2024 (5) TMI 1663 - AT - Income Tax

Validity of revision under section 263 and quashing of consequential assessment restores original assessment, revenue appeal dismissed

Revisionary jurisdiction under section 263 was challenged and the revision was quashed, which operated to restore the original assessment; consequent ... Validity of Revision u/s 263 - Quashing of assessment consequent to quashing of revision under section 263 - Erroneous and prejudicial to the interests of revenue - CIT has taxed the income from offshore supply of goods under section 44BB HELD THAT:- Co-ordinate Bench of ITAT has quashed the order passed under section 263 which effectively restores the original assessment order. AO passed the final order dated June 27, 2022 under section 143(3) read with section 263 of the Act, in line with the order passed by the Ld. CIT under section 263 of the Act. CIT(A)-43 vide order dated 12.06.2023 unequivocally held that, when the revision order passed u/s 263 has been quashed by the ITAT, the order o f the AO passed u/s 143(3) r.w s. 263 dated 27.06.2022, no longer remains operative and quashed the assessment order passed by the AO u/s 143(3) r.w.s. 263 of the Act, following the order of the ITAT in its own case. CIT(A) has rightly quashed the Assessment Order passed u/s 143(3) r w s. 263. Appeal of the Revenue is dismissed. Issues: Whether the Commissioner of Income-tax (Revisionary Authority) and the Assessing Officer's subsequent order under section 143(3) read with section 263 could be sustained where the revisionary order under section 263 was quashed by the Appellate Tribunal, and whether the Commissioner of Income-tax (Appeals) erred in quashing the assessment order by following the Tribunal's quashal of the section 263 order without deciding merits.Analysis: The Tribunal had quashed the revisionary order under section 263 on the ground that the conditions for invoking section 263 were not fulfilled, noting absence of change in facts and absence of demonstration that the assessment order was erroneous and prejudicial to revenue. Where a revisionary order under section 263 is quashed by the Tribunal, a consequential order passed by the Assessing Officer pursuant to the quashed revisionary order loses operative effect. The Commissioner of Income-tax (Appeals) acted by applying the Tribunal's ruling and quashing the consequential assessment order passed under section 143(3) read with section 263. The legal framework includes the limits on revisionary powers under section 263, the requirement that an order be erroneous and prejudicial to revenue to sustain revision, and the effect of a Tribunal quashal on consequential proceedings.Conclusion: The Commissioner of Income-tax (Appeals) correctly quashed the assessment order passed under section 143(3) read with section 263 by following the Tribunal's quashal of the section 263 order; the Revenue's appeal is dismissed and the outcome favors the assessee.