ITAT Quashes PCIT’s Revision: Section 263 Cannot Override Valid 153D Approval in Search Assessments

Tarun Kumar Sahay (HUF) filed its return for AY 2016-17, declaring income of Rs. 2.11 lakh. Pursuant to a search under Section 132 on the Alankit Group in October 2019, proceedings under Section 153C were initiated against the assessee, culminating in an assessment order dated 04.03.2024 assessing income at Rs. 3.31 crore. The assessment was completed after obtaining mandatory approval under Section 153D from the Additional Commissioner of Income Tax.

While the assessee’s appeal was pending before the CIT(A), the Principal Commissioner invoked Section 263, holding that the Assessing Officer had failed to examine certain issues and treating the Section 153C assessment as erroneous and prejudicial to the interests of the Revenue. The PCIT directed a fresh assessment.

Main Issue: Whether an assessment passed under Section 153C, after obtaining mandatory approval under Section 153D, can be revised under Section 263 without first holding the statutory approval itself to be erroneous and prejudicial to the Revenue.

Tribunal Decided: The Delhi ITAT quashed the revision order. It held that approval under Section 153D is a statutory safeguard and an integral part of a valid search assessment. Once such approval is granted, the PCIT cannot indirectly set aside the assessment under Section 263 unless the approval itself is examined and found to be erroneous and prejudicial to the Revenue.

Relying on PCIT v. Prakhar Developers Pvt. Ltd., the Tribunal held that in the absence of any adverse finding on the Section 153D approval, assumption of jurisdiction under Section 263 was invalid. Thus, the revision order was quashed, and the assessee’s appeal was allowed.

To Read Full Judgment, Download PDF Given Below