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Facts
The assessee filed a return declaring loss, which was accepted in the original assessment. Subsequently, the ld. Commissioner initiated proceedings under Section 263 of the Act concerning share application money, leading to the setting aside of the original assessment order and a direction for a fresh assessment. The AO then passed a fresh assessment order under Section 143(3) read with Section 263.
Held
The Tribunal had already quashed the ld. PCIT's order passed under Section 263, which formed the basis for the fresh assessment. With the foundational Section 263 order being set aside, the AO was denuded of the power to pass any fresh assessment order. Therefore, the ld. CIT (Appeals) rightly quashed the consequential fresh assessment order passed by the AO.
Key Issues
Whether a fresh assessment order, passed by the AO based on a Section 263 direction, remains valid if the underlying Section 263 order itself has been subsequently quashed by the ITAT.
Sections Cited
263, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
The Revenue is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 08.01.2025 passed for assessment year 2016-17.
The brief facts of the case are that assessee has filed its return of income electronically on 17.10.2016 declaring loss A.Y.2016-17 2 of Rs.13,13,667/-. An assessment order was passed on 15.11.2018 and returned loss was accepted. The ld. Commissioner took cognizance u/s 263 of the Act and observed that assessee had received share application money of Rs.1,36,00,000/- and it was pending for allotment of shares, hence, he issued a Show Cause Notice inviting the explanation of the assessee as to why assessment order be not set aside and AO be directed to pass a fresh assessment order.
After hearing the assessee, ld. Commissioner has passed the order u/s 263 of the Act on 29.03.2021 and set aside the assessment order.
This order of the Commissioner was challenged before the Tribunal by the assessee. Meanwhile, AO has passed assessment order u/s 143(3) read with Section 263 of the Act. The Tribunal has allowed the appeal of the assessee bearing on 23.09.2022. It has set aside the order of the ld. PCIT passed u/s 263. Consequently, the AO would be denuded from his power to pass any fresh order because the very foundation of the AO has been extinguished. In other words, he was supposed to pass assessment order on A.Y.2016-17 3 the direction of the order of the ld. CIT but that order of ld. CIT has been quashed. Therefore, there was no power to the AO to pass a fresh assessment order. The ld. CIT appreciated these facts and quashed the consequential assessment order.
The Revenue has challenged the order of the CIT (Appeals) simply for the reason that appeal against the order of the ITAT passed on an appeal of the assessee against 263 proceeding is pending in the Hon'ble High Court. But as on today, there is no order on the basis of which an assessment can be passed. Accordingly, we are of the view that ld. CIT (Appeals) has rightly quashed the fresh assessment order passed u/s 143(3) read with Section 263 of the Act. We do not find any merit in this appeal. It is dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced on 27.08.2025.