The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that where an assessment order under Section 143(3) read with Section 153C has been passed after obtaining mandatory prior approval under Section 153D of the Income Tax Act, such approval forms an integral part of the assessment record, and the PCIT cannot validly invoke revisional jurisdiction under Section 263 of the Income Tax Act without examining that approval and recording a finding that the approval under Section 153D itself is vitiated or infirm in law.
In the absence of such a finding, the assessment order cannot independently be treated as erroneous and prejudicial to the interests of the revenue. Accordingly, the Tribunal held that the PCIT had no power to revise the assessment orders under Section 263 in the present case, since the assessments had been passed with the approval of the Addl. CIT under Section 153D, and therefore the revision orders were set aside.
The Division Bench comprising Justice Saktijit Dey (Vice President) and Justice Prabhash Shankar (Accountant Member) observed that Section 153D mandates prior approval before passing an assessment or reassessment order in search-related cases, and that such approval is not a mere procedural formality but an integral part of the assessment proceeding. It noted that an assessment order under Section 153A/153C is incomplete without approval under Section 153D.
The Tribunal further observed that where an assessment order is passed under Section 143(3) read with Section 153C after obtaining mandatory approval under Section 153D, the approval becomes part of the assessment record. Therefore, while invoking revisional jurisdiction under Section 263, the PCIT is required to examine not only the assessment order but also the approval granted under Section 153D.
The Tribunal found merit in the appellant’s argument that the PCIT had revised the assessment order without first revising, examining or recording any infirmity in the approval granted under Section 153D. In the Tribunal’s view, once no defect was found in the approval under Section 153D, assumption of jurisdiction under Section 263 could not be sustained.
The Tribunal also observed that the AO had examined the seized material, considered the appellant’s replies, and after carrying out enquiry, made additions where considered necessary. It held that once adequate enquiry had been conducted and a permissible view had been taken by the AO, the PCIT could not invoke Section 263 merely to direct the AO to re-conduct enquiry in the manner the PCIT deemed fit.
Briefly, the appeals were filed by Shashi Kant Damodar Khandelwal for AYs 2014-15 to 2020-21 and by Sunita Khandelwal for AY 2014-15 against revision orders passed by the PCIT under Section 263 of the Income-tax Act, in relation to assessment orders passed under Section 153C read with Section 143(3). For AY 2014-15, the appellant had originally filed a return declaring total income of Rs. 21.68 lakhs. Thereafter, the Assessing Officer completed the assessment under Section 143(3) read with Section 153C determining total income at Rs. 3.15 crores by making an addition of Rs. 2.93 crores under Section 69A as unexplained income.
The assessment proceedings arose out of a search and seizure action under Section 132 conducted in the Alankit Group cases. During search, hard and soft copy incriminating material was seized, and from the analysis of digital evidence recovered from Sunil Kumar Gupta, who was stated to be a key employee/accountant of Alok Kumar Agarwal, the department formed a view that parallel books were maintained and accommodation entries were being provided to various persons/entities including the appellant.
The seized material and ledgers allegedly reflected that the appellant had taken accommodation entries through entities such as Diwakar Commercial Pvt Ltd. and New Wave Commercial Pvt Ltd. The AO issued notices and, after considering the appellant’s explanation that SWD Industries had received legitimate loans through banking channels and had furnished supporting documents, rejected the explanation and made the addition under Section 69A.
Subsequently, the PCIT examined the assessment records and formed a view that the AO had failed to verify crucial issues arising from the seized material, including genuineness of parties, flow of funds and creditworthiness, and that the assessment order was erroneous and prejudicial to the interests of the revenue under Section 263 read with Explanation 2. The PCIT therefore set aside the assessment and directed the AO to complete the assessment de novo after conducting necessary enquiry and verification.
Appearances:
Advocates Salil Kapoor, Sumit Lalchandani, and Ananya Kapoor, for the Appellant/ Taxpayer
CIT-DR Amit Kumar Singh, for the Respondent/ Revenue
