Case Law Details
Manohar & Filaments Pvt. Ltd. Vs PCIT (ITAT Delhi)
Search Assessment Has Boundaries: Revision Beyond 153C Fails- 153D Approval Shields Assessment from 263 Revision;
No Incriminating Material, No 263: ITAT Reins in PCIT- PCIT Can’t Bypass Statutory Approval: 263 Order Quashed
Delhi ITAT quashed revision order u/s 263 holding that PCIT cannot assume revisional jurisdiction over an assessment completed u/s 153C after due approval u/s 153D, unless such statutory approval itself is shown to be erroneous & prejudicial to Revenue. In Manohar & Filaments Pvt. Ltd vs. PCIT (Central)-3, ITA No. 2645/Del/2025, AY 2017-18, Tribunal noted that assessment was an unabated search assessment completed u/s 153C/143(3) with prior approval of JCIT u/s 153D. PCIT sought to revise the order directing fresh enquiries into alleged non-genuine loan transaction of ₹5.50 lakh, despite absence of any incriminating material or reference in satisfaction note.
Following Delhi ITAT decisions in Alankit Associates Pvt. Ltd, Devender Kumar Gupta and relying on MP HC ruling in PCIT vs. Prakhar Developers Pvt. Ltd. (162 taxmann.com 48), Tribunal held that revisional authority must examine not only AO’s order but also the statutory approval forming part of the “record”. Without holding such approval to be vitiated, PCIT cannot invoke s.263. Tribunal further observed that PCIT travelled beyond scope of s.153C by directing enquiry on issues not arising from seized material. Accordingly, revision order was quashed & other grounds were left open as academic
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the assessee against the order of the Ld.PCIT (Central)-3, Delhi vide order dated 11.03.2025 for the A.Y. 2017-18 passed u/s.263 of the Act.
2. The assessee has raised following grounds of appeal :-
1. On the facts and circumstances of case and in law, the Id. PCIT, Central 3, New Delhi erred in initiating proceedings under section 263 of Income Tax Act, 1961 (Act) by wrongly assuming jurisdiction under section 263 of the Act and hence, the order passed by the Ld. CIT under section 263 of Act is bad in law, without jurisdiction and barred by limitation.
2. On the facts and circumstances of case and in law, the Id. PCIT erred in setting aside the assessment and has also erred in holding that the original assessment order passed by the Assessing Officer under section 153C/143(3) of Act was erroneous and prejudicial to the interest of the revenue.
3. On the facts and circumstances of case and in law, the directions issued by the Ld. PCIT under section 263 of Act are erroneous, vague, ambiguous and untenable and, therefore the order u/s 263 of the Act passed by the Ld. PCIT is liable to be quashed.
4. On the facts and circumstances of the case and in law, the Id. PCIT erred in setting aside the assessment order without appreciating the fact that the same was passed after taking due approval u/s 153D of JCIT.
5. On the facts and circumstances of the case and in law, the Id. PCIT erred in stating that the assessment passed by the assessing officer was without making inquiries or verification which should have been made.
6. On the facts and circumstances of case and in law, the Ld. PCIT erred in invoking the provisions of section 263 of the Act and thereby directing the Assessing Officer to the carry out detailed enquiries on issue of alleged non-genuine transactions of Rs. 5,50,000/-.
7. On the facts and circumstances of case and in law, the order passed by PCIT u/s 263 is liable to be quashed as it is arbitrary and against the principles of natural justice
8. On the facts and circumstances of case and in law, order passed by PCIT u/s 263 is liable to be quashed as the directions given by PCIT are beyond the scope of provisions of section 153C of the Act.
3. The Ld. Counsel for the assessee referring to ground No.1 and 4 of grounds of appeal, at the outset, submitted that the order passed u/s.263 of the Act by the Ld.PCIT is bad in law since the assessment order for A.Y.2017-18 in the case of the of the assessee was passed u/s.153A after obtaining approval u/s.153D of the Act from the competent authority. The Ld. Counsel for the assessee placing reliance on the decision of the Hon’ble Madhya Pradesh in the case of PCIT Vs.Prakhar Developers Pvt. Ltd. reported in 162 com48 (2024) submitted that once prior approval had already taken by the AO, the Ld. PCIT cannot invoke the provision of Section 263 of the Act. Reliance was also placed on the decision of the coordinate Bench in the case of Alankit Associates Vs. PCIT in ITA No. 2051/Del/2024 dated 25.11.2024, Devender Kumar Gupta Vs. PCIT in ITA No. 1890 to 1893/Del/2024 dated 30.08.2024.
4. The ld. Counsel for the assessee further submitted that assessment for the A.Y.2017-18 is unabated assessment and the assessment was completed u/s.153C by disallowing interest expenses on unsecured loans. The Ld. Counsel for the assessee submitted that the Ld. PCIT set aside the assessment order to make enquiries in respect of loan transactions amounting to Rs.5,50,000/- when the loan transactions are not part of any seized material nor they are part of the satisfaction note recorded by the AO. Therefore, the Ld. Counsel submitted that the Ld.PCIT travelled beyond the scope of Section 263 in holding that the assessment order passed u/s.153C is erroneous and prejudicial to the interest of the revenue.
5. The ld. Counsel for the assessee submitted that when there was no incriminating materials were found in the course of search in respect of an issue then no addition can be made while completing assessment u/s.153A or U/s. 153C of the Act. Reliance was placed on the decision of the Hon’ble Jurisdiction Delhi High court in the case of PCIT Vs. TDI Infrastructure Ltd. (2024) 169 com223.
6. On the other hand the Ld. DR strongly objected to the contentions raised by the Ld. Counsel for the assessee. The ld. DR further submitted that the Ld. PCIT has the authority to invoke provisions of Section 263 of the Act even though the assessment u/s.153C is completed by taking prior approval u/s.153D of the Act. The Ld. DR vehemently submitted that taking prior approval u/s.153D for completion of assessment u/s.153C shall not come in the way of the powers exercised by the Ld.PCIT u/s.263 of the Act.
7. Heard rival contentions and perused the orders of the authorities below. First contention of the Ld. Counsel for the assessee in ground No. 1 and 4 of grounds of appeal is that when once the AO completed the assessment u/s.153A/153C by taking prior approval u/s.153D of the Act, the Ld.PCIT cannot invoke provisions of section 263 and hold that such assessment order is erroneous and prejudicial to the interest of the revenue. We observed that identical issue came up for consideration before the coordinate Bench of the Tribunal in the case of Alankit Associates Pvt. Ltd. Vs. PCIT in ITA No. 2054/Del/2024 dated 25.11.2024 wherein the Tribunal held as under :-
“3. We have heard the rival submissions and perused the material available on record. The return of income for A.Y. 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.
4. Admittedly, the assessment order sought to be revised was framed by the id AQ u/s 153C of the Act on 31.03.2022 and this assessment was framed after obtaining the prior approval of the Id Additional CIT. Central Range-7, New Delhi vide letter F.No.ADDL.CIT/CR-7/1530/2021-22/1759 dated 30.03.2022. This approval obtained from the Id Addl. CIT was not considered erroneous and prejudicial to the interest of the revenue by the id PCIT in his revision order u/s 263 of the Act. The id AR before us argued that the Id PCIT in order to revoke his revision jurisdiction u/s 263 of the Act should also hold even the approval proceeding granted by the Id 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 ITA Nos. 1890 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 Id. 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 Id. 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 mrcumstances 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 ld. PCIT deserves to be quashed and is hereby quashed. Accordingly, grounds raised by the assessee are allowed.”
8. Similarly in the case of Devender Kumar Gupta Vs. PCIT in ITA No.1890 to 1893/Del/2024, dated 30.08.2024 the coordinate Bench considering various judgments of various Tribunals and the decision of the Hon’ble Madhya Pradesh High Court on identical issue held as under :-
“5. Further, the Id. AR has submitted that in regard to the assessment orders under consideration for the four years, the assessment orders were passed u/s 153A of the Act after approval of Addl. CIT u/s 1530 dated 24.09.2021. It was submitted by the Id. AR that an order which has been subject of approval u/s 153D of the Act cannot be subject to revision u/s 263 of the Act and for that the id. AR has relied the following judicial pronouncements:-
i) PCIT vs. Prakhar Developers Pvt. Ltd. (2024) 162 taxmann.com 48 (MP),
ii) Smt. Abha Bansal vs. PCIT (2021) 132 taxmann.com 231 (Del-Trib);
iii) Gyan Infrabuild (P) Ltd. vs. PCIT (2024) 162 taxmann.com 664 (Patna);
vi) BU Bhandari Schemes v. Pr. CIT [IT Appeal Nos. 637 to 641/Pune/2018 dated 14-11-2018)
v) Vishwa Infraways (P.) Ltd. v. CIT (Central) [IT Appeal Nos: 596,597 & 599/Pune/2015];
vi) Rasi Kalal M. Dhariwal (HUF) v. CIT [IT Appeal Nos. 1102 to 1107/Pune/2014),
vii) Ramamoorthy Vasudevan v. PCIT [IT Appeal Nos. 967 & 968/Pune/2016];
viii) Dhariwal Industries Ltd. v. CIT [IT Appeal Nos. 1108 to 1113 (Pune) of 2014, dated 23-12-2016];
ix) Smt. Nama Chinnamma v. Dy. CIT [IT Appeal Nos. 1150-1157 (Hyd.) of 2015, dated 9-8-2017):
x) Trinity Infraventures Ltd. v. Dy. CIT [IT Appeal Nos. 584-589 (Hyd.) of 2015, dated 4-12-2015);
xi) S. Satyanarayana v. Syed Rasiuddin [IT Appeal No. 901 (Hyd.) of 2014];
xii) Mehtab Alam v. Dy. CIT [IT Appeal No. 288/Luck/2014, dated 18-11-2014);
xiii) Dharmendra Kumar Bansal v. CIT (20141 48 com53/2015) 152 ITD 406 (p. -Tr)
&
xiv) CIT vs. Dr. Ashok Kumar, Proprietor, S.S. Nursing Home, ITA 192/2000, order dated 06.08.2012
6. This is countered by the id. DR by relying the order of Nagpur Bench of this Tribunal in ITA No. 162/Nag/2018, order dated 01.04.2022 in M/s Shrigopal Rameshkumar Sales Pvt. Ltd. vs. ACIT.
7. We have given thoughtful consideration to this aspect of the controversy and we find that a specific ground No.2 is raised by the assessee as follows
“2. That the asstt. Order passed u/s 153A u/s 143(3) after getting Commissioner U/s 1530 could not be revised u/s 253, hence Ld. PCIT exceeded his jurisdiction in approval of Addl. invoking Sec. 263 in respect of impugned asstt. Order framed u/s 1534rwis. 1530″
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 1530 of the Income Tax Act.
9. We find that in the impugned order the id. 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 1530 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 Id. 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, 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.”
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 Nos.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.”
9. Facts being identical, respectfully following the abovesaid decisions we hold that the Ld.PCIT travelled beyond the scope of section 263 in holding that the assessment order passed u/s.153C is erroneous and prejudicial to the interest of the revenue. Thus, we hold that the order passed by the Ld.PCIT u/s.263 of the Act is liable to be quashed on this ground and accordingly the same is quashed.
10. Since we have quashed the order of the Ld.PCIT passed u/s.263 by allowing ground No. 1 and 4 all other grounds are not required be re-adjudicated and they are left open.
11. In the result, the appeal of the assessee is partly allowed as indicated above.
Order pronounced in the open court on 31.12.2025.
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