ITAT quashes revision order under Section 263, rules Board Circulars cannot override statutory provisions without specific mention

The ITAT Delhi ruled in favor of the assessee, quashing a revision order u/s 263. The PCIT had invoked revision claiming the assessment order was erroneous for not following Board Circulars requiring a draft assessment order u/s 144C before passing the final assessment. The ITAT held that Board Circulars cannot be considered as orders issued u/s 119 unless specifically mentioned, and explanatory notes serve only as interpretative aids. The tribunal found the PCIT's jurisdiction under clause (c) of Explanation 2 of Section 263(1) was improperly exercised, as revision applies to valid orders passed in due course of law, not void orders.

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Issues Involved:
1. Validity of the order passed by Ld. Pr. CIT u/s 263 of the Income Tax Act, 1961.
2. Requirement of passing a draft assessment order u/s 144C of the Act.
3. Invocation of revisionary jurisdiction by Ld. Pr. CIT.

Summary:

1. Validity of the order passed by Ld. Pr. CIT u/s 263 of the Income Tax Act, 1961:
The assessee challenged the order dated 31.03.2021 passed by Ld. Pr. CIT u/s 263 of the Act, arguing that the assessment order dated 12.11.2018 was void ab initio as it was passed without issuance of a draft assessment order. The assessee relied on the judgment of the Hon'ble Supreme Court in Zuari Cement Limited vs. ACIT and other relevant case laws to support their claim that a non est and void order cannot be subject to revisionary proceedings u/s 263 of the Act.

2. Requirement of passing a draft assessment order u/s 144C of the Act:
The Ld. Pr. CIT observed that the final assessment order dated 12.11.2018 was passed without considering CBDT Circulars No. 05/2010 and 09/2013, which mandate the issuance of a draft assessment order u/s 144C of the Act. The Tribunal noted that the TPO had passed an order dated 29.10.2018 in compliance with the Tribunal's remand order, and the assessee was given a fresh opportunity of hearing. The Tribunal distinguished the present case from the judgment of the Hon'ble Madras High Court in Enfinity Solar Solutions (P) Ltd., and relied on the Hon'ble Delhi High Court's judgment in Headstrong Services India (P) Ltd., which mandates the passing of a draft assessment order in remand proceedings.

3. Invocation of revisionary jurisdiction by Ld. Pr. CIT:
The Ld. Pr. CIT invoked revisionary jurisdiction u/s 263 of the Act, considering the assessment order to be erroneous and prejudicial to the interests of the Revenue. The Tribunal held that the exercise of jurisdiction by invoking clause (c) of Explanation 2 of Section 263(1) of the Act was bad, as the circulars relied upon were not issued u/s 119 of the Act. The Tribunal further held that a non est and void order cannot be the subject matter of revisionary proceedings u/s 263 of the Act, citing relevant case laws.

Conclusion:
The appeal of the assessee was allowed, and the impugned order u/s 263 of the Act was quashed. The Tribunal concluded that the final assessment order was not in accordance with the law due to the failure to issue a draft assessment order as mandated by the CBDT Circulars.

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