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Facts
The assessee filed his return of income declaring a certain amount. A search and seizure action on a related group led to the initiation of proceedings under Section 153C against the assessee. The assessment order was passed under Section 153C. Subsequently, the Pr. CIT initiated revision proceedings under Section 263, holding the assessment order to be erroneous and prejudicial to the revenue.
Held
The Tribunal held that the revision order passed by the Pr. CIT under Section 263 was bad in law and deserved to be quashed. It followed the precedent that without examining the validity of the prior approval granted under Section 153D, the assessment order cannot be deemed erroneous and prejudicial to the revenue.
Key Issues
Whether the Pr. CIT can revise an assessment order passed under Section 153C without challenging the prior approval granted under Section 153D? Whether the revisionary jurisdiction under Section 263 was validly invoked when the assessment order was passed after obtaining necessary approvals?
Sections Cited
139(1), 132, 153C, 263, 148, 153D, 143(3), 153A
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Income Tax Appellate Tribunal, DELHI “E” BENCH: NEW DELHI
Before: SHRI SUDHIR KUMAR & SHRI MANISH AGARWAL
ORDER
PER MANISH AGARWAL, AM :
The present appeal is filed by assessee against the order dated 25.03.2025 by Ld. Pr. Commissioner of Income Tax (Central), Delhi- 3 [“Ld. PCIT”] passed u/s 263 of the Income Tax Act, 1961 [“the Act”] pertaining to Assessment Year 2016-17.
Brief facts of the case are that the assessee is an individual and has filed his return of income u/s 139(1) of the Act on 03.08.2016, declaring total income at INR 2,11,090/-. A search and seizure action u/s 132 of the Act was carried out on Alankit Group, Shri Alok K. Agarwal, his son Ankit Agarwal and some of the close associates and key employees of Shri Alok K. Agarwal on 18.10.2019. Various incriminating evidences were found and seized which clearly shows that Shri Alok Agarwal has facilitated acquisition of shares of several shell entities for the benefit of his own group as well as his known associates and clients on commission basis. He has received and provided accommodation entries and also facilitated bogus short term capital loss to set off long term capital gains to various persons through several entities managed and controlled by him and his associates. Based on the incriminating material so found and seized from the possession of third person which pertained to the assessee, satisfaction was recoded and proceedings u/s 153C of the Act were initiated in the case of assessee. In response, the assessee filed his return of income on 16.09.2022, declaring same income as was declared in the return filed u/s 139(1) of the Act at INR 2,11,090/-. Since proceedings u/s 153C of the Act were initiated thus earlier proceedings of re-assessment u/s 148 were abated. The AO thereafter raised various quires and thereafter the assessment order was passed on 04.03.2024 u/s 153C of the Act at a total income of Rs. 3,31,71,090/- by making various additions.
Against the said order, an appeal is filed by the assessee before Ld.CIT(A) which was decided in terms of the order dated 12.06.2025 in Appeal No.11168/2015-16 wherein appeal of the assessee is dismissed by Ld. CIT(A)-25, Delhi.
4. In the meantime, in terms of the notice issued on 20.11.2024, Ld. PCIT has initiated proceedings u/s 263 of the Act wherein Ld. PCIT observed that the issues for which the case of the assessee was re-opened u/s 148 of the Act, have not been discussed and accordingly, it is proposed to hold the assessment order passed u/s 153C of the Act, as erroneous and pre-judicial to the interest of the Revenue. Thereafter, the assessee filed replies and after considering the replies filed by the assessee, the impugned order u/s 263 was passed by Ld. PCIT, Central, Delhi-3 wherein vide order dated 25.03.2025, Ld. PCIT held the order passed u/s 153C of the Act on 04.03.2024 as erroneous and pre-judicial to the interest of the Revenue and directed the AO to make necessary inquiries and verification with respect to the issues raised in the reasons recorded for 148 proceedings and passed the order afresh.
Aggrieved by the said order, the assessee preferred an appeal before the Tribunal by taking following grounds of appeal:- 1. “That the notice issued under Section 263 of the Income Tax Act, 1961 ("the Act") and the order passed thereunder by the Principal Commissioner of Income Tax (Central), Delhi are bad in law, without jurisdiction, barred by limitation, and not in accordance with the provisions of the Act.
2. That the assumption of jurisdiction under Section 263 of the Act is vitiated, as the assessment order passed under Section 153C is itself not in accordance with law, rendering the entire revision proceedings void ab initio.
3. That the assessment order under Section 153C is void ab initio, as the approval under Section 153D was granted in a mechanical manner, with multiple approvals issued in a single day, evidencing complete non application of mind and vitiating the entire proceedings.
4. That the PCIT erred in invoking revisionary jurisdiction under Section 263 of the Act without examining or holding the approval granted under Section 153D of the Act to be erroneous and prejudicial to the interest of the Revenue, thereby vitiating the very assumption of jurisdiction.
5. Without prejudice, that the notice issued under Section 148 of the Act is ex facie illegal and void ab initio, having been issued without adherence to the mandatory preconditions stipulated under the Act, and thus impugned proceeding are liable to be quashed.
That the PCIT 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 jurisdiction under Section 263 of the Act.
That the initiation of proceedings under Section 263 is legally untenable in the absence of any new material or tangible evidence and amounts to a mere change of opinion, which is not permissible under the law.
8. That the PCIT has erred in holding the assessment order passed under Section 153C of the Act to be erroneous and prejudicial to the interest of the Revenue without demonstrating any cogent or objective basis to support such a conclusion. 9. That the assumption of jurisdiction under Section 263 is invalid as the assessee appeal against the impugned assessment order was already pending adjudication before the Commissioner of Income Tax (Appeals), and therefore, the same could not have been taken up under revision. 10. That the PCIT has failed to appreciate that the AO, after due application of mind and comprehensive examination of records and submissions, consciously chose not to make any addition in respect of the such alleged transactions. 11. That the assessment order passed under Section 153C of the Act after due inquiry and application of mind cannot be said to be erroneous merely because the PCIT holds a different view, and as such, the revisionary action is devoid of legal merit. 12. That the PCIT has wrongly invoked Explanation 2 to Section 263 of the Act, without establishing the requisite conditions for assumption of jurisdiction thereunder. 13. That the impugned order passed under Section 263 of the Act grossly violates the principles of natural justice, inasmuch as the PCIT has failed to consider the detailed reply filed by Assessee and provide adequate opportunity of hearing.”
Before us, with respect to the Ground of appeal No.4, Ld.AR 6. submits that impugned order under revision was passed u/s 153C of the Act after obtaining statutory approval from Adl. CIT, Central Range-7, New Delhi and the ld. PCIT assumed jurisdiction u/s 263 of the Act whereby holding the assessment order as erroneous and prejudicial to the interest of revenue without annulling the statutory approval granted u/s 153D of the Act by the Range head i.e. Adl. Commissioner of Income Tax. Ld. AR submits that the jurisdiction assumed by Ld. PCIT u/s 263 is fundamentally flawed as the approval u/s 153D is not a mere administrative formality but statutory safeguard, forming an integral part of assessment proceedings under chapter XIV of the Act. He submits that unless such approval itself is withdrawn or held to be invalid by the competent forum, Ld. PCIT cannot invoke the provision of section 263 of the Act to indirectly nullify the same. For this, he placed reliance on the judgement of the Co-ordinate Bench of Delhi Tribunal in the case of Devender Kumar Gupta vs PCIT reported in 166 taxmann.com 95 and further in the case of Alankit Associates P. Ltd. vs PCIT in ITA No.2051/Del/2024. Ld. AR therefore, prayed that the order passed u/s 263 of the Act is bad in law and deserves to be quashed.
7. On the other hand, Ld. CIT DR submits that proceedings u/s 148 of the Act were abated and stood merged in the proceedings u/s 153C subsequently initiated in the case of assessee after recording necessary satisfaction on the basis of documents found and seized during the course of search of third person. He further submits that in the order passed u/s 153C of the Act, no inquiry was made nor any addition was made on the issues for which the satisfaction of escapement of income was reached in the reasons recorded before issue of notice u/s 148 of the Act. Regarding the approval by Adl. CIT u/s 153D of the Act, the ld. CIT DR submits that the ld. PCIT is the higher authority and who has the power to examine the approval so granted. He thus submits that action of Ld. PCIT in holding the order passed u/s 153C as erroneous and pre-judicial to the interest of the Revenue is valid and deserves to be uphold on this count.
Heard the contentions of both the parties and perused the material available on record. At the outset, it is seen that the assessment order which is subject matter of revision u/s 263 was passed u/s 153C of the Act after getting statutory approval u/s 153D of the Act from the higher authorities i.e. Adl. CIT/JCIT. In the instant case, the Adl.CIT in terms of his letter vide DIN & letter No. ITBA/COM/F/17/2023-24/1061644784(1) dated 28.02.2024 has conveyed his statutory approval on the draft assessment order submitted by the AO and thereafter the AO has passed the final assessment order u/s 153C of the Act dated 04.03.2024. Further, from the perusal of the order of Ld. PCIT passed u/s 263 of the Act, it is seen that such approval has not been doubted / challenged / annulled by Ld. PCIT.
Identical issue came up before the Co-ordinate Bench of Delhi Tribunal in the case of Alankit Associates P. Ltd. (supra) wherein the Co-ordinate Bench vide its order dated 25.11.2024 has made the following observations:- 3. “We have heard the rival submissions and perused the material available on record. The return of income for AY 2013-14 was filed by the assessee on 29.09.2013 declaring total income of Rs. 8,090/-. A search and seizure action u/s 132 of the Act was carried out on 18.10.2019 at Alankit Group of companies. During the search & seizure proceedings, documents/ incriminating materials related to the assessee were found. Hence, notice u/s 153C of the Act stood issued to the assessee on 26.02.2021 and assessment proceedings were completed on 31.03.2022 u/s 153C of the Act determining income of Rs. 6,71,48,270/-. The assessee had preferred an appeal before National Faceless Appeal Centre (NFAC) and the same is pending. Pending this appeal, the ld PCIT sought to revise the order passed by the ld AO dated 31.03.2022 by treating the order passed by the ld AO erroneous and prejudicial to the interest of the revenue.
Admittedly, the assessment order sought to be revised was framed by the ld AO u/s 153C of the Act on 31.03.2022 and this assessment was framed after obtaining the prior approval of the ld Additional CIT, Central Range-7, New Delhi vide letter F. No. ADDL.CIT/CR-7/153D/2021-22/1759 dated 30.03.2022. This approval obtained from the ld Addl. CIT was not considered erroneous and prejudicial to the interest of the revenue by the ld PCIT in his revision order u/s 263 of the Act. The ld AR before us argued that the ld PCIT in order to revoke his revision jurisdiction u/s 263 of the Act should also hold even the approval proceeding granted by the ld Addl. CIT u/s 153D of the Act to be erroneous and prejudicial to the interest of the revenue. He placed reliance on the decision of this Tribunal in the case of Devender Kumar Gupta Vs. PCIT in to 1893/Del/2024 for AYs. 2015-16 to 2018- 19 dated 30.08.2024 in support of his contentions. We have gone through the said decision and we find that the ratio decidendi of the said decision squarely applies to the facts of the instant case before us. The relevant operative portion of the said decision is reproduced herein:- “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 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 Id. 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. 9.1 The catena of judicial pronouncements relied by the ld. AR have also laid down the same proposition of law and we will like to refer specifically to the judgement of the Hon'ble Madras High Court in the case of PCIT vs. Prakhar Developers (P) Ltd. (supra) where the Hon'ble Madras High Court has taken into consideration the fact that the Pune Bench order in the case of Ramamoorthy Vasudevan v. PCIT [IT Appeal Nos. 967 & 968/Pune/2016] wherein it was held that the order passed by the PCIT is unsustainable due to lack of jurisdiction in invoking section 263 of the Act for the reason that the same was passed upon taking prior approval u/s 153A of the Act, was not challenged by the Department before the Hon'ble High Court or the Hon'ble Supreme Court and, thus, the Hon'ble Madras High Court in its judgement dated 01.04.2024 has held as follows:- "8. 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 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 Conders Sections 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 canned exercitume power under Section 263 of the Act to reverse the order of Assessing Officer."
10. The judgement which the Id. DR has relied is not applicable as in that judgement, this aspect was not actually examined at all and only for the reason that there also the impugned assessment order was passed u/s 153A of the Act, does not lay down a view contrary to the one we are relying above.
11. In the light of the aforesaid discussion, we are inclined to allow grounds No.2 and 3 for AYs 2015-16 and 2016-17; and ground No.3 in AYs 2017-18 and 2018-19.
Consequently, the appeals are allowed and the impugned orders in respective years are quashed.” 5. Respectfully following the same, we hold that the revision order passed u/s 263 of the Act by the ld PCIT deserves to be quashed and is hereby quashed. Accordingly, grounds raised by the assessee are allowed.”
In the aforesaid order, the Co-ordinate Bench of Delhi Tribunal has followed the order of Hon’ble Madhya Pradesh High Court in the case of PCIT vs Prakhar Developers P. Ltd. reported in 162 taxmann.com 48 (M.P) and also of the Delhi Tribunal in the case of the Devender Kumar Gupta vs PCIT (supra).
The Co-ordinate Bench of Delhi Tribunal under identical circumstances, in the case of Aditya Gupta in vide order dated 23.07.2025 has also expressed the same view.
In view of above discussion and by respectfully following the judgement of Hon’ble Madhya Pradesh High Court and Co-ordinate Benches of the Tribunal as stated above, the revision order passed u/s 263 of the Act by the ld. PCIT is hereby, quashed. Accordingly, Ground of appeal No.4 raised by the assessee is allowed.
Since we have already allowed Ground of appeal No. 4 of the assessee, other grounds of appeal required no separate adjudication.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 12.12.2025.