Loading judgment…
Facts
The Revenue filed appeals against the orders of the CIT(A) that had allowed the assessee's appeals. The original assessment was made u/s 143(3), then revised u/s 263 by the PCIT, leading to a fresh assessment u/s 143(3) r.w.s. 263 with an addition for under-reported sale consideration. The assessee's appeal to the CIT(A) was allowed.
Held
The Tribunal held that since the PCIT's order u/s 263 was set aside by a coordinate bench, the subsequent assessment order and penalty order could not survive. Therefore, the CIT(A)'s decision to quash these orders was upheld.
Key Issues
Whether the assessment order and penalty order can survive when the PCIT's order u/s 263, which led to these orders, has been set aside by the Tribunal.
Sections Cited
143(3), 263, 271(1)(c), 43CA, 50C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA
O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: These two appeals are filed by the Revenue against the orders of the National Faceless Appeal Centre (NFAC), Delhi (in short “the CIT(A)”) both dated 29.07.2025 for the Assessment Year (A.Y.) 2015-16 in the proceeding under Section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and the proceeding u/s 271(1)(c) of the Act, respectively.
As the facts involved in the two appeals are common, both the matters were heard together and are being disposed of vide this common order for the sake of convenience. We will first take up the quantum appeal in .
The brief facts of the case are that the original assessment in this case was completed u/s 143(3) of the Act on 31/10/2017 accepting the returned income of the assessee. Thereafter, the Principal Commissioner of Income Tax-4, Ahmedabad (hereinafter referred as the PCIT) had examined the case records of the assessee and considered the assessment order u/s 143(3) dated 31/10/2017 as erroneous and prejudicial to the interest of revenue and accordingly he had passed an order u/s 263 of the Act on 23/03/2020 whereby he set-aside the assessment order with a direction to make the assessment de-novo. In pursuance to the direction of the Ld. PCIT, the AO had passed fresh assessment order u/s 143(3) r.w.s. 263 of the Act on 31.03.2022 wherein an addition of Rs. 4,76,54,820/- was made on account of under-reported sale consideration u/s 43CA/50C of the Act.
Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was allowed.
Now, the Revenue is in second appeal before us. The following grounds have been taken in this appeal: -
“(a) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.4,76,54,820/- made on account of under-reported sale consideration u/s 43CA/50C, without independently examining the merits of the case or the evidence on record. (b) The Ld. CIT(A) has erred in law and on facts to exercise appellate jurisdiction properly by not examining the substantive merits of the & 1839/Ahd/2025 (Assessment Year: 2015-16) ITO vs. Sharanam Reality P. Ltd. Page 3 of 5 additions made in the assessment order, which were based on detailed verification of sale deeds, unit-wise areas (including carpet and common/undivided share), Jantri rates (Rs.20,000/- per sq. mtrs. for offices/godowns), and stamp duty valuations, as evidenced by the sample sale deed (Sr. No.2892/2014) for Shri Rajkumar Varadmal Budhani, where the deemed sale consideration was Rs.1,11,16,200/- against the reported Rs.75,00,000/-, clearly establishing under-reporting of income. (c) The Ld. CIT(A) has erred in law and on facts by not calling for or considering the assessee's explanations regarding discrepancies in stamp duty payments and area measurements, such as the assessee's claim of voluntary payment of higher stamp duty (e.g., Rs.4,17,000/- used vs. Rs.3,67,500/-calculated) on purported lesser Jantri value, and the stamp valuation authority's underestimation of the saleable area (299.86 sq. mtrs. vs. actual 555.81 sq. mtrs.), which justified the invocation of sections 43CA/50C at the uniform rate of Rs.20,000/- per sq. mtrs. (d) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.”
Shri Rameshwar P Meena, Ld. Sr. DR submitted that the Ld. CIT(A) had allowed the appeal of the assessee for the reason that the order of the Ld. PCIT passed u/s 263 of the Act was set aside by the Hon’ble ITAT. Therefore, he had quashed the assessment order framed u/s 143(3)/263 of the Act. The Ld. Sr. DR submitted that the Department had filed an appeal before the Hon’ble High Court against the order of the Tribunal setting aside the order u/s 263 of the Act passed by the Ld. PCIT. Therefore, the present appeal was preferred in respect of the quantum addition in order to keep the matter alive.
Per contra, Shri Tushar Hemani, Ld. Sr. Advocate appearing for the assessee, submitted that when the order u/s 263 of the Act passed by the Ld. PCIT was set aside by the coordinate bench of this Tribunal, the consequent assessment order cannot survive. Therefore, the Ld. CIT(A) had rightly quashed the assessment order framed u/s 143(3)/263 of the & 1839/Ahd/2025 (Assessment Year: 2015-16) ITO vs. Sharanam Reality P. Ltd. Page 4 of 5 Act as well. Ld. Sr. Counsel has brought on record a copy of order of the coordinate bench of the Tribunal in the assessee own case in dated 08.03.2024, whereby the order of the PCIT passed u/s 263 of the Act was set aside.
We have considered the rival submissions. The facts of the case are not under dispute. The present assessment order u/s 143(3) r.w.s. 263 of the Act dated 31.03.2022 was passed in accordance with the direction of Ld. PCIT vide his order under section 263 of the Act dated 23.03.2020. The assessee had preferred an appeal against the said order u/s 263 of the Act passed by the PCIT, which was adjudicated by the coordinate bench of this Tribunal in vide order dated 08/03/2024, a copy of which has been brought on record. It is found that the Tribunal vide that order had set aside the order u/s 263 passed by the Ld. PCIT as the same was found to be non-sustainable. Since the order u/s 263 of the Act passed by the Ld. PCIT stands set aside, the consequent assessment order cannot survive. Therefore, the Ld. CIT(A) had rightly quashed the assessment order u/s 143(3) r.w.s. 263 of the Act dated 31.03.2022. In view of the facts as discussed above, we do not find any merit in the grounds as raised by the Revenue in the present appeal, which are dismissed.
In the result, the appeal preferred by the Revenue is dismissed.
This appeal pertains to quashing of penalty order under Section 271(1)(c) of the Act. As the quantum appeal filed against the order u/s & 1839/Ahd/2025 (Assessment Year: 2015-16) ITO vs. Sharanam Reality P. Ltd. Page 5 of 5 143(3)/263 of the Act dated 31.03.2022 was allowed in favour of the assessee, consequent to quashing of the proceeding u/s 263 of the Act by the ITAT, the Ld. CIT(A) had cancelled the penalty order u/s 271(1)(c) of the Act as well. In view of our decision in Ld. CIT(A). Since the quashing of the assessment order has been upheld, the penalty order also can’t survive. We, therefore, upheld the order of the Ld. CIT(A) on this issue as well and the appeal of the Revenue is dismissed.
In the final result, both the appeals of the Revenue are dismissed.
Order pronounced in the open Court on this 9th December, 2025.