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Judgment
Per Raj Kumar Chauhan, Judicial Member:
The appeal is directed against the order dated 28.03.2025 of Ld. Principal Commissioner of Income T ax (Central), KNP at Meerut [hereinafter referred to as the “Pr. CIT” ] passed u/s 263 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] wherein the ld. PC IT has set aside the order passed by the Assessing Officer u/s 143(3) of the Act with the direction to pass fresh order after conducting proper inquiries.
Brief facts as culled out fro m the proceedings of the lo wer authorities are that or iginal return was filed by the assessee for the relevant ye ar on 22.12.20 21 declaring total inco me of Rs.24,26,000/-. A search and seizure operation u/s 132 of the Act was co nducted on 27.11.2020 on the premise s of M/s Shiv Shakti Co nstruction and the asse ssee was formerly a partner in the said e ntity. During the search operation, vario us incr iminating documents/information belonging to the assessee were found and seized from the premises of M/s Shiv Shakit Construction. T he satisfaction note was recorded by the ld. AO and proceedings u/s 153C of the Act were initiated. In pursuance to the statutory no tices, assessee filed its re turn of income for A.Y. 2021-22 on 22.12.2021 declaring an income of Rs.24,26,000/- and the notice u/s 143(2) was issued on 15.03.2022. Further, notices u/s 142(1) of the Act were issued to the assessee on vario us date s i.e. 15 .03.2022, 19.03.2022 and 15.08.2022. The assessee furnished replies which were placed on record and the replies given by the assessee were examined and after due verification, the retur n of income of the assessee was accepted and no addition u/s 143(3)/153A/153C was proposed. The said order was passed with the prior approval of Addl. Commissioner of Income Tax, Central Range, Meerut dated 29 .09.2022 w ho accorded approval u/s 153D of the Act.
The ld. PC IT on careful verification of the Assessment Order dated 29.09.2022 u/s 153A r.w.s. 143(3) of the Act perused the record and found the said assessment order to be erroneous as well as prejudicial to the interest of the Revenue because the necessary inquiries or verificatio n to examine the genuineness and correctness of the claim of the assessee had not been carried out. Accordingly a show-cause notice u/s 263 of the Act w as issued to the assessee on 05.12.2 024 requiring to explain as to why the order dated 29.09.2022 passed by DCIT , Central Circle- II, Noida u/s 153A r.w.s. 143(3) of the Act should not be considered as erroneous and so far as to be prejudicial to the interest of the Revenue . The assessee has submitted his reply through his representative giving all the necessary details regarding cash expenditure of Rs.1 ,19,00,000/- and also regard ing source of capital addition of Rs.1,80 ,75,00 0/-. The ld. PCIT did no t find merit in the said submissions of the assessee on the ground that AO has complete ly failed to notice that the name of the assessee appears on the loose document, papers and the bills recovered during the search and as such the Assessing Officer has failed carrying out any inq uiries or investigatio n related to these cash expenses incurred as reflected through the bills recovered. It was therefore co ncluded that there was no n-application of mind on the part of the Assessing Officer as he has failed necessary verification o f facts/inquiries which oug ht to have been made but has not been made and as such the assessment order was erroneous being prejudicial to the interest of the Revenue in terms of Clause A of Explanation- II u/s 263 of the Act. Accordingly, the impugned order was passed on the basis of the above facts.
Aggrieved by the order of the ld. CIT(A), the assessee filed appeal before us and raises the following grounds of appeal:
“1 . That Hon’ble PCIT is wrong i n set aside t he or der pass ed u/s 143(3) by AO for revi sio n o f assessment u/s 263 when t he issues unde r co nsider ati on have been duly inqui r ed, veri fied and examined by Ld. A O d uri ng the assessment and al l t he facts have been duly disclosed in res ponse of s how caus e notic e u/s 2 63.
2.That Hon’bl e PCIT is wr ong in set-aside t he order pass ed u/s 143(3) fo r frami ng fres h assess ment t o cash expenditures of Rs.1.19 Cr. in the c onstructio n of prop erty agai nst when t he appellant was scr uti nized conti nuously by making speci fic query i n this regard for seven year s ass essme nts u/s 153C and 143(3) and appellant denie d any relation t o seized docume nts and the plea of appellant has been dul y accept ed.
3.That Hon’bl e PCIT is wro ng i n reopeni ng the cas e for i nquiring cash expendit ur es of Rs.1.19 Cr . whe n all the seized d ocuments have been challenged by appellant and none of the doc uments is related to current year whic h have also been exami ned and verifi ed in prec eding assessments.
4.That Hon’ble PCIT is wr ong in reopening t he case for infusion of capital of Rs.1,80,75,000/- i n t he firm M/s Rawat Associates when appella nt has submitt ed reply in res ponse to speci fic query i n thi s regard made by A O in show caus e noti ce and appellant replied in detail clarifyi ng that these are transf er entri es from appellant personal account from genui ne source, to firm and it is not fres h capit al ge neratio n.”
During the hearing o n 14.11.2025, the assessee raised additio nal grounds of appeal under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 by moving an ap plication, the additio nal ground enumerated therein as under:
“That assess ment or der passed u/s 143(3) r.w.s. 153C of the Act after get ting approval of Additio nal C ommissio ner u/s 153D of t he A ct coul d not be r evised u/s 263 of the Act.”
We have heard the ld. AR and the ld. DR on this additional ground. The ld. AR submitted that the impugned order is not legally sustainable because the assessment order accepting the returned income was passed after due approval u/s 153D of the Act accorded by Additio nal Commissioner of Income Tax, Centr al Range, Meerut dated 29.09.2022. He further argued that the additional ground may be admitted and adjudicated in favour of the assessee as the similar issue has already been decided by the Co-ordinate Bench of ITAT in Devender Kumar Gupta Vs. PCIT in ITA Nos. 1890 to 1893/Del/2024 order dated 30.08.2024.
The ld. DR on the other hand opposed the raising of the additio nal ground on the ground that the facts of the case in hands are different from the facts in IT A No. 1890 to 1893/Del/2024 (supra) because the present case is u/s 153C whereas the case in ITA No. 1890 to 1893/Del/2024 (supra) u/s 153A of the Act. The ld. DR therefore relied upon the judgment of the ld. PCIT and prayed for dismissal of the appeal.
We have considered the rival submissions. Regard ing the admission of the additio nal ground, the same being a purely question of law and need no factual adjudication or material to be produced or no new material is required to be produced on behalf of the assessee. Hence, in view of the law laid down in Natio nal Thermal Power Company Limited vs. CIT (1998) 229 ITR 383 (SC), the additio nal ground is admitted.
We deem it expedient to fir st adjudicate the additional ground raised in the present case as reproduced in par No. 5 above.
We have considered the submissio ns of the ld. AR on behalf of the assessee that the matter is covered by the order of the Co-ordinate Bench of ITAT in Devender Kumar Gupta Vs. PCIT ( supra). We are not convinced by the arguments raised by the ld. DR on behalf of the Revenue that the factual matrix is differe nt simply on the ground that case in Devender Kumar Gupta Vs. PCIT (supra) was u/s 153A of the Act and the case in hand is u/s 153C of the Act. However, the approval u/s 153 D of the Act is similar in bo th the cases and on the basis of which the order passed u/s263 of the Act was set aside by the learned Co-ordinate Bench. Hence, the questio n before us is whether because of the reasoning given by the learned Co-ordinate Bench re ferred above, the order u/s263 of the Act need to be set aside because the assessment order was passed after due approval accorded u/s153D of the Act by the competent authority. It was categorically observed by the learned Co-ordinate Be nch that so long the said approval stands and is not declared illegal, the exercise of the jur isdiction u/s 263 of the Act is bad and co ntrary to law . W e deem it expedient to extract the relevant portion of the judgment of the lear ned Co-ordinate Bench which would make the things clear, as under:
7.We have given t houg htful con sid eration to th is aspect of th e controv ersy and we find that a specific g round No. 2 is raised by th e ass essee as fo ll ows:-
“2.That the a sst t. Order passed u /s 153A r.w.s. 143 (3) after g etting an approval of A ddl. Commission er U/s 153 D cou ld not be revised u /s 26 3, hence Ld. P CIT exceed ed his j urisdiction in invoking S ec.26 3 in respect of impu gned asstt . O rder f ramed u/s 153A r.w.s. 153D .”
8.The assessment orde rs m ake it categorical that the sam e are passed wit h statutory a pprova l o f A ddl. Commissioner of In come-tax, C entra l R ange, Gurg aon communicated vide his office letter F. No. A ddl.CIT(C R )/GGM/202122/664 da ted 24.09.2021 in accorda nce with section 15 3D of th e Inco me Tax A ct .
9.We find t hat in t he impug ned orde r t he ld. PCIT has not ta ken account of t he fact tha t the assessm ents wer e comp let ed aft er p ri or app roval of t he competent aut hority. Thu s, we are of t he consider ed view that at t he time of exam ining th e issue as to i f th e assessmen t or der is er rone ous so far as prej udicia l to t he interest of t h e R evenue, th e ld. r evisional aut hor ity is not only supposed to see the assessmen t record of A O, but also t he recor d of th e approval whic h as far as t he r evisi onal aut hority is concerned b ecome s “record” of the quasi j udicial authority whose ord er is bei n g exam ined by invok ing the r evisi on al j urisdicti on. T herefo re, without giving a finding that the prio r appro val u /s 153 D wa s vit ia te d and was also er ro neous so fa r as prejudicial to the interest o f the Re ve nue, th e assessment o rder independent ly canno t be he ld to be err o ne ous so far as prejudicial to the inte rest o f the Revenue.
9.1T he cat ena of j udicia l pron ou ncements relied by the l d. AR have also laid down th e sam e prop osition of l aw and we will lik e to ref er specifical ly to t he j udgement of th e Hon’bl e Mad ras Hig h Court in the case of PCIT vs. Prak har Develope rs (P) Lt d . (supra) whe re the Hon ’bl e Madras High C ourt has t ak en into consid eration t h e fa ct t hat t he Pun e B ench order in th e case o f R am amo ort hy V asud evan v. PC IT [I T A ppeal Nos. 96 7 & 968 /Pune /2016] wherein it was held that the order passed by the PC IT is unsustainable du e to lack of j urisd icti on in invok ing section 263 of th e Act for th e reason th at the sam e was pa ssed upon taki ng prio r ap proval u/s 153 A of the Act , was not challenged by th e Departm ent before t he Hon’b le H igh C ourt o r the Hon ’b le S upreme Cour t and, t hus, the Hon’bl e M adra s Hi gh Cou rt in it s j udgemen t dat ed 01.04.2024 ha s held as fo llows:-
“8.Even othe rwise, as per Section 2 63 of t he A ct, th e Principal C hief C om missioner o r Principal Com missioner or C omm issione r ma y call fo r an d exam ine t he rec ord of an y proceeding und er th is A ct and if he con sid ers that an y ord er passed therein by th e A ssessing Officer , is er rone ous in s o fa r as it is preju dicial t o the int erests of th e R evenue, he m ay m ak e enquiry as he deem s necessary, p ass such o rder t hereon as t he circumstances of t he case just ify. For passin g any order under Se ct ions 143 (3) & 153A of the A ct, prio r a ppro va l of J oin t Com missi oner is r equired unde r Sect ion 153A of th e A ct, or P rincipa l C om missioner or Comm issioner as the case may be. T heref ore, once p rio r app roval ha d already been ta ken b y the Assessing Officer and accepted the retu rn subm itted by t he assessee, then the sam e auth orit y cannot exer ci se the power under S ect ion 2 63 of th e Act to reve rse th e ord e r of A ssessing Offic er.”
10.The j udg ement which t he ld. DR has relied is not ap plicable a s in that judgem ent , this aspect was not actually examin ed at all and only f or t he reason that t her e also the im pugned assessmen t ord er wa s passed u/s 153A of the A ct, does not lay down a vie w contrary to the one w e are relying above.
11.In th e light of th e aforesaid discussion, we are incli ned to al low g roun ds N o.2 and 3 for A Ys 20 15-16 and 2016-17; an d ground N o.3 in AYs 2 017-18 an d 20 18-19. C onseq uent ly, t he appeals are allow ed and the im pugned orders in respective yea rs are quash ed.”
Thus on perusal of the above findings it becomes clear that the factual matrix of the case in hand is to tally covered by the reasoning given by the ld. Co-ordinate Bench Devender Kumar Gupta Vs. PCIT (supra). In the case in hand also the ld. PCIT has exercised jurisdiction u/s 263 of the Act despite the assessment order having been passed after the approval accorded u/s 153D of the Act by the co mpetent authority i.e. Addl. Commissioner of Income Tax, Central Range , Meerut. The ld. PCIT in the impugned order has not given any finding that the prior approval u/s 153D of the Act was vitiated or erroneous so far as prejud ice to the interest of the Revenue.
We therefore find that the ld. PC IT was not justified in exercising the jurisdiction u/ s 263 of the Act because the sanctio n accorded u/s 153D was neither declared invalid nor set aside by any competent authority. The impugned order is according ly set aside and the additional ground raised in the appeal is accordingly allowed. In view of the decision on additio nal ground, the decision on other ground in appeal is rendered acade mic and we have not decided the same.
In the result, the appeal of the assessee is accordingly allowed in above terms.