Assessment approval under s. 153D and s. 54F deduction scrutiny: PCIT barred from revising under s. 263; order quashed

The dominant issue was whether the PCIT could invoke revisionary jurisdiction under s. 263 to revise an assessment completed under s. 143(3) with prior approval under s. 153D. The Tribunal held that once the AO's order is passed with the mandatory supervisory approval of the Addl. CIT under s. 153D, the PCIT is barred from revising that order under s. 263, even if the PCIT alleges lack of proper enquiry before allowing deduction under s. 54F. Consequently, the s. 263 order was quashed and the appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the Tribunal should quash the revision order under section 263 on the ground that the underlying assessment order had been passed with prior approval under section 153D, and therefore could not be revised under section 263 without addressing the approval record and its validity.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Revisional jurisdiction under section 263 where assessment was completed with prior approval under section 153D

Legal framework (as discussed by the Tribunal): The Tribunal proceeded on the basis that section 263 permits revision only if the order sought to be revised is "erroneous in so far as it is prejudicial to the interests of the Revenue". It also treated the statutory approval under section 153D, obtained before completion of the assessment, as part of the "record" connected with the assessment proceedings for purposes of examining validity of revision.

Interpretation and reasoning: The Tribunal accepted the contention that where an assessment is completed after obtaining prior approval under section 153D, the revisional authority cannot proceed to revise the assessment order under section 263 in isolation. The Tribunal reasoned that, for deciding whether the assessment is erroneous and prejudicial, the revisional authority must also consider the approval record; and unless there is a finding that such prior approval itself was vitiated and also "erroneous in so far as prejudicial to the interests of the Revenue", the assessment order cannot independently be branded as erroneous and prejudicial for section 263 purposes. The Tribunal found that in the present case the assessment had been completed with prior approval under section 153D, and on the reasoning adopted in the decisions it relied upon, the Principal Commissioner lacked jurisdiction to revise without addressing the statutory approval.

Conclusions: Since the assessment order was passed with prior approval under section 153D, the Tribunal held that the Principal Commissioner could not have validly invoked section 263 in the manner done. The revision order under section 263 was therefore quashed on this legal ground. Having quashed the revision on jurisdictional/legal grounds, the Tribunal did not adjudicate the remaining grounds on merits (including the deduction claim), holding them academic.

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