DEPUTY COMMISSIONER OF INCOME TAX, GANDHINAGAR vs. GUJARAT INDUSTRIAL INVESTMENT CORPORATION LIMITED, GANDHINAGAR

Briefly stated, the facts of the case are that the assessee-company is registered as a Non-Banking Financial Company (NBFC) under section 45-IA of the Reserve Bank of India Act, 1934 vide Registration Certificate No. G.01.00458 dated 31.03.2003 and is engaged in the business of extending financial assistance by way of term loans, financial services and implementation of joint and associated sector projects in the State of Gujarat. The assessee filed its return of income for the year under consideration on 29.03.2019 declaring total income of Rs.4,24,42,56,011/- under the normal provisions of the Act and book profit of Rs.3,80,57,62,511/- u/s 115JB of the Act. The assessment was completed under section 143(3) read with section 144B of the Act on 27.09.2021, wherein disallowance u/s 14A read with Rule 8D amounting to Rs.31,30,987/- and disallowance of provision written back amounting to Rs.6,86,73,630/- were made while computing the income under the normal provisions of the Act. Subsequently, the Ld. PCIT invoked the provisions of section 263 of the Act vide order dated 08.03.2024 holding that the assessment order was erroneous in so far as it was prejudicial to the interests of the Revenue on the ground that the aforesaid amounts were also liable to be added back while computing the book profit u/s 115JB of the Act. Pursuant to the directions issued u/s 263 of the Act, the Assessing Officer passed the consequential assessment order under section 143(3) r.w.s. 263 of the Act.

Aggrieved by the order passed u/s 263 of the Act, the assessee preferred an appeal before the Tribunal vide ITA No. 942/Ahd/2024. The Tribunal, vide its order dated 24.07.2025, quashed the order passed by the Ld. PCIT u/s 263 of the Act. The Tribunal, while doing so, observed that the very issues forming the basis of the revision stood concluded in favour of the assessee in its own case for the earlier assessment years and that the Ld. PCIT was not justified in invoking the revisionary juri iction merely because the Revenue had preferred appeals before the Hon'ble Gujarat High Court against the earlier orders of the Tribunal. The Tribunal accordingly held that the assumption of juri iction under section 263 was unsustainable in law and set aside the revisionary order.

Taking note of the order of the ITAT, the Ld. CIT(A) held that once the order passed u/s 263 had been quashed, the consequential assessment framed u/s 143(3) read with section 263 of the Act no longer survived and, therefore, the appeal before him had become infructuous.

Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.

Before us, the Ld. DR submitted that the Ld. CIT(A) was not justified in allowing the assessee's appeal solely on the basis of the order of the Tribunal quashing the proceedings under section 263. The Ld. DR also contended that the Department has already challenged the order of the Tribunal before the Hon'ble Gujarat High Court and, therefore, the issue has not attained finality.

The Ld. AR, on the other hand, supported the order of the Ld. CIT(A) and submitted that as on the date of passing of the impugned appellate order, the order passed u/s 263 stood quashed by the Coordinate Bench of the Tribunal. It was submitted that in the absence of any stay granted by the Hon'ble High Court, the order of the Tribunal continued to be binding upon the authorities below. Accordingly, it was contended that the consequential assessment framed pursuant to the quashed order under section 263 could not survive in law.

We have heard the rival submissions and perused the material available on record.

1 There is no dispute to the fact that the impugned assessment order has been framed by the Assessing Officer solely in consequence of the directions issued by the Ld. PCIT u/s 263 of the Act. It is also undisputed that the Coordinate Bench of the Tribunal, in ITA No.942/Ahd/2024, has already quashed the very order passed u/s 263 of the Act. Once the revisionary order itself has been set aside, the consequential assessment framed pursuant thereto loses its very foundation and cannot survive independently.

2 The contention of the Revenue that the order of the Coordinate Bench has been challenged before the Hon'ble Gujarat High Court is not acceptable. Mere filing of an appeal before the Hon'ble High Court does not render the order of the Tribunal inoperative unless its operation has been stayed or the order has been reversed. Since no material has been placed on record to show that the order of the Coordinate Bench has been stayed by the Hon'ble Juri ictional High Court, the Revenue's contention is rejected.

3 In view of the foregoing discussion, we find no infirmity in the order of the Ld. CIT(A) in holding that, once the order passed u/s 263 of the Act stood quashed by the order of the Tribunal, the consequential assessment framed u/s 143(3) r.w.s. 263 of the Act became infructuous. Accordingly, the order of the Ld. CIT(A) is upheld.

In the result, the appeal filed by the Revenue is dismissed.