Income Tax Officer cannot rectify order under Section 154 after original reassessment order was quashed

Delhi HC quashed a rectification order under Section 154 of the Income Tax Act. The original reassessment order under Section 148 had been previously quashed for non-compliance with Section 149(1)(b) requirements regarding minimum escaped income threshold of Rs. 50 lakhs. The Assessing Officer attempted rectification despite the original order being quashed. HC held that once an order is quashed by prerogative writ, it ceases to exist in law and cannot be rectified under Section 154. The power of rectification requires an existing valid order, which was absent after quashing. Writ petition allowed.

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Issues:
Challenge to rectification order based on previous judgment quashing reassessment notices for AY 2013-14 due to income being below threshold of INR 50 lakhs, Review petition dismissal leading to AO invoking powers under Section 154 for rectification, AO's oversight of quashed orders not capable of rectification, Court's reliance on precedent to establish orders deemed to have never existed, Conclusion on Section 154 not applicable, Impugned order quashed, Respondents allowed to initiate other permissible proceedings.

Analysis:
The writ petition sought to quash the impugned order dated 22.11.2022 passed under section 154 of the Act and the prior approval granted by Respondent No. 2, along with reassessment proceedings for AY 2013-14 and related notices/orders. The challenge was based on a previous judgment where the Court allowed the petition due to income alleged to have escaped assessment being less than INR 50 lakhs, contrary to CBDT Instruction No. 01/2022. The Court quashed the impugned order under Section 148A(d) as it violated the CBDT Instruction, relying on legal precedents. The writ petition was allowed, and the reassessment notices were quashed.

The review petition filed by the respondents after the initial judgment was dismissed on 09.11.2022. The respondents contended that the income escaped assessment was actually more than INR 50 lakhs, but the Court observed that the corrected order was neither issued nor served. The Court rejected the review petition, emphasizing that without a corrected order, complete facts could not be considered. Subsequently, the Assessing Officer invoked Section 154 powers to issue the impugned notices, overlooking that the quashed orders were incapable of rectification as they were deemed to have never existed in law.

The Court referenced the settled legal position that when an order is quashed, it is as if it never existed. Citing a Supreme Court case, the Court highlighted that the passing of interim orders does not revive disposed proceedings. Therefore, the power under Section 154 could not be invoked as the original reassessment orders were quashed, requiring a fresh or rectified order to be issued. Consequently, the impugned order dated 22.11.2022 for AY 2013-14 was quashed, as Section 154 could not be applied in this scenario. The respondents were allowed to pursue other permissible proceedings as per law.

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