Tribunal quashes orders under Section 263, emphasizes need for error and prejudice. Approval under Section 153D crucial.

The Tribunal allowed all the appeals of the assessee, quashing the orders passed under Section 263 by the Ld. PCIT. It reiterated that for the exercise of jurisdiction under Section 263, the order must be both erroneous and prejudicial to the revenue. The Tribunal held that in the absence of incriminating material, the assessment framed under Section 143(3) read with Section 153A cannot be considered erroneous or prejudicial to the revenue. Additionally, it emphasized that revisionary jurisdiction under Section 263 is invalid if the approval under Section 153D is not revised, and upheld the validity of deductions claimed under Section 35(2AB) based on DSIR approval.

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Issues Involved:
1. Jurisdiction exercised by the Ld. PCIT under Section 263 of the Income Tax Act.
2. Validity of the assessment framed under Section 143(3) read with Section 153A without incriminating material.
3. Approval under Section 153D and its impact on revisionary jurisdiction under Section 263.
4. Deduction claim under Section 35(2AB) and its verification.

Detailed Analysis:

1. Jurisdiction Exercised by the Ld. PCIT under Section 263 of the Income Tax Act:
The primary issue raised by the assessee was the invalid jurisdiction exercised by the Ld. PCIT under Section 263 of the Act. The Ld. PCIT observed that the AO allowed the claim of deduction under Section 35(2AB) without proper verification, rendering the assessment order erroneous and prejudicial to the revenue. The Tribunal noted that for the exercise of jurisdiction under Section 263, the order must be both erroneous and prejudicial to the interest of the revenue. The Tribunal quashed the order passed under Section 263, citing that the AO's order was neither erroneous nor prejudicial to the interest of the revenue, especially in the absence of incriminating material.

2. Validity of the Assessment Framed under Section 143(3) read with Section 153A without Incriminating Material:
The Tribunal examined whether the AO could make additions in an unabated assessment year without incriminating material found during the search. It was held that in an unabated assessment year, additions can only be made based on incriminating material found during the search. The Tribunal cited decisions from the Hon'ble Bombay High Court and the Hon'ble Delhi High Court, which supported the view that in the absence of such material, the AO's assessment cannot be considered erroneous or prejudicial to the revenue.

3. Approval under Section 153D and its Impact on Revisionary Jurisdiction under Section 263:
The Tribunal addressed the issue of whether an assessment order passed with the approval of the Additional CIT under Section 153D can be revised without cancelling or revising the approval itself. It was held that the approval under Section 153D is a statutory requirement, and without revising this approval, the Ld. PCIT cannot exercise jurisdiction under Section 263. The Tribunal relied on multiple judicial pronouncements which established that the revisionary jurisdiction under Section 263 is invalid if the approval under Section 153D is not revised.

4. Deduction Claim under Section 35(2AB) and its Verification:
The Tribunal considered the validity of the AO allowing the deduction under Section 35(2AB) based on the approval granted by the Department of Scientific and Industrial Research (DSIR). It was argued that once the research facility is approved by DSIR, the AO has no jurisdiction to question the deduction. The Tribunal agreed with this view, citing a decision from the Co-ordinate Bench of Kolkata, which held that the AO must allow the deduction if the research facility is approved by DSIR. The Tribunal quashed the order passed under Section 263, affirming that the AO's order was neither erroneous nor prejudicial to the revenue.

Conclusion:
The Tribunal allowed all the appeals of the assessee, quashing the orders passed under Section 263 by the Ld. PCIT. The Tribunal reiterated that the revisionary jurisdiction under Section 263 cannot be exercised without satisfying the twin conditions of the order being erroneous and prejudicial to the revenue, and without revising the statutory approval under Section 153D. The Tribunal also upheld the validity of deductions claimed under Section 35(2AB) based on DSIR approval.

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