Revision u/s 263 quashed; valid assessment u/ss 153C and 153D upheld, assessee's appeal allowed

ITAT Delhi set aside the revisionary order u/s 263, holding that the PCIT lacked jurisdiction to invoke revisional powers. The Tribunal found that the assessment order u/s 153C had been validly passed after obtaining mandatory prior approval u/s 153D from the Adl. CIT/JCIT, as evidenced by a specific approval letter dated 28.03.2023, and such approval was neither questioned nor annulled by the PCIT. Following its earlier coordinate bench ruling on an identical issue, ITAT held that, in the absence of any defect in the statutory approval, the order u/s 263 was unsustainable. The assessee's appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether additional grounds raising a pure question of law regarding the validity of revision under section 263, in the context of prior approval under section 153D, could be admitted at the appellate stage.

1.2 Whether an assessment order passed under section 153C after obtaining mandatory prior approval under section 153D can be revised under section 263 without the revisional authority examining and holding such approval itself to be erroneous and prejudicial to the interests of the Revenue.

1.3 Consequent upon the above, whether the revisionary order passed under section 263 was valid in law or liable to be quashed.

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2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Admission of additional grounds raising pure questions of law

Interpretation and reasoning

2.1 The Tribunal noted that the assessee, by way of additional grounds, challenged the jurisdiction of the revisional authority under section 263 on the basis that the impugned assessment order under section 153C had been passed after obtaining statutory approval under section 153D and that such approval had neither been annulled nor held invalid.

2.2 The Tribunal observed that these additional grounds involved pure questions of law going to the root of the matter and did not require any fresh factual verification, as the necessary facts were already available in the assessment and revision records placed on record.

2.3 Relying on the ratio laid down by the Supreme Court in NTPC Ltd., the Tribunal held that such pure legal grounds could be raised for the first time before the Tribunal and deserved to be admitted in the interest of justice.

Conclusion

2.4 The additional grounds were admitted for adjudication.

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Issue 2 - Power to revise assessment under section 153C when prior approval under section 153D not itself revised or held erroneous

Legal framework (as discussed)

2.5 The assessment under challenge had been made under section 153C, and prior approval of the Additional Commissioner had been obtained under section 153D before passing the assessment order.

2.6 The revisional order was passed under section 263 on the ground that the assessment order was "erroneous and prejudicial to the interests of the Revenue" due to alleged lack of inquiry regarding purported bogus purchases.

2.7 The Tribunal discussed the legal position emerging from prior decisions, including:

(a) The decision of a Coordinate Bench in Devender Kumar Gupta, holding that while exercising jurisdiction under section 263 in respect of assessments completed with prior approval under section 153D, the revisional authority must also examine the approval proceedings and record a finding that such approval itself is erroneous and prejudicial to the interests of the Revenue.

(b) The decision of a Coordinate Bench in Alankit Associates P. Ltd., which applied the above principle and held that, where approval under section 153D had not been found erroneous or prejudicial, the assessment order could not be independently revised under section 263.

(c) The decision of the High Court (as referred to and followed in the Tribunal's earlier orders) holding that, once prior approval of the competent authority has been taken in the process of framing an assessment (under provisions analogous to section 153A/153D), the same authority cannot subsequently invoke section 263 to reverse that assessment without first addressing the validity of such approval.

Interpretation and reasoning

2.8 The Tribunal found, as a matter of fact, that:

(a) The assessment order under section 153C had been passed after obtaining prior approval from the Additional Commissioner under section 153D.

(b) The revisional order under section 263 did not doubt, challenge, examine, or annul the approval granted under section 153D, nor did it record any finding that such approval proceedings were themselves erroneous and prejudicial to the interests of the Revenue.

2.9 Following the reasoning in Alankit Associates P. Ltd. and Devender Kumar Gupta, the Tribunal held that, for the purpose of section 263, the "record" includes not only the assessment order and materials before the Assessing Officer but also the record of the prior approval under section 153D, which is an integral part of the assessment process under Chapter XIV.

2.10 It was held that, without first examining the validity of the prior approval and recording a finding that such approval was vitiated and itself "erroneous in so far as it is prejudicial to the interests of the Revenue", the revisional authority could not validly characterize the assessment order alone as erroneous and prejudicial.

2.11 The Tribunal emphasized that approval under section 153D is a statutory safeguard and not a mere administrative formality, and therefore cannot be bypassed or indirectly nullified by revisional action without being specifically addressed.

2.12 The Tribunal also noted that the contrary argument advanced on behalf of the Revenue-namely that the Principal Commissioner, being a higher authority, could revise the assessment without separately disturbing the section 153D approval-stood answered by the binding ratio of the judgments already followed by the Coordinate Benches, which required scrutiny and a specific finding on the approval itself.

Conclusion

2.13 The Tribunal concluded that, in absence of any finding by the revisional authority that the approval under section 153D was erroneous and prejudicial to the interests of the Revenue, the assumption of jurisdiction under section 263 was legally untenable.

2.14 The revision order passed under section 263 was therefore held to be bad in law and was quashed.

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Issue 3 - Consequential effect on other grounds of appeal

Interpretation and reasoning

2.15 Having quashed the revision order under section 263 on the basis of Additional Ground No. 1, the Tribunal observed that the impugned revisional order stood annulled in entirety.

2.16 As a result, examination of the remaining original and additional grounds (including those challenging the very initiation of proceedings under section 153C, the requirement of incriminating material for the relevant year, and the alleged non-pendency of other proceedings) was rendered academic and unnecessary for disposal of the appeal.

Conclusion

2.17 In view of the allowing of Additional Ground No. 1 and the consequent quashing of the revision order, all other grounds of appeal were left unadjudicated as they required no separate determination.

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