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Facts
The original assessment for A.Y. 2015-16 was completed under Section 143(3). The PCIT set aside this order under Section 263, directing a de novo assessment. The AO completed the assessment afresh under Section 144 read with Section 263. The CIT(A) allowed the assessee's appeal.
Held
The Tribunal held that the CIT(A) rightly allowed the assessee's appeal as the order under Section 263 was set aside by ITAT, making the consequential assessment order void. The additions on merits were not adjudicated by the CIT(A) as the assessment order itself was void.
Key Issues
Whether the CIT(A) was justified in allowing the assessee's appeal solely on the ground that the Section 263 order was set aside, without adjudicating the additions on merits.
Sections Cited
143(3), 14A, 8D, 263, 144, 69, 56(2)(vii)
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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & 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 08.01.2025 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 18.12.2017 at total income of Rs.11,32,760/- wherein disallowance of Rs.1,73,172/- was made under Section 14A read with Rule 8D of the Act. Thereafter, the Ld. PCIT Ahmedabad-3, vide order under Section 263 of the Act dated 26.03.2021, 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 direction of Ld. PCIT, the Assessing Officer (AO) had completed the assessment afresh under Section 144 read with Section 263 of the Act on 21.03.2022 at a total income of Rs.1,34,58,192/-.
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 allowing the assessee appeal on the ground that the order u/s.263 of IT Act passed by PCIT had been set aside by ITAT, hence, consequential order u/s.143(3) r.w.s. 263 of the IT Act passed by AO will not survive, despite the fact that department has challenged the order of ITAT before Hon’ble High Court which is pending for adjudication? (b) The Ld. CIT(A) has erred in law and on facts in not adjudicating the case on merits? (c) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.70,24,110/- made by AO on account of unexplained investment in immovable property u/s.69 of the IT Act? (d) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.15,24,120/- made by AO on account of difference between the stamp duty value and purchase value of immovable property u/s.56(2)(vii) of the Act. (e) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.37,77,200/- made by AO on account of unexplained investment in agricultural land u/s.69 of the Act. (f) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,73,172/- made by AO on account of disallowance u/s.14A r.w. Rule 8D of the Act. (g) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.
Assessment Year: 2015-16 DCIT vs. Vijay Manubhai Hirpara Page 3 of 4 5. Shri S.K. Agal, Ld. Sr. 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 30.05.2024. As a result, the Ld. CIT(A) had held that the consequential assessment order passed under Section 144 read with Section 263 of the Act does not survive and accordingly he had allowed the relief to the assessee. The Ld. Sr. 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 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 Hardik Vora, 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 26.08.2021 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. A copy of the order of the Co-ordinate Bench of this Tribunal in dated 30.05.2024 has been brought on record. It is found that the Tribunal had held that the original assessment order passed under Section 143(3) of the Act on 18.12.2017 was not erroneous and prejudicial to the interest of the revenue. Therefore, the exercise of jurisdiction by the Ld. PCIT under Section 263 of the Act was not held as valid and accordingly the order under Section 263 of the Act dated 26.08.2021 was set aside by the Tribunal. When the order under Section 263 stands set aside, the assessment order passed in consequence to the said order cannot Assessment Year: 2015-16 DCIT vs. Vijay Manubhai Hirpara Page 4 of 4 survive. Further, when the order of the AO was held as void, there was no necessity to adjudicate the various additions 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 144 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 perspective. 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 of the Revenue, the Department will be free to approach this Tribunal for restoration of the present appeal.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on this 13th June, 2025.