2025 (7) TMI 1943 - AT - Income Tax

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 ... Revision u/s 263 - “lack of enquiry” or “lack of investigation” - assessment order had been passed with prior approval u/s 153D - assessment order is held to be erroneous in so far as it is prejudicial to the interest of the revenue since the AO did not make any proper inquiry before allowing claim of the assessee u/s 54F - HELD THAT:- Since in the case on hand the assessment u/s 143(3) of the Act was completed on 12.05.2021 by the AO with the prior approval u/s 153D of the Act of the Addl. Commissioner of Income Tax. Therefore, since the assessment was completed with the prior approval of Addl. CIT u/s 153D PCIT could not have revised the assessment order invoking the revisionary powers u/s 263 of the Act. Thus, respectfully following the above decisions, we quash the order passed by the Ld. PCIT u/s 263 of the Act for the AY 2019-20 by allowing ground of the grounds of appeal. Appeal of the assessee is allowed. 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.