Revision Order Under Section 263 Invalid Without Finding Mandatory Approval Under Section 153D Erroneous

By | October 17, 2026
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Revision Order Under Section 263 Invalid Without Finding Mandatory Approval Under Section 153D Erroneous

Issue

Whether the PCIT can validly invoke revisionary powers under Section 263 to set aside an assessment completed under Section 153C without recording a specific finding that the prior mandatory approval granted by the JCIT under Section 153D was erroneous or legally vitiated.

Facts

  • Requisition & Search Trigger: Pursuant to a requisition under Section 132A in the case of an employee from whom cash was seized, the assessee (proprietor of a money changing business) acknowledged the cash as business receipts recorded in his books.
  • Returns Filed: Notices under Section 153C were issued for AY 2019-20 and AY 2020-21. The assessee filed returns declaring NIL income for both assessment years.
  • Inquiry & Compliance:
    • During proceedings, the Assessing Officer issued notices under Section 142(1).
    • The assessee submitted sworn statements, books of account (cash book), and documentary evidence substantiating cash gifts of approximately ₹84 lakhs received in FY 2018-19 from eleven individuals.
  • Assessment & Approval: The AO completed the assessment orders under Section 153C read with Section 143(3) accepting the NIL income return after obtaining the mandatory prior approval from the JCIT under Section 153D.
  • Revisionary Action: The PCIT invoked Section 263 for both assessment years, questioning the genuineness of the cash gifts and non-verification of the cash book, and set aside the assessment orders for de novo consideration.
  • Absence of Finding on Approval: The PCIT did not record any finding or observation indicating that the Section 153D approval granted by the JCIT was erroneous, mechanical, or legally invalid.

Decision

  • Jurisdictional Threshold Not Met: For an assessment order passed under Section 153C with statutory approval under Section 153D, the revisionary authority must first establish that the approval granted by the competent authority (JCIT) was legally vitiated or erroneous.
  • Lack of Finding on Section 153D Approval: In the absence of any specific finding undermining the validity of the JCIT’s approval under Section 153D, proceedings under Section 263 cannot be validly invoked.
  • Revision Order Invalidated: The revision orders passed by the PCIT under Section 263 were unsustainable and set aside. (In favour of assessee)

Key Takeaways

  • Interplay Between Section 263 and Section 153D Approval: Where an assessment order undergoes mandatory supervisory review and approval under Section 153D by a JCIT, a PCIT exercising Section 263 revisionary jurisdiction cannot bypass or ignore the legal validity of that approval.
  • Prerequisite for Section 263 in Search Cases: To hold a Section 153C search assessment order as “erroneous and prejudicial to the interest of Revenue,” the PCIT must explicitly record how the Section 153D statutory approval was granted without due application of mind or suffered from legal infirmity.
  • Protection Against Summary Re-Inquiry: When an AO conducts inquiries, examines documentary evidence regarding cash gifts/cash books, and secures higher administrative approval, revision under Section 263 cannot be used to arbitrarily re-open verified issues.
IN THE ITAT AMRITSAR BENCH
Sandeep Singh
v.
Principal Commissioner of Income-tax, Central
Udayan Das Gupta, Judicial Member
and S. Rifaur Rahman, Accountant Member
IT Appeal No. 391 & 402 (Asr) OF 2025
[Assessment years 2019-20 and 2020-21]
SEPTEMBER  15, 2026
Rohit Kapoor, Adv. and V.S. Aggarwal, ITP for the Appellant. Mrs. Roshanta Kumari Meena, CIT. DR for the Respondent.
ORDER
Udayan Dasgupta, Judicial Member. – These two appeals are filed by the assessee against the orders of the Ld PCIT (Central) Ludhiana, both passed u/s 263, one for Asst year: 2019-20 dated 07.03.2025 and the other for the Assessment Year 2020-21 dated 18/03/2025.
Asst year : 2019-2020
2. Grounds of appeal taken in ITA No. 391/Asr/2025 (AY 2019-20) in Form 36 are as follows:
“1. That the order of the learned PCIT (Central) U/s 263 of the Income Tax Act is illegal, violative of natural justice and without fair application of mind
2. That the learned PCIT has erred in invoking Jurisdiction U/s 263 once the order U/s 153C has been passed after taking prior approval from JCIT U/s 153D.
3. A) That without prejudice to above neither in facts nor on law the Ld. PCIT (Central) is justified in exercising jurisdiction under Section 263 of the Income tax Act, 1961.
B) That without prejudice to above the Ld. PCIT (Central), while summarily setting aside the assessment order passed by Assessing Officer Central Circle, Amritsar for A.Y 2019-20 neither applied his mind to the detailed explanations and documents filed by assessee in proceedings U/s 263 nor to the assessment order bearing categorical findings of the ITO on issue involved.
4. That the appellant craves leave to add or amend any other grounds of appeal either at the time of the hearing or before the hearing. “
3. Additional Grounds (being legal grounds) raised by the assessee in course of appellate proceedings are as follows:
“Ground No 5: That the Ld. PCIT (Central) erred in assuming jurisdiction under section 263 without appreciating that, for Assessment Year 2019-20, the Assessing Officer had conducted detailed enquiries, recorded the statements of the donors, examined the supporting evidence and consciously accepted the gifts as genuine, thereby taking a legally permissible and plausible view. The Ld. PCIT further erred in importing the findings recorded in the subsequent Assessment Year 2020-21 into Assessment Year 2019-20, even though each assessment year constitutes a separate unit of assessment and the findings of a later year could not retrospectively render the assessment order for Assessment Year 2019-20 erroneous and prejudicial to the interests of the Revenue.
Ground No 6: That the order u/s 263 passed by the PCIT is illegal and bad in law since the very assessment order passed u/s 153C dated 31-03-2023 is without jurisdiction. That the order passes u/s 153C is bad in law as the same has been in violation of provisions of Section 153C.”
4. Brief facts emerging from records are that the assessee being the proprietor of M/s Singapore Money Changers, Amritsar, has filed his return on 30.09.2019 declaring total income at Rs. NIL. On the basis of a requisition u/s 132A of the Act, in the case of one Mr. Amandeep Singh (an employee of the assessee), who was apprehended by Punjab Police for carrying cash on 23/05/2019 and again on 12/08/2019 , the ownership of which was accepted and explained by the assessee being his business cash duly recorded in regular books of accounts , notice u/s 153C was issued to the assessee on 18.02.2022, in response to which the return was filed in compliance to such notice on 08.03.2023, declaring income at Rs. Nil.
5. Thereafter, notice u/s 142(1) with questionnaire was issued on 12.12.2022, and the assessment was completed u/s 153C at Rs. Nil vide order dated 31.03.2023, after approval u/s 153D of the Act.
6. Subsequently, the Ld. Pr. CIT assumed jurisdiction u/s 263 and has set aside the order u/s 153C, vide its 263 order dated 07.03.2025, for denovo assessment, raising doubts about the cash gift received by the assessee, observing that the cash book of the assesseee has not been verified by the AO and has raised doubts regarding its genuineness and authenticity. Per contra the assessee has claimed the source of gifts of Rs. 84,00,000/-, to be fully explained which has been received during F.Y. 2018-19 (relevant to A.Y. 2019-20) from eleven persons, details of which were duly substantiated before the Assessing Officer through statements on oath and documentary evidence, to his satisfaction (as per details contained in the 263 order itself).
7. Now before the Tribunal, the Ld AR of the assessee submitted that, from the facts stated hereinabove, it is evident that the Ld. AO conducted due and adequate enquiry during the assessment proceedings and that the appellant furnished all the requisite documentary evidence during assessment stage. Therefore, the assumption of jurisdiction by the Ld. PCIT u/s 263 on the ground of lack of enquiry is wholly unjustified and unsustainable in law.
8. Taking up the legal issue in ground -2, first , the Ld AR submitted that both the assessments for A.Y. 2019-20 and AY 2020-21 were completed by the Assessing Officer under section 153C of the Income-tax Act, 1961, vide assessment orders dated 31-03-2023. The aforesaid assessments were completed under section 153C of the Income-tax Act, 1961, after obtaining prior approval of the Joint Commissioner of Income Tax under section 153D of the Act.
8.1 He submitted that notices under section 263 were issued for both Assessment Years 2019-20 and 2020-21. The assessee objected during the course of 263 proceedings that the assessments, having been completed under section 153C with prior approval under section 153D, could not validly be revised. The Ld. PCIT rejected the objection by relying on the general powers conferred under section 263.
8.2 This issue has been agitated in Ground No. 2, (form 36) where the appellant has challenged the assumption of jurisdiction under section 263 on the ground that an assessment order passed under section 153C, with prior approval under section 153D, cannot be revised unless the statutory approval itself is found to be erroneous or vitiated.
8.3 The Ld AR further submitted that in the present case, the order under section 263 contains no such finding and is wholly silent regarding the validity of the approval granted under section 153D of the Act. He further stated that, while exercising revisional jurisdiction under section 263, the Ld. PCIT was required to examine not only the assessment record but also the record relating to the statutory approval granted under section 153D, which also forms an integral part of the quasijudicial decision-making process and in the absence of any such finding that such approval was erroneous or vitiated and prejudicial to the interests of the Revenue, the assessment order could not independently be held to be erroneous and prejudicial to the interests of the Revenue.
8.4 On this issue the Ld AR, relied on the judgment of the Hon’ble Madhya Pradesh High Court in Pr. CIT v. Prakhar Developers (P.) Ltd.  (Madhya Pradesh), order dated 01/04/2024, wherein, at paragraph 8, it was held that where an assessment order under section 153A had been passed after obtaining approval of the Joint Commissioner under section 153D, revisional jurisdiction under section 263 could not be validly invoked. The Hon’ble High Court accordingly held that the Tribunal had committed no error of law in quashing the revisionary proceedings.
9. The Ld AR further relied upon the Allhabad High Court decision in the case of CIT v. Dr Ashok Kumar (Appeal No 192 of 2000, 163 of 2008, 413 of 2012, and 414 of 2012) which was also relied upon before the Ld PCIT and the Ld AR explained that the Ld. PCIT, in paragraph 5.2 of the order under section 263 , has sought to distinguish the judgment of the Hon’ble Allahabad High Court in Dr. Ashok Kumar(supra) by observing that the High Court had nowhere held that revision under section 263 was barred merely because the assessment under section 153C had been completed with approval under section 153D. The Ld AR submitted that the said observation is factually erroneous, as the Hon’ble High Court, in paragraph 5 of its judgment, duly reproduced and affirmed the relevant findings of the Tribunal on this very issue.
10. The Ld AR in support of his arguments has placed reliance upon various decisions of the Coordinate Benches of the Tribunal, wherein it has been held that, once an assessment is completed pursuant to approval under section 153D, the revisional authority must first record a finding that such approval is erroneous or vitiated and only upon crossing this jurisdictional threshold can proceedings under section 263 be validly invoked and no such finding has been recorded in the present case, and he relied on the following decisions:
• 2015 (12) TMI696 – ITATHYDERABAD Ms. Trinity Infra Ventures Ltd., New Delhi Versus DCIT, Hyderabad
• 2026 (1) TMI 1115 – ITAT DELHI Manohar & Filaments Pvt. Ltd Versus PCIT, (Central) -3, Delhi:
• Smt. Abha Bansal v. Pr. CIT  (Delhi – Trib.);
• Gyan Infrabuild (P.) Ltd. v. Pr. CIT (Central) (Patna – Trib.);
• BU Bhandari Schemes v. Pr. CIT [IT Appeal Nos. 637 to 641/pune/2018 dated 1411-2018)
• Vishwa Infraways (P.) Ltd. v. CIT (Central) [IT Appeal Nos: 596,597 & 599/pune/2015];
• Rasi Kalal M. Dhariwal (HUF) v. CIT [IT Appeal Nos. 1102 to 1107/pune/2014),
• Ramamoorthy Vasudevan v. PCIT [IT Appeal Nos. 967 & 968/pune/2016];
• Dhariwal Industries Ltd. v. CIT [IT Appeal Nos. 1108 to 1113 (Pune) of 2014, dated 23-12-2016];
• Smt. Nama Chinnamma v. Dy. CIT [IT Appeal Nos. 1150-1157 (Hyd.) of 2015, dated 9-8-2017):
• S. Satyanarayana v. Syed Rasiuddin [IT Appeal No. 901 (Hyd.) of 2014];
• Mehtab Alam v. Dy. CIT [IT Appeal No. 288/Luck/2014, dated 18-11-2014);
• Dharmendra Kumar Bansal v. CIT  (Jaipur – Trib.)/[2015] 152 ITD 406 (Jaipur – Trib.)
11. Apart from the above legal issues argued upon the Ld AR also made submissions on merits explaining the nature and source of gifts received supported by various evidences, gift deeds affidavits, copies of recorded statements u/s 131(1A) , computation of income , copies of ITR , from various parties from whom received , etc which are all placed in paper book and are taken on record.
12. Before concluding the ld AR of the assessee has filed submissions on the Additional Grounds.
13. The Ld AR submitted that pursuant to the amendment in law with effect from 01.04.2021, proceedings arising from searches conducted thereafter were brought within the framework of sections 147 to 151 of the Income-tax Act, 1961.
Simultaneously, sub-section (3) was inserted in section 153C, expressly providing that nothing contained in that section shall apply in relation to any search initiated under section 132, or books of account, other documents or assets requisitioned under section 132A, on or after 01.04.2021.
14. The relevant provisions of section 153C(3) is reproduced for ready reference:
(3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.
14.1 The Ld AR submitted that in the instant case , cash amounting to Rs. 74,00,000 and Rs. 30,00,000 was seized from Shri Amandeep Singh, on 23.05.2019 and 12.08.2019, respectively. In his statements, Shri Amandeep Singh expressly stated that the seized cash belonged to Shri Sandeep Singh (assessee in this case).
14.2 Strangely, the Department being aware of this fact, no notice under section 153C was issued to Shri Sandeep Singh at the relevant time and the said notice under section 153C was issued only on 18-02-2022 (post amendment after April 2021).
14.3 Therefore, the Ld. AR submitted that the assumption of jurisdiction under section 153C was invalid and, consequently, the assessment framed pursuant thereto is void ab initio and once the underlying assessment order itself is without jurisdiction and incapable of surviving in law, the same could not validly be revised under section 263. Accordingly, the impugned proceedings under section 263 and the consequential order passed by the Ld. PCIT deserve to be quashed and in support of his arguments he placed reliance upon the following case laws and prayed for setting aside the revisional order.
Decisions relied upon ~ for support;
• 2026 (1) TMI 872 – ITAT DELHI Ashok Kumar Jain Versus Pr. CIT-20, New Delhi
• Great Eastern Shipping Co. Ltd. v. National Faceless Assessment Centre/ National e-Assessment Centre  (Bombay)/[2024] 463 ITR 145 (Bombay) :
• Maheshwari Coal Benefication & Infrastructure (P.) Ltd. v. Asstt. CIT  (Nagpur – Trib.)[14-05-2025] :
• Jagjeet Singh v. DCIT/ACIT  (Amritsar – Trib.)/[2024] 208 ITD 250 (Amritsar – Trib.)[10-07-2024] :
• Aishwarya Rai Bachchan v. Pr. CIT  194 ITD 272 (Mumbai – Trib.)[25-02-2022] :
• Shailesh Asalraj Jain v. Pr. CIT   (Mumbai – Trib.)[24-02-2026] :
• Westlife Development Ltd. v. Pr. CIT-5  (Mumbai)/[2016] 49 ITR(T) 406 (Mumbai)[24-06-2016]:
• Krishan Kumar Saraf v. CIT   (Delhi – Trib.)/[2016] 46ITR(T) 387 (Delhi – Trib.)[24-09-2015]
• Inder Kumar Bachani (HUF) v. ITO [2006] 99 ITD 621 (Lucknow) :
• 2021 (3) TMI1008 – ITATDELHIM/s Shahi Exports Pvt Ltd Versus The Pr. C.I.T New Delhi M/s Shahi Exports Pvt Ltd Versus The Pr. C.I.TNew Delhi:
• 2021 (8) TMI 1023 – ITAT DELHI Suraj Pulses Pvt. Ltd., Suraj Buildmart India Pvt. Ltd., Suraj Pulses Processors Pvt. Ltd., Versus Pr. CIT-8, New Delhi. Suraj Pulses Pvt. Ltd., Suraj Buildmart India Pvt. Ltd., Suraj Pulses Processors Pvt. Ltd., Versus Pr. CIT-8, New Delhi:
15. The Ld DR relied on the order of the Ld PCIT u/s 263 and has not filed any written submissions and has not raised any verbal objections to any of the issues discussed above.
16. We have heard the rival submissions and considered the materials on record and also the judicial precedents laid down by the Hon’ble High Courts referred to above. We observe that in the instant case assessment has been completed u/s 153C rws 143(3) after obtaining mandatory approval u/s 153D from competent authority (in this case JCIT), as per provisions of law, and there is no specific finding recorded by the Ld PCIT, that the approval granted by the Ld JCIT u/s 153D is erroneous or legally vitiated and without crossing this jurisdictional threshold proceedings u/s 263 could not have been validly invoked.
16.1 At this stage we would also like to refer on the decision of the Hon’ble Madhya Pradesh High Court in the case of Prabhakar Developers Private Limited(supra), where the Hon’ble Court has observed in paragraph – 8 of the order as follows:
“8. Even otherwise, as per section 263 of the Act, the Principal Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Assessing Officer, is erroneous in so far as it is prejudical to the interests of the Revenue, he may make enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. For passing any order under sections 143(3) & 153A of the Act, prior approval of Joint Commissioner is required under section 153A of the Act, or Principal Commissioner or Commissioner as the case may be. Therefore, once prior approval had already been taken by the Assessing Officer and accepted the return submitted by the assessee, then the same authority cannot exercise the power under Section 263 of the Act to reverse the order of Assessing Officer.
16.2 We also refer to the decision of the Hon’ble Allahabad High court in the case of Dr. Ashok Kumar(supra), dated 06.08.2012, on the same issue, where the Hon’ble Court has observed in Paragraph 5.2 of the order as follows:
“5.2 In the last it is also relevant fact that the AO was fully alive about the facts of the case and that is why he got necessary approval of Addl. Commissioner before completing the assessment orders for all the assessment years and once that is not disputed by the Revenue than the CIT would not be justified in interfering in the approval accorded by the Addl. CIT for framing the assessment order and thus there was no case for setting aside the assessment orders for the assessment years in question. On the basis of facts and circumstances of the case I am of the opinion that the impugned order is liable to be quashed accordingly.
6. In the result, appeals are allowed.”
16.3 We further observe that in light of settled judicial precedents the AO has conducted the necessary inquiries regarding the transactions carried out vis-a-vis the documentary evidences submitted by the assessee in course of proceedings and thereafter has obtained necessary approval u/s 153D of the Act from the competent authority before passing of the assessment order u/s 153D/143(3).
16.4 We further observe that the ld. PCIT, before assumption of jurisdiction u/s 263 has not made any specific inquiries and in a case where there is an approval u/s 153D it has been held by the Hon’ble Courts that the revisionary powers u/s 263 of the Act cannot be exercised specially without finding any error in the approval order u/s 153D.
16.5 Moreover, relying on the judicial precedents laid down by the Hon’ble Madhya Pradesh High Court and the Hon’ble Allahabad High Court (referred to above) we are of the opinion that once prior approval had already been taken by the AO from the competent authority as per provision of section 153D of the Act then it is not open to the ld. PCIT to exercise the power u/s 263 of the Act to revise the order of the AO without recording a specific finding that the approval originally granted by the ld. JCIT u/s 153D is erroneous or legally invalid.
16.6 In absence of any such findings in the instant case recorded by the ld. PCIT we are of the opinion that the jurisdiction has not been legally assumed u/s 263 and as such, relying on the decision of the Hon’ble Allahabad High Court in the case of Ashok Kumar (supra) we hold that the revision order passed u/s 263 of the Act deserves to be quashed.
16.7 We also observe that in the instant case the statutory notice u/s 153C has been issued on 18/02/2022 (which is post amendment after April 2021), and the same is vitiated at the very beginning, and the subsequent assessment framed in pursuance to such notice suffers from jurisdiction defect and is incapable of surviving and the same cannot be validly revised u/s 263.
17. In the result, the appeal of the assessee is allowed, on both the legal issues.
18. Since we have allowed the appeal of the assessee on the legal grounds we are not adjudicating on the grounds of appeal on merits.
ITA No. 402/Asr/2025 (A.Y. 2020-21)
19. Grounds of appeal taken by the assessee in Form 36 are as follows:
“1. That the order of the learned PCIT (Central) U/s 263 of the Income Tax Act is illegal, violative of natural justice and without fair application of mind.
2. That the learned PCIT (Central) has erred in invoking Jurisdiction U/s 263 once the order U/s 153C has been passed after taking prior approval from JCIT U/s 153D.
3. That the learned PCIT (Central) has erred in invoking Jurisdiction U/s 263 after revision application U/s 264 was moved by the appellant
4. A) That without prejudice to above, neither in facts nor on law, the Ld. PCIT (Central) is justified in exercising jurisdiction under Section 263 of the Income tax Act ,1961.
B) That without prejudice to above the Ld. PCIT (Central), while summarily setting aside the assessment order passed by Assessing Officer Central Circle Amritsar for A.Y 2020-21, neither applied his mind detailed explanations and documents filed by assessee in proceedings U/s 263 nor to the assessment order bearing categorical findings of the Assessing Officer on issue involved.
5. That the appellant craves leave to add or amend any other grounds of appeal either at the time of the hearing or before the hearing.”
20. In the instant case, in ground no.2, the assessee has challenged the invocation of jurisdiction u/s 263 by the ld. PCIT on identical grounds and our observations and findings in the ITA 391/Asr/2025 will apply mutatis mutandis to this appeal also.
20.1 As such, the appeal of the assessee for this year also is allowed on the legal grounds as discussed in ITA No. 391/Asr/2025.
21. In the result, both the appeals are allowed.