the Commissioner of Income Tax passed under Section 263 of the IT Act, the assessee filed an appeal and the ITAT by its order dated 5/1/2009 set aside the order of the Commissioner of Income Tax dated 4/10/2007 on the ground that neither the computation of book profit under Section 115JA nor deduction under Section 80HHC of the IT Act were the subject matter of the proceedings under Section 153A and, therefore, the Commissioner of Income Tax could not have invoked the jurisdiction under Section 263 of the IT Act. Challenging the aforesaid order, the present appeal is filed by the revenue.
7. According to Shri Jaiswal, learned Counsel for the revenue, once the proceedings under Section 153A of the IT Act are initiated, then the original P a g e | 9 A.Y. 2019-20 Infinity Cars Private Limited assessment/reassessment orders already passed in the assessment years covered under Section 153A stand abated and the Assessing officer is obliged to pass fresh assessment/reassessment orders and determine the total income afresh for those assessment years. In the present case, according to Mr. Jaiswal, the assessment order passed under Section 153A read with Section 143(3) of the Income- Tax Act is erroneous and prejudicial to the interests of the revenue because, firstly, the AO had only determined undisclosed income and had not determined the total income which the mandate of Section 153A of the Income- tax Act. Secondly, the total computed after giving effect to the order of Commissioner of Income-tax(A) being loss which less than 30% of the book profit, the AO ought to have computed book profit as per Section 115JA of the Income-tax Act. Thirdly, the deduction allowed under Section 80HHC of the Act in the original assessment was erroneous and since the original assessment order stood abated on initiation of proceedings under Section 153A of the Act, the AO ought to have correctly computed deduction under Section 80HHC in the assessment order passed under Section 153A read with Section 143(3) of the Income-tax Act. Accordingly, Mr. Jaiswal submitted that in the facts of the present case, the Commissioner of Income Tax was justified in invoking jurisdiction under Section 263 and the ITAT committed an error in setting aside the order passed by the C.I.T.
We find it difficult to accept the above contention raised on behalf of the revenue. The object of inserting Sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIVB of the Income-tax Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 (see 260 ITR (St) 191 at 219) was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as ' undisclosed income' or whether a particular income could be said to be relatable to the material found during the course of search, etc., which led to prolonged litigation. To overcome that difficulty, the legislature by Finance Act 2003, decided to discard Chapter XIVB provisions and introduce Sections 153A, 153B and 153C in the IT Act.
What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to Section 153A provides for abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under Section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived.
Thus on a plain reading of section 153A of the Income-tax Act, it becomes clear that on initiation of proceedings under Section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting P a g e | 10 A.Y. 2019-20 Infinity Cars Private Limited search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessments/reassessments already finalised for those assessment years covered under Section 153A of the Act. By a circular No.8 of 2003 dated 18-9- 2003 (See 263 ITR (St) 61 at107) the CBDT has clarified that on initiation of proceedings under Section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalized assessment/reassessment shall not abate. It is only because, the finalized assessments/reassessments do not abate, the appeal, revision or rectification pending against finalized assessments/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of under Section 153A, the assessments/reassessments finalised for the assessment years covered under Section 153A of the Income-tax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1).
In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for the assessment year 1998-99 was finalized on 29-12-2000 and search was conductedthereafter on 3-12-2003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affect the assessment finalized on 29-12-2000.
Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the AO while passing the independent assessment order under Section 153A read with Section 143(3) of the I.T Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings.
13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80HHC was erroneous. In such a case, the AO while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalized on 29.12.2000 relating to Section 80HHC deduction and consequently the C.I.T could not have invoked jurisdiction under Section 263 of the Act.
Moreover, since the AO had made addition on account of undisclosed income at Rs. 89,19,477/- in the assessment order passed under Section 153A, there was no question of computing book profits under Section 115JA of the I.T Act. When the addition of undisclosed income was deleted by CIT(A) without any direction to compute the book profits, the AO was bound to modify the assessment order passed under Section 153A read with s. 143(3) of the Act as directed by CIT(A). Therefore, in the facts of the present case, no fault could be found with the AO in giving effect to the order of CIT(A). Consequently, the CIT could not invoke jurisdiction under Section P a g e | 11 A.Y. 2019-20 Infinity Cars Private Limited 263 of the income-tax Act on the ground that the assessment under Section 153A read with Section 143(3) was erroneous or prejudicial to the interests of revenue.
In the result, the decision of the Tribunal in quashing the order of C.I.T passed under Section 263 of the I.T Act cannot be faulted. Accordingly, we see no merit in the present appeal and the same is hereby dismissed with no order as to costs." We also find that the impugned issue is also supported by the decision of the Hon'ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd and All Cargo Global Logistics Ltd reported in (2015) 374 ITR 645 (Bom) vide order dated 21.4.2015, wherein the facts before the Court and decision rendered thereon are as below :- "Under section 153A of the Income-tax Act, 1961, which enables carrying out of search or exercise of power of requisition, assessment in furtherance thereof is contemplated. There is a mandate to issue notices under section 153(1)(a) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, the crucial words "search" and "requisition" appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. True it is that the assessment which has to be made in pursuance of the notice is in relation to the six years. An order will have to be made in that regard. While making the order, the income or the return of income filed for all these assessment years is to be taken into account. A reference will have to be made to the income disclosed therein. However, the scope of enquiry though not confined essentially revolves around the search or the requisition under section 132A , as the case may be. The provision deals with those cases where assessment or reassessment, if any, relating to the assessment years falling within the period of six assessment years referred to in sub-section (1) of section 153A were pending. If they were pending on the date of the initiation of the search under section 132 or making of requisition under section 132A , as the case may be, they abate. It is only pending proceedings that would abate and not where there are orders made of assessment or reassessment and which are in force on the date of initiation of the search or making of the requisition. The assessee was engaged in the operation of a container freight station. It claimed deduction under section BO-IA(4) producing a certificate dated July 13, 2006, from the Jawaharlal Nehru Port Trust Nhava Sheva declaring that the assessee was considered an extended arm of port-related services. The education was disallowed on the ground that the certificate was withdrawn on October 5, 2007. The Commissioner (Appeals) confirmed the view of the Assessing Officer. The Tribunal held in favour of the assessee. A search was carried out on its premises and a notice under section 153A was issued to the assessee. The assessee declared a total income of Rs.5,54,63,220 while claiming the deduction under section 80-IA(4) of Rs.1,25, 77,637. The Assessing Officer held that the assessee was not entitled to the deduction under section 80-IA.
P a g e | 12 A.Y. 2019-20 Infinity Cars Private Limited The Commissioner (Appeals) upheld the order of the Assessing Officer. The Special Bench of the Tribunal held that by the clear language of section 153A together with its provisos, pending assessments abated and that the Assessing Officer was required to make one assessment for each of the six years on the basis of the search and any other material existing or brought on record by the Assessing Officer, that in other cases assessments would be made on the basis of the books of account and other documents found during the search and not produced during assessment and also on any other undisclosed income or property found during the search. On the issue of deduction under section BO-IA(4) the Tribunal held that the container freight station was an inland port and its income was entitled to deduction under section 80-IA(4) . On appeals: Held, dismissing the appeals, (i) that the notice under section 153A was founded on search. If there was no incriminating material found during the search then the Tribunal was right in holding that the power under section 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material. If that was not found then in relation to the second phase of three years, there was no warrant for making an order within the meaning of this provision." In view of the aforesaid findings and judicial precedent relied upon, we hold that the addition towards deemed dividend u/s 2(22)(e) of the Act in the assessments framed u/s 153C of the Act for the Asst Years 2007-08 to 2010-11 without any incriminating materials found during the course of search with respect to those assessment years, is not warranted and held as not in accordance with law. 5.6. We hold that the Learned CIT had just entertained a belief that order passed by the Learned AO u/s 153 C of the Act is erroneous , which otherwise does not emanate from the provisions of the Act. Hence in this scenario, invoking jurisdiction under section 263 proceedings is not permissible. 5.7. Since we have decided the impugned issue of addition towards deemed dividend in favour of the assessee on facts as well as on law, we don't find it necessary to address the same issue on the ground of limitation of invoking jurisdiction u/s 263 of the Act. Hence we refrain to give our findings in this regard on the issue of limitation. 5.8. In view of the aforesaid findings, we quash the order passed u/s 263 of the Act by the Learned CIT and allow the grounds and additional grounds raised by the assessee for all the asst years.
6. In the result, the appeals of the assessee are allowed.”
P a g e | 13 A.Y. 2019-20 Infinity Cars Private Limited 6.2 Likewise,in 2754/Mum/2018 A.Y. 2010- 11 M/s Nishita Infrastructure Pvt. Ltd. Vs. Principal Commissioner of Income Tax it was observed as under:
“10. We have deliberated at length on the issue under consideration and are of the considered view that M/s Wellknown Polyester Ltd. after booking bogus capital expenditure, had in the process of routing back the purchase consideration through various shell companies had introduced the same into its group concerns, which included amongst others the assessee company viz. M/s Nishita Infrastructure Pvt. Ltd. In our considered view the receipt of share application money (along with premium) by the assessee company [as being a group entity] which had facilitated siphoning of the funds of M/s Wellknown Polyester ltd. has a clear inextricable nexus with the aforesaid transaction of booking of bogus capital expenditure by M/s Wellknown Polyester Ltd. In fact, now when M/s Wellknown Polyester Ltd. had in its return of income filed in compliance to notice under Sec.153A withdrawn its claim of fictitious depreciation amounting to Rs.60,14,71,456/- on the value of the bogus assets as were claimed to have been purchased, and the same had been admitted by the A.O after necessary deliberations on the modus operandi so adopted by the assessee, therefore, the share application money (along with premium) received by the assessee from the shell companies could not be characterised as an unexplained cash credit in terms of Sec. 68 of I.T. Act. In sum and substance, the receipt of the bogus share capital (along with premium) by the assessee from the shell companies only formed a part of the chain of events involved in routing back of the purchase consideration pertaining to the bogus purchase of capital assets claimed to have been made by the aforementioned group entity viz. M/s Wellknown Polyester Ltd. We are unable to persuade ourselves to subscribe to the observations of the Pr. CIT that an inextricable nexus between the claim of bogus capital expenditure by the aforementioned group entity viz. M/s Wellknown Polyester Ltd. and receipt of bogus share application money by the assessee from the shell companies had not been established. We are of a strong conviction that the view taken by the A.O that the amount of bogus share application received by the assessee has a clear and an established inextricable nexus with the bogus capital expenditure debited by M/s Wellknown Polyster Ltd., hence no addition of the said amount was liable to be made in the hands of the assessee under Sec. 68 was a permissible and a possible view. In fact, the aforesaid view so arrived at by the A.O had been acted upon by the revenue P a g e | 14 A.Y. 2019-20 Infinity Cars Private Limited while accepting the withdrawal of claim of depreciation amounting to Rs. 60,14,71,456/- by M/s Wellknown Polyester Ltd. in its return of income filed in response to notice issued under Sec.153A of the IT Act. Be that as it may, in our considered view the observation of the A.O that no addition under Sec. 68 and/or Sec. 2(24)(iv) of the IT Act was liable to be made in respect of the bogus share application money received by the assessee from the shell companies could not have been dislodged by the Pr. CIT in exercise of his revisional jurisdiction under Sec. 263 of the IT Act. We have further perused the order passed by the Tribunal in the case of other group entity viz. M/s Wellknown Technologies Pvt. ltd. Vs. Pr. CIT (Central)-4 [ITA No. 2912- 2915/Mum/2018; dated 03.12.2018] for A.Ys. 2009-10 to 2013-14, and find that the order passed by the CIT under Sec.263 on similar lines in the case of the said group entity had been vacated by the Tribunal. Apart therefrom, we also find substantial force in the contention of the ld. A.R that as during the course of the search and seizure proceedings conducted on M/s Wellknown Polyester Ltd. and its directors no incriminating material pertaining to receipt of bogus share capital (along with premium) was found, therefore, in the backdrop of the judgment of Hon'ble High Court of Bombay in the case of CIT Vs. Continential Warehousing Corporation (2015) 374 ITR 645 (Bom) no addition on the said aspect could have been made by the A.O while framing the assessment under Sec.153C r.w.s. 143(3) of the IT Act.
11. We thus in terms of our aforesaid observations are of the considered view that the order passed by the A.O under Sec. 143(3) r.w.s. 263, dated 01.04.2015 cannot be held to be erroneous. As a result thereof, the very exercise of the revisional jurisdiction by the Pr. CIT culminating into an order under Sec.263, dated 21.03.2018 cannot be sustained and is liable to be vacated.
12. We thus set aside the order passed by the Pr. CIT under Sec.263 of the IT Act and restore the order passed by the A.O under Sec. 143(3) r.w.s 153C of the IT Act, dated 01.04.2015.
The appeal of the assessee is allowed.” 6.3 In a recent decision in the case of Alliance Broadcasting Pvt.vs PCIT (Central), Chennai on 18 June, 2025 in on similar issue it was held as below:
P a g e | 15 A.Y. 2019-20 Infinity Cars Private Limited “9. The second reason is that the search operation u/s.132 of the Act was conducted in the case of VV Group Concerns on 25.10.2018. Pursuant to it, proceedings u/s.153C of the Act have been initiated against the assessee on 11.03.2021 and directed assessee to file RoI including that for AY 2017-18. In this regard, it is noted that the assessee had filed RoI for AY 2017-18 u/s.139(1) of the Act on 07.11.2017 and the intimation u/s.143(1) of the Act was issued dated 02.06.2018 and the time- limit to issue notice u/s.143(2) of the Act got expired on 30.09.2018; and taking note of the crucial facts in this case i.e. the search commenced on 25.10.2018 and consequent notice u/s.153C of the Act was issued to the assessee on 11.03.2021, it can be safely presumed that assessment for AY 2017-18 was not pending before the AO on the date of search. Therefore, assessment for AY 2017-18 has to be held to be unabated assessment for the purpose of assessment u/s.153C r.w.s.153A of the Act; and as per the settled position of law in respect of unabated assessment, only on the basis of incriminating materials qua assessee qua for AY 2017-18, any addition can be made. [refer to the decision of the Hon'ble Supreme Court in CIT v. Sinhgad Technical Education Society 250 Taxman 225].It is undisputed fact that there was no incriminating material for making any disallowance under PF/ESI found during search. Therefore, the AO can't be blamed for not making any disallowance on this count. Therefore, on the aforesaid reasons stated supra we find that action of the AO not to take any adverse view against the assessee was a plausible view and can't be termed as erroneous and prejudicial to the interest of the Revenue. Therefore, assessee succeeds on the legal issue raised before us.
10. In the light of the aforesaid discussion, we find that the Ld.PCIT erred in invoking his jurisdiction u/s.263 of the Act, therefore, the impugned order u/s.263 of the Act stands quashed.”
In view of the above discussion and respectfully following the of decisions of coordinate benches of Tribunal, we have no hesitation in concluding that the revision order passed by the ld.PCIT is not sustainable and is therefore, quashed, thus allowing the grounds of appeal of the assessee in this regard.
P a g e | 16 A.Y. 2019-20 Infinity Cars Private Limited 8. In the result, the appeal is allowed. Order pronounced in the open court on 21.07.2025. SANDEEP GOSAIN PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)