Revision over alleged cash payments in TDR purchase despite Section 153D approval; Section 263 action quashed on merits.

The dominant issue was whether the PCIT could validly revise an assessment framed u/s 153C r.w.s. 143(3) despite prior administrative approval u/s 153D, and whether the assessment was "erroneous and prejudicial to the interests of the Revenue" u/s 263 regarding alleged cash payment in a TDR purchase. The Tribunal held that u/s 153D approval does not fetter the PCIT's jurisdiction u/s 263. However, on merits, it found the AO had conducted adequate enquiries, called for and verified documents, and taken a plausible view, including recording a key statement denying linkage of seized notings to the assessee, and the Revenue showed no unmet enquiry or incriminating material; the revision was quashed and the assessee's appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the revisionary jurisdiction under section 263 could be exercised in respect of an assessment framed in a search-related case after administrative approval under section 153D, and whether such approval constrained or nullified the Principal Commissioner's power to revise.

(ii) Whether the assessment order was "erroneous and prejudicial to the interests of the Revenue" on the ground of alleged lack of proper enquiry/verification regarding the purported payment of Rs. 4.20 crores towards purchase of TDR, or whether the Assessing Officer had made adequate enquiries and adopted a plausible view on the available material.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Effect of section 153D approval on section 263 revision

Legal framework (as discussed by the Court): The Tribunal treated approval under section 153D and passing of assessment under section 143(3) in search cases (153A/153C) as part of a single comprehensive statutory procedure.

Interpretation and reasoning: The Tribunal rejected the objection that, because the assessment was passed after administrative approval under section 153D, treating the assessment as erroneous would render it void ab initio and beyond revision. It held that section 153D approval does not curtail the Principal Commissioner's powers, and that the power under section 263 remains available notwithstanding such approval.

Conclusion: The Tribunal held that the Principal Commissioner's authority to invoke section 263 in such circumstances is not barred merely because the assessment had been approved under section 153D.

Issue (ii): Whether section 263 was validly invoked on alleged non-enquiry regarding the Rs. 4.20 crore TDR payment

Interpretation and reasoning: The Tribunal examined whether the Assessing Officer had failed to conduct enquiry/verification about the alleged transaction reflected in seized notings. It found that during assessment proceedings the Assessing Officer (a) recorded a statement of the concerned person under section 131, where he did not recall making a deal with the alleged persons; (b) examined the bank account and found no such payment by the assessee; and (c) considered affidavits disputing that the seized notings ("Malaybhai") could be linked to the assessee. The Tribunal also noted internal inconsistency in the revisionary reasoning: the revision order began by alleging payment by the assessee, but then shifted towards alleging payment by a firm, while ultimately fastening the alleged cash payment on the assessee in his individual capacity. The Tribunal further recorded that the Revenue could not identify any specific enquiry that the Assessing Officer still ought to have conducted, nor place any incriminating material from the search directly implicating the assessee.

Conclusion: Since the Assessing Officer had made enquiries, called for documents, verified evidence, and taken a credible view on the material, the assessment could not be treated as erroneous and prejudicial on the basis adopted in revision. The Tribunal therefore set aside the section 263 order and allowed the appeal.

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