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Facts
The Assessing Officer (AO) passed an order under Section 143(3) read with Section 263, making an addition of Rs. 2,44,57,693/- by disallowing the assessee's claim for deduction under Section 54F. This order was based on an earlier order passed by the Pr. Commissioner of Income Tax (PCIT) under Section 263 of the Act.
Held
The Tribunal noted that the Section 263 order, which formed the basis of the AO's assessment order, had been quashed by the Tribunal itself. Consequently, all subsequent proceedings, including the assessment order under Section 143(3) read with Section 263, became infructuous. The Revenue's appeal was therefore dismissed.
Key Issues
Whether an assessment order passed under Section 143(3) read with Section 263 can stand when the underlying Section 263 order has been quashed by the Tribunal.
Sections Cited
Section 143(3), Section 263, Section 54F
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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: MS. ASTHA CHANDRA & SHREE DR. DIPAK P. RIPOTE
आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the Revenue is directed against the order dated 29.07.2025 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)/NFAC”] pertaining to Assessment Year (“AY”) 2012-13.
The Revenue has raised the following grounds of appeal : “i) On the facts and the circumstances of the case and in law, the Ld. CIT(A)/NFAC is not justified in set aside the assessment order u/s 143(3) r.w.s. 263 of the Act as the matter is under subjudice before the Hon’ble Court of Bombay against the decision of the Hon’ble ITAT in dated 13.11.2019. ii) On the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC is not justified in deleting the disallowance of deduction of Rs. 2,44,57,693/-(Rs. 1,44,57,693/- regarding interior work plus Rs. 1,00,00,000/- deposited in Capital Gains Accounts Scheme), claimed by the assessee u/s 54F of the Act despite the fact that this amount was never part of cost of new residential property as per purchase agreement/deed.
iii) On the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC is not justified in adjudicating the part of deduction of u/s 54F of Rs. 1,00,00,000/- without considering that the assessee has never established that this amount was utilized for construction of new asset, in fact, as per purchase deed/agreement, this amount was never part of net asset purchased by the assessee. iv) The appellant craves to add, amend, alter or delete the above ground of appeal during the course of appellate proceedings before the Hon’ble Tribunal.”
The Ld. Counsel for the assessee at the outset submitted that the Ld. Assessing Officer (“AO”) in the instant case has passed the order u/s 143(3) r.w.s. 263 of the Income Tax Act, 1961 (the “Act”) on 18.12.2017 determining the total income of the assessee at Rs.7,54,78,463/-as against the returned income of Rs.5,10,20,770/- pursuant to the order passed u/s 263 of the Act thereby making an addition of Rs.2,44,57,693/- on account of disallowance of assessee’s claim of deduction u/s 54F of the Act. Referring to the copy of the order of the Tribunal, he submitted that section 263 order has since been dismissed by the Tribunal vide order dated 13.11.2019 and therefore, the subsequent proceedings become infructuous.
3.1 Further, without prejudice to the above argument, the Ld. AR submitted that the Revenue is in appeal before the Hon’ble Bombay High Court against the order of the Tribunal which is still pending. However, since the tax effect involved in the consequential order of the Ld. AO u/s 143 r.w.s. 263 is below Rs.1 crore, the appeal of the Revenue is not maintainable before the Hon’ble High Court in view of the CBDT Circular No. 17/2019, dated 08.08.2019.
The Ld. DR fairly conceded that the Tribunal has quashed the section 263 proceedings.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC. It is an admitted fact that the Tribunal vide order dated 13.11.2019 has quashed the order dated 29.03.2017 passed by the Pr. Commissioner of Income Tax (PCIT) u/s 263 of the Act. It is also the submission of the Ld. AR that the Revenue’s appeal against the order of the Tribunal (supra) before the Hon’ble High Court is not maintainable as per CBDT Circular No. 17/2019, dated 08.08.2019. The Revenue has raised no objection to the aforesaid arguments of the Ld. AR. We find the Ld. AO in the instant case has passed the order u/s 143(3) r.w.s. 263 of the Act on 18.12.2017 by making disallowance of Rs.2,44,57,693/-. Since the order passed u/s 263 of the Act by the PCIT has since been quashed by the Tribunal, therefore, the subsequent proceedings pursuant to such order passed u/s 263 become infructuous. The grounds raised by the Revenue are accordingly dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 04th February, 2026.