2024 (6) TMI 263 - AT - Income Tax

Revision u/s 263 quashed by ITAT - as per CIT AO has not made any specific /not called for any details regarding notional flats lying unsold in the assessee's closing stock and the issue remained unexplained - HELD THAT - The assessment order has been passed giving effect to the order passed u/s. 263 by the ld. PCIT. In this case, order u/s. 263 was passed revising the earlier assessment order passed u/s. 143(3) completed on 29/12/2017 vide order dated 30/03/2019. The aforesaid order of the ld. PCIT was subject matter of challenge before the Tribunal and the Tribunal has quashed and set aside the order of the ld. PCIT. Once the order u/s 263 has been quashed, then assessment order passed in pursuance of 263 order has become infructuous. This precisely has been held by the ld. CIT(A) that once the Tribunal has allowed the appeal of the assessee and quashed the order u/s. 263 which is basis of present assessment proceedings and therefore, the impugned order u/s. 143(3) r.w.s. 263 has become infructuous. Accordingly, the appeal of the Revenue is dismissed.

Summary

Issues involved:
The appeal filed by the Revenue against the order dated 29/11/2023 passed by NFAC, Delhi for the quantum of assessment u/s. 143(3) r.w.s. 263 for the A.Y. 2015-16.

Grounds of Appeal:
1. The Revenue challenged the ITAT order quashing the order u/s 263, which led to the assessment order being passed. The order u/s 263 was revised by the ld. PCIT, and the Tribunal set it aside. Consequently, the assessment order passed in pursuance of the quashed 263 order became infructuous. The ld. CIT(A) held that since the Tribunal allowed the appeal of the assessee and quashed the 263 order, the impugned order u/s. 143(3) r.w.s. 263 became infructuous, resulting in the dismissal of the Revenue's appeal.

The judgment highlights the challenge posed by the Revenue against the ITAT decision to quash the order u/s 263, leading to the assessment order's invalidation. The legal proceedings revolved around the revision of the assessment order u/s. 143(3) r.w.s. 263 by the ld. PCIT, which was subsequently set aside by the Tribunal. As a consequence, the assessment order became ineffective, as it was based on the quashed 263 order. The ld. CIT(A) reasoned that the appeal of the assessee, which resulted in the quashing of the 263 order, rendered the subsequent assessment order infructuous. This interpretation led to the dismissal of the Revenue's appeal, emphasizing the impact of the Tribunal's decision on the validity of the assessment proceedings.

The grounds of appeal raised crucial questions regarding the justification of the ld. CIT(A) in deeming the order u/s. 143(3) r.w.s. 263 as infructuous following the ITAT decision to quash the 263 order. The Revenue contended that the ld. CIT(A) failed to appreciate the significance of specific details concerning "notional flats lying unsold in the assessee's closing stock," which remained unexplained. Additionally, the Revenue argued that the ld. CIT(A) overlooked the implications of explanation 2 to Section 263 of the IT Act, which deems orders passed without necessary inquiries or verifications as erroneous and prejudicial to revenue interests. The reference to the Hon'ble Delhi High Court's decision in a related case further underscored the complexity of the legal interpretation surrounding the assessment proceedings and the subsequent implications of the quashed 263 order on the assessment's validity.

The judgment elucidates the sequence of events where the Revenue's challenge against the quashed 263 order ultimately led to the dismissal of the appeal. The Tribunal's decision to set aside the ld. PCIT's order u/s. 263 had a cascading effect on the assessment proceedings, rendering the subsequent order u/s. 143(3) r.w.s. 263 infructuous. The legal analysis emphasized the interplay between the Tribunal's decision, the validity of the assessment order, and the implications of the quashed 263 order on the overall appeal. By dismissing the Revenue's appeal, the judgment underscored the critical importance of legal interpretations and procedural adherence in tax assessment matters.