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Facts
The original assessment for A.Y. 2015-16 was completed under Section 143(3) at NIL income. Subsequently, the PCIT, under Section 263, set aside this assessment, directing a de novo assessment. The AO then completed a fresh assessment under Section 143(3) read with Section 263, making an addition of Rs.7,87,38,346/-. The assessee appealed to the CIT(A), who allowed the appeal based on a previous ITAT order that had quashed the PCIT's original Section 263 order.
Held
The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, ruling that once the primary revisionary order passed by the PCIT under Section 263 is set aside by the ITAT, the consequential assessment order passed under Section 143(3) read with Section 263 becomes null and void. The Tribunal clarified that the Revenue's pending appeal before the Hon'ble High Court against the ITAT's quashing order does not alter the current legal position, especially since no stay was granted.
Key Issues
1. Whether a consequential assessment order passed under Section 143(3) read with Section 263 remains valid after the primary Section 263 revisionary order has been quashed by the ITAT. 2. The effect of a pending appeal before the High Court against the ITAT's order quashing the Section 263 revisionary order on the validity of the consequential assessment.
Sections Cited
143(3), 263
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 NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the Revenue against the order of National Faceless Appeal Centre, Delhi (in short ‘the CIT(A)’) dated 10.12.2024 for the Assessment Year (A.Y.) 2015-16.
The brief facts of the case are that the original assessment for the A.Y. 2015-16 was completed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 24.11.2017 at total income of Rs. NIL, as per return. Thereafter, the Ld. PCIT Ahmedabad-3, vide order under Section 263 of the Act dated 28.03.2021, had set aside the assessment order with a direction to make requisite enquiries and proper verification in respect of the issues as mentioned in his order and, thereafter, complete the assessment de novo. In pursuance to the Assessment Year: 2015-16 DCIT vs. Rayon Reality Pvt. Ltd. Page 2 of 4 direction of Ld. PCIT, the Assessing Officer (AO) had completed the assessment afresh under Section 143(3) read with Section 263 of the Act on 29.03.2022 at a total income of Rs.7,87,38,346/-.
The assessee had filed an appeal with the First Appellate Authority against this assessment order which was decided by the Ld. CIT(A) vide the impugned order and 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.7,87,38,346/- made by the AO on account of disallowance of excess depreciation on Wind Mill by stating that order of PCIT u/s 263 was quashed by Hon’ble ITAT and therefore consequential order u/s 143(3) r.w.s. 263 do not survive, without deciding the appeal on merits and not appreciating that the revenue had already filed an appeal before the Hon’ble high Court against order of Hon’ble ITAT quashing order u/s 263 and the same is pending before the Hon’ble High Court vide TA No. 660 of 2024. (b) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.
Shri Rignesh Das, Ld. CIT-DR appearing for the Revenue submitted that the Ld. CIT(A) had allowed the relief to the assessee for the reason that the order passed by the Ld. PCIT -3, Ahmedabad under Section 263 of the Act was set side by the ld. ITAT in dated 25.01.2024. As a result, the Ld. CIT(A) had held that the consequential assessment order passed under Section 143(3) read with Section 263 of the Act has become null and void and accordingly he had allowed the relief to the assessee. The Ld. CIT-DR submitted that the Department has challenged the order of the ITAT and the matter was pending for adjudication before the Hon’ble High Court. He further submitted that the Assessment Year: 2015-16 DCIT vs. Rayon Reality Pvt. Ltd. Page 3 of 4 Ld. CIT(A) had allowed relief to the assessee on technical ground only without examining the merit of the addition as made by the AO.
Per contra, Shri Kushal Fofaria, Ld. AR of the assessee strongly supported the order of the Ld. CIT(A). He submitted that when the order under Section 263 of the Act dated 28.03.2021 was quashed by the Ld. ITAT, the consequential assessment order does not survive. Accordingly, the Ld. CIT(A) had rightly allowed the relief to the assessee.
We have considered the rival submissions. The Ld. CIT(A) has given a finding that the Co-ordinate Bench of this Tribunal vide order in dated 25.01.2024 had quashed the order u/s 263 of the Act dated 28.03.2021 passed by the PCIT, holding that the twin conditions for invoking revisionary power u/s 263 of the act were not satisfied. This fact has not been disputed by the Revenue. When the order under Section 263 stands set aside, the assessment order passed in consequence to the said order cannot survive. The Ld. CIT(A) had rightly held the consequential assessment order passed under Section 143(3) read with Section 263 of the Act dated 29.03.2022 was null and void. Further, when the order of the AO was held as void, there was no necessity for the Ld. CIT(A) to adjudicate the addition as made by the AO in the assessment order on merits. Therefore, the Ld. CIT(A) had rightly cancelled the assessment order passed under Section 143(3) read with Section 263 of the Act. We do not find anything wrong with the decision of the Ld. CIT(A). Merely because the Department had challenged the order of ITAT before the Hon’ble High Court, it does not change the legal position. No stay was granted by the Hon’ble High Court against the order of the Tribunal setting aside the order under Section 263 of the Act passed by the PCIT. In case the Hon’ble High Court decides the matter in favour
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on this 18th June, 2025.