SWD INDUSTRIES,MUMBAI vs. PCIT (CENTRAL), MUMBAI-1, MUMBAI

ITA No. 9007/Mum/2025 (Assessment Year: 2014-15)

ITA No. 9008/Mum/2025 (Assessment Year: 2015-16)

ITA No. 9009/Mum/2025 (Assessment Year: 2016-17)

ITA No. 9010/Mum/2025 (Assessment Year: 2017-18)

ITA No. 9011/Mum/2025 (Assessment Year: 2019-20) & 6. ITA No. 9012/Mum/2025 (Assessment Year: 2020-21)

The tabulated details of disallowances and assessed income are given below: Assessment Year Addition / Disallowance made by AO Amount Total Income Assessed 2014–15 Disallowance of interest expenditure Rs. 20,48,479/- Loss of Rs. 12,23,703/- 2015–16 Disallowance of interest expenditure Rs. 33,85,440/- Rs. 56,92,160/- Adjustment of brought forward loss Rs. 20,48,480/- 2016–17 Disallowance of interest expenditure Rs. 15,46,880/- Rs. 69,07,010/- 2017–18 Disallowance of interest expenditure Rs. 22,75,929/- Rs. 1,55,13,120/- 2019–20 No addition made Nil Rs. 3,05,36,450/- 2020–21 No addition made Nil Rs. 3,03,20,050/-

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 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. 6. 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: 1. That the notice issued under Section 263 of the Income Tax Act, 1961 (“the Act”) and the order passed by the Principal Commissioner of Income Tax (Central), Mumbai are bad in law, without juri iction, barred by limitation, and not in accordance with the provisions of the Act. 2. That the assumption of juri iction under Section 263 of the Act is vitiated, as the notice issued under Section 153C of the Act and consequent assessment order passed is not in accordance with law having been issued without adherence to the mandatory preconditions stipulated under the Act rendering the entire revision proceedings void ab initio. 3. That on the facts and in the circumstances of the case, the assumption of juri iction under Section 263 of the Act is bad in law and without juri iction, as the assessment sought to be revised is founded on proceedings initiated without recording the mandatory satisfaction that the alleged seized material had any bearing on the determination of the assessee’s income, thereby rendering the impugned proceedings void ab initio and not amenable to revision under Section 263 of the Act. 4. That the learned Principal Commissioner of Income Tax has erred in assuming juri iction under Section 263 of the Act without setting aside or invalidating the statutory approval under Section 153D of the Act forming the foundation of the assessment, rendering the impugned revision proceedings without juri iction and bad in law. 5. That the PCIT, Mumbai has erred in invoking Explanation 2 to section 263 of the Act by holding the assessment order to be erroneous and prejudicial to the interests of the Revenue, despite the fact that the Assessing Officer had completed the assessment after due and comprehensive enquiry and verification. 6. That the PCIT, Mumbai has failed to appreciate that the issues raised in the show cause notice, at best, pertain to the adequacy of enquiry and not lack of enquiry, which is not a valid ground for invoking juri iction under Section 263 of the Act. 7. The PCIT, Mumbai erred in setting aside the assessment order passed under Section 153C for making fresh assessment without assigning any defects or inconsistency in the assessment order, thus invoking revisionary powers u/s 263 of the Act merely for make roving and fishing query is beyond the juri iction and unjustified. 8. That PCIT, Mumbai failed to appreciate that assessment order was passed in the group cases which were centralised, after analysis of all the incriminating seized material (in the case of Alankit Group), statement recorded and after mandatory approval u/s 153D of the Act from Addl CIT and therefore, to hold such an order as erroneous and prejudicial to the interest of the revenue is unjustified and bad in law. 9. The PCIT, Mumbai in the impugned order as failed to point out any specific defect or escapement of income or any particular issue or document which had remained to be examine, therefore, merely invoking Explanation 2 to sec. 263 in fact of the case is not justified. 10. That the impugned order passed under Section 263 of the Act grossly violates the principles of natural justice, inasmuch as the ld. PCIT failed to provide an adequate opportunity of a hearing and passed the order in undue haste. The Assessee craves leave to add to, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing appeal. 7. 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 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 juri iction under section 263 is legally unsustainable. 8. 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 been framed after obtaining approval under section 153D, the revisional authority while exercising juri iction 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 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 juri iction 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 juri iction 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. 9. 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 assessment orders. Therefore, according to the AR, the learned PCIT could not have assumed juri iction under section 263 of the Act and the impugned orders are liable to be quashed. 10. The learned Departmental Representative (DR), on the other hand, supported the revisionary orders passed by the learned PCIT under section 263 of the Act. 11. 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 juri iction under section 263 of the Act in respect of the assessment orders passed under section 143(3) read with section 153C of the Act. 12. 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 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 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. 13. 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. 14. Having noted the statutory scheme under section 153D, we now proceed to examine the scope of revisionary juri iction under section 263 of the Act. 15. 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 juri iction 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 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 juri iction 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. 16. 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: 8. 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. 9. 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 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 juri iction. 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. 17. 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 juri iction under section 263 of the Act cannot be invoked. (para 6-7) 18. The Hon’ble High Court further observed: 8. Even otherwise, as per section 263 of the Act, the Principal Chief Commissioner or Principal Commissioner or Commissioner may call for 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. 19. 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 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. 20. 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. 21. 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 juri iction 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 juri iction under section 263 cannot be sustained. 22. 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 juri iction 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. 23. Since the appeals are being allowed on the preliminary legal issue itself, the other grounds raised by the assessee do not require adjudication. 24. 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. Order pronounced in the open court on 12.03.2026. (SAKTIJIT DEY) ACCOUNTANT MEMBER

अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT 5. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //// 1. उि/सहायक िंजीकार ( Asst.