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Facts
The Revenue challenged the CIT(A)'s order which annulled an assessment order made subsequent to a Section 263 revisionary order. The CIT(A) relied on a prior ITAT decision in the assessee's own case, which had set aside the foundational Section 263 order for lack of jurisdictional conditions. The Revenue's appeal contended that the ITAT's order was not final and under challenge.
Held
The Tribunal held that once the foundational Section 263 order is set aside and quashed, all consequential proceedings derived from it, including the subsequent assessment order, become null and void. The Tribunal found no reason to interfere with the CIT(A)'s well-reasoned decision to annul the assessment.
Key Issues
Whether an assessment order passed consequent to a Section 263 order retains legal force if the foundational Section 263 order is subsequently set aside by the ITAT.
Sections Cited
250, 143(3), 263, 24(b)
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Income Tax Appellate Tribunal, “F” BENCH MUMBAI
आदेश / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the Revenue challenging the impugned order 05.08.2025 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2017-18. The following grounds are reproduced below: “Whether the Ld. CIT(A) erred in law and on facts in annulling the assessment order passed u/s 143(3) r.w.s. 263 of the Income-tax Act, 1961 merely on the ground that the order passed u/s 263 1 by the Principal Commissioner of Income Tax was set aside by the Hon'ble ITAT, without appreciating that the said ITAT order has not attained finality and is under challenge before the Hon'ble High Court?
The solitary ground raised by the Revenue relates to challenging the order of the CIT(A) in annulling the assessment order by considering and relying upon the decision of the Coordinate Bench of the ITAT in the assessee’s own case.
We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we noticed that in the present case, the original assessment order under Section 143(3) of the Act was completed on 25.12.2019, thereby accepting the return of income. Subsequently, the PCIT, Mumbai-2, passed a revisionary order under Section 263 of the Act on 29.03.2022, directing the AO to frame a fresh assessment after making fresh inquiries and consideration as directed therein.
In compliance with the said order, the AO passed a fresh assessment order under Section 143(3) read with Section 263 of the Act dated 27.03.2023, wherein additions were made under Section 24(b) of the Act on account of interest claimed. However, in the meantime, the assessee had preferred an appeal before the Coordinate Bench of the ITAT against the main order passed under Section 263 of the Act by the PCIT. Consequently, the Coordinate Bench of the ITAT, in dated 09.08.2023, set aside and quashed the foundational order passed under Section 263 of the Act by the PCIT on 29.03.2022, holding that the jurisdictional conditions for invoking Section 263 of the Act were not satisfied.
We are of the view that once the foundational order in the present case under Section 263 of the Act is set aside and quashed, then in that eventuality all consequential proceedings pursuant thereto, including any assessment or reassessment made, lose their legal force and are rendered null and void.
Since the Ld. CIT(A) has passed the order relying upon the order of the Coordinate Bench of the ITAT, we find no reason to interfere with or deviate from the well-reasoned order so passed.
Even otherwise, no new facts, circumstances, or contrary judgements have been relied upon by the Ld. DR in order to controvert or rebut the lawful findings recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings so recorded by the Ld. CIT(A). Accordingly, we dismiss the grounds raised by the Revenue and uphold the order of the Ld. CIT(A).
In the result, the appeal filed by the Revenue stands dismissed with no order as to cost.
Order pronounced in the open court on 11.03.2026