ACIT CENTRAL CIRCLE 1(3), MUMBAI vs. DBL TIKAMGARH NOWGAON TOOLWAYS PRIVATE LIMITED, MADHYA PRADESH

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ITA 2301/MUM/2026Status: DisposedITAT Mumbai10 August 2026AY 2015-167 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the revisional order under section 263, which formed the jurisdictional basis for the assessment, was quashed, the consequential assessment order could not survive independently. Therefore, the deletion of the addition by the CIT(A) was upheld.

What were the facts?

The Revenue appealed against the CIT(A)'s deletion of an addition made under section 143(3) read with section 263. The addition was consequential to a revisional order under section 263, which was previously quashed by a coordinate bench of the ITAT due to jurisdictional infirmity.

What were the issues?

Whether a consequential assessment order can survive if its jurisdictional foundation (a section 263 order) is quashed. The merits of the expenditure claimed were not considered.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI ANIKESH BANERJEE

For Appellant: Shri Yash Kukreja (Virtually)
For Respondent: Shri Sandeep Lakra – CIT DR
Hearing: 05/08/2026Pronounced: 10/08/2026

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER)

ITA No. 2301/MUM/2026 Assessment Year: 2015-16

Assistant Commissioner of DBL Tikamgarh Nowgaon Income Tax, Circle 1(3), 9th Toolways Private Limited, Floor, Prathista Bhavan, CGO Vs. PlotNo.5, Inside Govind NRYN Building, Maharshi Karve Singh, Gate Kolar Road Marg, Mumbai – 400020. ChunaBhatti, Bhopal. PAN NO. AAECD 8604 L Appellant Respondent

Assessee by : Shri Yash Kukreja (Virtually) Revenue by : Shri Sandeep Lakra – CIT DR.

Date of Hearing : 05/08/2026 Date of pronouncement : 10/08/2026 ORDER PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against order dated 05/12/2025, passed by the learned Commissioner of Income-Tax (Appeals)-47, Mumbai [in short, the learned ‘CIT(A)’] for Assessment Year 2015-16, raising following grounds:

"Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deciding the facts on merits of the case, since the loss claimed by assessee in return for AY 2015-16 on account of change of scope of work of Rs.7,65,98,377/- is an expense in the nature of capital expenditure and therefore it should be added to the income of the assessee?”

DBL Tikamgarh Nowgaon 2 Toolways Private Limited ITA No. 2301/MUM/2026

2.

At the outset, we find that the impugned assessment order was framed under section 143(3) read with section 263 of the Income- tax Act, 1961 (“the Act”), pursuant to the order dated 17.02.2020 passed by the learned Principal Commissioner of Income-tax-1, Bhopal under section 263 of the Act. Significantly, the very same order under section 263, in the case of the assessee for the impugned assessment year, came to be challenged before the Coordinate Bench of the Tribunal in ITA No.145/Ind/2020. By order dated 31.07.2023, the Coordinate Bench quashed the revisional order on the ground of jurisdictional infirmity and restored the original assessment order passed by the Assessing Officer. The relevant conclusion of the Coordinate Bench reads as under:

“We have considered rival contentions of both sides and perused the material placed before us. On perusal of the order-sheets (reproduced above) and show- cause notices issued by PCIT in all four cases, we find that the PCIT received proposal for revision from AO and the AO has even placed draft-notices before PCIT for signature. Thus, the Ld. AR is successfully able to demonstrate that the revision in these cases had been conducted on the bedrock of AO's proposal and draft-notice. That means, the conditions prescribed in section 263 are not fulfilled. We have gone through the decision of ITAT, Pune cited above and find that the said decision quashing the revision has been rendered on exactly same set of facts. Although Ld. DR for the revenue has dutifully made certain arguments as noted in foregoing paragraph but neither able to rebut the arguments made by Ld. AR nor the applicability of the decision of ITAT, Pune on facts or in law. Therefore, respectfully following the said decision, we are inclined to hold that the present case is having a jurisdictional deficit resulting into vitiating the impugned order. Therefore, we quash the impugned order on legality aspect itself and restore the original assessment-order passed by AO. Since we have quashed the revision- order, the pleadings made by both sides on merits are not required to be dealt.”

DBL Tikamgarh Nowgaon 3 Toolways Private Limited ITA No. 2301/MUM/2026

3.

It is thus evident that the order under section 263, which constituted the jurisdictional foundation for framing the impugned consequential assessment, no longer survives. The learned CIT(A), taking note of the aforesaid decision of the Coordinate Bench, held that once the revisional order under section 263 had been quashed, the consequential assessment framed pursuant thereto could not independently survive. He accordingly deleted the addition of Rs.7,65,98,377/- without entering into the merits of the expenditure claimed by the assessee. The learned CIT(A), inter alia, observed that the original assessment order stood restored by the Tribunal and that the assessment framed pursuant to the quashed revisional order consequently had no independent legal foundation. The relevant finding of learned CIT(A), is reproduced as under:-

8.

I have carefully considered the assessment order passed u/s 143(3) r.w.s. 263 r.w.s. 144B, the detailed written submissions of the appellant, the documents placed on record including the concession agreement, invoices, correspondence with MPRDC, and the judicial authorities relied upon by the appellant. I have also perused the order of the Hon’ble ITAT, Indore Bench dated 31.07.2023, which directly concerns the present appellant and the same assessment year. 8.1 At the outset, it is noted that the very foundation of the impugned assessment—i.e., the revisionary order under section 263 dated 17.02.2020— has been quashed by the Hon'ble ITAT. The Hon’ble Tribunal has categorically held that the revision proceedings suffered from a jurisdictional defect as the PCIT had invoked section 263 mechanically, based solely on a proposal of the Assessing Officer, without calling for and examining the assessment records as required under law. 8.2 The ITAT has therefore restored the original assessment order u/s 143(3) where the loss declared by the appellant was fully accepted, thereby extinguishing the impugned reassessment proceedings. Once the 263 order is quashed, all consequential actions taken in pursuance thereof—including the reassessment order now under appeal—automatically lose legal force.

DBL Tikamgarh Nowgaon 4 Toolways Private Limited ITA No. 2301/MUM/2026

8.3 In view of this binding judicial pronouncement, the present assessment order cannot survive independently. The law is well-settled that where the basis of an assessment is annulled, the superstructure built upon it collapses. Further, the Hon’ble ITAT has categorically quashed the 263 order-the very foundation upon which this reassessment order rests-holding that the revision lacked jurisdiction and legal validity. The assessment under appeal is therefore void ab initio. The original assessment u/s 143(3) having been restored by the Tribunal, the order u/s 143(3) r.w.s. 263 cannot survive. The relevant part of the judgement is quoted below; “8. Per contra, Ld. Dr for the Revenue submitted that there are multiple communications and in-house working in department before show-cause notice is actually issued to assessee. He stressed that the draft-notice was prepared by the AO at the behest of PCIT. He submitted that the objection raised by Ld. AR that the showcause notice issued on the very same day on which proposal is mooted before PCIT does not have any merit because it cannot be said that the PCIT could not apply mind on the same day. 9. We have considered rival contentions of both sides and perused the material placed before us. On perusal of the order-sheets (reproduced above) and showcause notices issued by PCIT in all four cases, we find that the PCIT received proposal for revision from AO and the AO has even placed draft-notices before PCIT for signature. Thus, the Ld. AR is successfully able to demonstrate that the revision in these cases had been conducted on the bedrock of AO’s proposal and draft-notice. That means, the conditions prescribed in section 263 are not fulfilled. We have gone through the decisions of ITAT, Pune cited above and find that the said decision quashing the revision has been rendered on exactly same set of facts. Although Ld. DR for the revenue has dutifully made certain arguments as noted in foregoing paragraph but neither able to rebut the arguments made by Ld. AR not the applicability of the decision of ITAT, Pune on facts or in law. Therefore, respectfully following the said decision, we are inclined to hold that the present case is having a jurisdictional deficit resulting into vitiating the impugned order. Therefore, we quash the impugned order on legality aspect itself and restore the original assessment-order passed by AO. Since we have quashed the revision- order, the pleadings made by both sides on merits are not required to be dealt”. 8.4 In light of the detailed submissions of the appellant, the contractual evidence on record, and the binding judicial pronouncement of the Hon’ble ITAT, I hold that the disallowance of Rs. 7,65,98,377/- made by the Assessing Officer is untenable and the AO is directed to delete the addition of Rs. 7,65,98,377/-. Therefore, grounds of appeal are allowed.”

DBL Tikamgarh Nowgaon 5 Toolways Private Limited ITA No. 2301/MUM/2026

4.

Before us, the learned Departmental Representative has relied upon the grounds raised by the Revenue. However, no material has been brought to our notice demonstrating that the order dated 31.07.2023 passed by the Coordinate Bench in ITA No.145/Ind/2020 has been reversed, modified or otherwise rendered inoperative by any superior judicial forum. The Revenue has also not disputed that the impugned assessment was framed solely in consequence of the order passed under section 263 which has since been quashed.

5.

We have considered the rival submissions and perused the material available on record. The issue before us, in the circumstances, admits of no ambiguity. The jurisdiction assumed by the Assessing Officer for framing the impugned assessment under section 143(3) read with section 263 was founded upon the revisional order dated 17.02.2020. That very revisional order has been quashed by the Coordinate Bench in the assessee's own case for the same assessment year, with the consequence that the original assessment order stands restored. Once the very foundation upon which the consequential assessment was made has been judicially annulled, the consequential assessment cannot survive independently of that foundation. The validity of the addition of Rs.7,65,98,377/- on merits, therefore, does not arise for our consideration in the present appeal. Any examination of

DBL Tikamgarh Nowgaon 6 Toolways Private Limited ITA No. 2301/MUM/2026

whether the expenditure arising from the change in scope of work was capital or revenue in nature would necessarily proceed on an assessment order which, in law, has ceased to have operative existence.

6.

We, therefore, find no infirmity in the order of the learned CIT(A) in deleting the impugned addition, albeit on the jurisdictional consequence flowing from the quashing of the order under section 263. The issue of the allowability or otherwise of the loss of Rs.7,65,98,377/- on merits does not survive for adjudication in the present proceedings.

7.

Accordingly, the order of the learned CIT(A) is upheld and the grounds raised by the Revenue are dismissed.

8.

In the result, the appeal of the Revenue is dismissed.

Order pronounced in the open Court on 10/08/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 10/08/2026 M. Ranganath Vittal , Sr. P.S.

DBL Tikamgarh Nowgaon 7 Toolways Private Limited ITA No. 2301/MUM/2026

Copy of the Order forwarded to :

1.

The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai

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