Revision order u/s 263 Quashed; AO’s order passed with Section 153D approval cannot be termed “Erroneous” merely on change of opinion

ORDER

Pawan Singh, Judicial Member.- These two appeals by assessee directed against the separate orders of Pr. CIT (Central), Mumbai – 1, both dated 29.03.2025 for A.Y. 2018-19 and 2020-21. Certain facts in both the appeals are common, the assessee has raised certain common ground of appeal, therefore, with the consent of parties both the appeals were clubbed, heard together and are decided by common order to avoid the conflicting decision. For appreciation of fact, facts in A.Y. 2018-19 in ITA No. 3644/M/2025 is treated as lead case. The assessee has raised following grounds of appeal:

“1. The Ld. CIT erred in holding the assessment order dated 30/03/2023 passed u/s 143(3) r.w.s 153(C) of the Act as erroneous and prejudicial to the interest of the revenue by invoking Explanation 2 to section 263 of the Act, without appreciating the fact that, the assessing officer had completed the assessment after making complete enquiry and verification, therefore, the general observations made by Ld. PCIT for invoking revisionary powers u/s 263 ofthe Act are incorrect and contrary to material on record.

2. The Ld. PCIT erred in setting aside the assessment order passed u/s 143(3) r.w.s 153(C) dated 30/03/2023 for making fresh assessment without assigning any defects or inconsistency in the assessment order, thus invoking revisionary powers u/s 263 ofthe Act merely for make roving and fishing query is beyond the jurisdiction and unjustified.

3. The Ld. PCIT failed to appreciate that assessment order was passed in the group cases which were centralised, after analysis of all the incriminating seized material (in the case of Alankit Group). statement recorded and after mandatory approval u/s 153D of the Act from Addl CIT and therefore, to hold such an order as erroneous and prejudicial to the interest of the revenue is unjustified and bad in law.

4. The Ld. PCIT in the impugned order as failed to point out any specific defect or escapement of income or any particular issue or document which had remained to be examine, therefore, merely invoking Explanation 2 to sec. 263 in fact ofthe case is notjustified.

5. The Assessee craves leave to add, alter modify or delete one or more ground before or at the time of hearing ofAppeal.”

3. The brief facts of the case are that assessee is individual, filed his return of income for A.Y. 2018-19 on 06.07.2018 declaring income at Rs. 44,68,530/-. A search action was carried out on Alankit Group Delhi group on 18.10.2019. During search action, certain documents were extracted from laptop of Sunil Kumar Gupta, associate of Alok Agarwal of Alankit Group. Such documents were seized from the residence of Sunil Kumar Gupta, Narang Colony, Gali No. 4, Tri Nagar, Delhi. Consequent upon search action cases of Alankit group was centralized with Central Circle, New Delhi. A satisfaction note about incriminating material pertaining to assessee was drawn by DCIT, Central Circle, New Delhi. On the basis of such satisfaction note was drawn and accordingly notice under section 153C was issued to the assessee for filing return of income for various assessment years. In response to notice under section 153C, the assessee filed his return of income on 19.10.2022 declaring the same income as declared originally. The assessing officer after issuing certain show cause notice and on receiving reply thereto accepted the return of income in assessment order dated 30.03.2023. The assessment order was passed with prior approval of Additional Commissioner of Income Tax Central Range – 1, Mumbai. The assessment order was revised by Id. PCIT in his order dated 29.03.2025 passed under section 263. Before revising the assessment order, the ld. PCIT issued show cause notice under section 263 dated 17.02.2025. In the show cause notice, the ld PCIT recorded that assessment order was passed by assessing officer without any enhancement and in accepting return of income, the ld PCIT recorded that there was significant unexplained gaps in the assessment order for enhancement of taxable income which has not been made in the assessment. In various assessments, in group case led by Shashi Khandelwal for various assessment years are completed in a hasty manner. The assessing officer has not examined the facts and the seized material and left various facts with regard to taxable amount and various issues remained unaddressed. The ld. AO has not examined whether transaction represent the trading is revenue or capital in nature, thus, the assessing officer failed to decide the matter with applicable and binding the statutory provision and assessment order passed by assessing officer may be held to be erroneous and prejudicial to the interest of revenue as per the provision of section 263.

4. The assessee filed reply on 06.03.2025. The contents of reply of assessee is mentioned in para 3 of order by ld. PCIT. In the reply, the assessee stated that during assessment, the assessing officer raised necessary queries and meticulously examined all the material while passing the assessment order. The assessment order was passed with the approval of Additional Commissioner. The reply filed by assessee was not accepted by ld. PCIT. The ld. PCIT in para 14 of his order recorded that assessee’s reply and explanation along with argument have no merit and are to be rejected. The assessment order is clearly erroneous and prejudicial to the interest of revenue. The assessing officer passed assessment order without making required enquiries and verification. Thus, assessment order for A.Y. 2018-19 dated 30.03.2023 appears to be meet both the conditions of section 263. The ld. PCIT further noted that Explanation 2 section 263, the order passed by assessing officer is erroneous if it does not fulfill the condition mentioned therein. The ld. PCIT set aside the assessment order and directed the assessing officer to complete the assessment order afresh on the lines detailed by him on examination of facts and available information. Aggrieved by the order of ld. PCIT, the assessee has filed present appeal before Tribunal.

5. We have heard the submissions of ld. Authorised Representative (ld. AR) of the assessee and the Commissioner of Income Tax – Departmental Representative (CIT – DR) for the revenue. The ld. AR of the assessee submits that assessee is a Director of three companies namely Bondwell Corps Solution Pvt. Ltd. having 8.81% shareholding, Packplast India Pvt. Ltd. having shareholding of 12.16% and Foxcom Service LLP having shareholding of 13%. The assessee filed his return of income declaring income of about Rs. 45.00 lakhs (approximately). Pursuant to search action of Alankit group, New Delhi on 18.10.2019, the assessee was served with notice under section 153C dated 26.09.2022. As per satisfaction note, certain material pertaining to the family member of assessee was allegedly found. On the basis of such information, case of assessee with family member was centralized. In response to notice under section 153C, the assessee declared similar income as declared originally. During assessment, the assessing officer issued notice under section 142(1) dated 08.12.2022, copy of such notice is placed on record at page no. 18 to 22. In response to such notice, the assessee filed his reply on 20.12.2022. Along with reply, the assessee furnished all required detail as required by assessing officer, copy of reply with relevant information are placed on record at page no. 23 to 26 of paper book. The assessing officer further issued notice under section 142(1) with annexure dated 10.01.2023. In the show cause notice, the ld. AO raised question about the documents seized at the time of search in Alankit group, copy of ledger accounts of Anarkali Complex. Details of transaction with Sashikant D Khandelwal copy of statement of Sunil Gupta. In response to such show cause notice, the assessee filed his reply, copy of which is filed at page no. 51 to 150. The assessing officer again issued further show cause notice dated 27.02.2023. In the show cause notice, the assessing officer enclosed ledger accounts maintained in tally. In response to such show cause notice, the assessee furnished explanation that he had not entered into transaction with Alankit group. The assessing officer also issued another letter dated 18.03.2023 copy of which is filed at page no. 158 and 159. The ld. AR of the assessee further submits that during assessment, the assessing officer examined entire record across all cases. The assessing officer carried out due verification and only thereafter completed assessment. The assessment was approved by Additional Commissioner of Range (Central Circle) as per section 153D. Such procedural compliance clearly shows that assessment order was passed after thorough scrutiny and by application of amount by assessing officer as well as by supervisory authority that is Additional Commissioner of Income Tax. Even otherwise, the assessing officer conducted extensive enquiry and based on verification on seized material not only in case of assessee but in case of whole group. Once the assessing officer on considering material took reasonable, plausible and legally sustainable view, such view is beyond the scope of revisionary power. In other words, ld. PCIT cannot substituted his own judgment when the order passed by assessing officer is reasonable and plausible and passed after due application of mind. Section 263 can only be exercised where there is a patent error in the assessment order which resulted in loss of revenue and not only difference of opinion on same set of fact. The ld. PCIT cannot pass revision order for making fresh assessment without assigning any defect and inconsistency in the assessment order. The assessment cannot revise for making roving and fishing enquiries which is beyond his jurisdiction. The ld. PCIT cannot substitute the decision of assessing officer, which was taken on the basis of evidence available on record and considering explanation furnished during assessment proceeding. The ld. AR of the assessee reiterated his submission that when assessment order has been passed after approval from supervisory authority which strengthen the fact that order was passed after due application of mind and proper enquiry. The fulfilment of higher authority in the assessment process adds an additional layer of his scrutiny and validation of finding of assessing officer. The case was considered by central circle which was approved by additional commissioner. To support his various submission, the ld. AR of the assessee relied upon the following case law”

6. On the other hand, the ld. CIT-DR for the revenue supported the order of PCIT. The ld. CIT-DR submits that assessing officer has not carried out the required verification and passed the assessment order without application of required enquiry. The assessing officer accepted the submission of assessee. There is no bar in revising the assessment which was passed after taking approval from additional commissioner under section 153D.

7. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by ld. AR of the assessee. We find that case of assessee was reopened after issuing notice under section 153C. The assessing officer during the assessment issued show cause notice vide notice dated 08.12.2022. In the notice dated 08.12.2022, the assessing officer asked about the details of transaction with Alankit Ltd. along with all relevant documentary evidence. We find that in response to such show cause notice, the assessee filed his reply dated 20.12.2022 and furnished all required details including transaction with Alankit Ltd. and with regard to transaction with Alankit Ltd., the assessee stated that he has not entered into any transaction with Alankit Ltd. We further find that assessing officer again issued show cause notice dated 10.01.2023. In the said notice, the assessing officer required the assessee to furnish reply in response to various material extracted from the laptop of Sunil Kumar Gupta, a family member of assessee which consists of ledger account of Anarkali Complex and ledger copy of Sashikant Khandelwal. In response to such show cause notice, the assessee filed his reply dated 20.01.2023. In the reply, the assessee explained that he was Director in Bondwell Corps Solution Pvt. Ltd. and earned salary income from said company. With regard to the transaction of his family member as recorded in the statement of Sunil Kumar Gupta, the assessee stated that he never dealt with Sunil Kumar Gupta, so he cannot made his comment about data maintained by him in his computer and he is unable to understand in the nature and manner and the purpose of transaction.

8. In without prejudice submission, the assessee submits that his name is mentioned at certain place wherein it is written Mridula Khan or Mridual Khandewal, so it is unidentifiable as to which context as referred the transaction. He is unable to explain such transaction is understanding unless he has given cross examination. For transaction recorded in tally, the assessee submitted that such transaction relates back to 20 years back. The assessee accordingly denied all the transaction shown in alleged recovered material. We further find that show cause notice dated 27.02.2023 was also issued to the assessee. The assessee filed his reply dated 10.03.2023. In his reply, the assessee submitted that he never dealt with Sunil Kumar Gupta and he cannot comment as it difficult to understand the nature and purpose of transaction unless he has given cross-examination to get proper clarity on the record maintained by him. It appears that on considering the aforesaid show cause notice and reply of assessee, the assessing officer accepted the returned income.

9. We find that in the show cause notice under section 263, the ld. PCIT vaguely recorded that assessment order appears to be erroneous and prejudicial to the interest of revenue. Further, even after receipt of reply in response to show cause notice under section 263, the ld. PCIT failed to give his clear finding as to how the assessment order is erroneous. We find that assessing officer passed the assessment order with prior approval of additional commissioner, thus ld. Additional commissioner appears to have examined the record and the view taken by assessing officer which was approved by him before giving approval for passing assessment order.

10. We find that Delhi High Court in Jyoti Foundation (supra) held that where revisionary authority opined that further inquiry was required, such inquiry should have been conducted by revisionary authority himself to record finding that assessment order passed by Assessing Officer was erroneous and prejudicial to revenue. It was also held that orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the revenue, but orders which are passed after inquiry/investigation on the question /issue are not per se cannot be treated as erroneous and prejudicial to the interest of the revenue, because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. Hon’ble Gujarat High Court in S.N. Trade links (P) Ltd (supra) also held that where Pr. Commissioner invoked revision jurisdiction on ground that there was difference in amount of opening/closing balance of liabilities shown as compared to total liabilities which ought to have been disallowed under section 41(1) and, thus, order passed by Assessing Officer was erroneous and prejudicial to interest of revenue, since Assessing Officer after applying his mind and making due enquiries had taken a plausible view and passed assessment order, Pr. Commissioner could not invoke revision jurisdiction under section 263 merely because view taken by Assessing Officer was not found acceptable to him. Hon’ble Delhi Tribunal in Amira Foods (P.) Ltd. v. PCIT [2018] 63 ITR 335 (Delhi) also held that PCIT cannot treat the assessment order as erroneous and prejudicial to the interest of revenue without conducting enquiry and recording a finding of fact as to how the assessment order is erroneous. As noted earlier, the PCIT himself recorded that the assessment order appears to be erroneous without giving a clear finding, thus, in view of the aforesaid factual and legal discussion, we find that ld PCIT failed to spell out as to how the assessment order, which is passed after due verification of fact, is erroneous, hence, we do not find any justification resume jurisdiction under section 263 by ld PCIT for revising assessment order. In the result, the grounds of appeal raised by the assessee are allowed.

11. In the result, the appeal filed by the assessee for AY 2018-19 is allowed.

12. Considering the facts that in the appeal for AY 2020-21, the assessee has raised similar grounds of appeal as raised for AY 2018-19, which we have allowed, thus, following the principal of consistency, the appeal for AY 2020-21 is also allowed with similar directions.

13. In the result, both the appeals of the assessee are allowed.