2025 (9) TMI 1186 - AT - Income Tax

Tribunal quashes PCIT revision under s.263 and consequent s.143(3) r.w.s.263 order disallowing excess Section 80IC deduction

Deputy Commissioner of Income-Tax, Central Circle – 3 (4), Mumbai Versus Johnson & Johnson Private Limited

ITAT MUMBAI held that the PCIT's revision under s.263 disallowing excess Section 80IC deduction (assessee claimed 100% for consumer-division in sixth year ... Revision u/s 263 - PCIT held that the assessee had wrongly claimed deduction u/s. 80IC in respect of consumer division in the 6th year of operation @100% as against the admissible claim @ 30% of the eligible profit in violation of the provisions of Section 80IC - Tribunal and vide order [2019 (7) TMI 2068 - ITAT MUMBAI] the revision order passed by the PCIT. Meanwhile, the Assessing Officer has passed the order u/s. 143(3) r.w.s. 263 revising the earlier assessment order as per the deductions in revision order of PCIT dated 25.06.2018 - HELD THAT:- Since the order u/s. 263 has already been quashed by the co-ordinate bench, therefore, the order u/s. 143(3) r.w.s. 263 also deserved to be quashed, and for this reason, Ld. CIT(A) has justifiably held that this order does not survive. ISSUES PRESENTED AND CONSIDERED 1. Whether an assessment order passed under section 143(3) read with section 263 of the Act, which is made consequential to or in conformity with a revision order under section 263 that has been quashed by a coordinate bench, survives independently or must also be quashed. 2. Whether the Tribunal should condone a minor delay in filing the appeal by the Revenue (2 days) under the applicable limitation provisions. 3. Whether the merits of allowance of a second 100% deduction under section 80-IC for a unit after substantial expansion (i.e., treating the expansion year as a fresh initial year) required determination in the present proceedings in view of the quashing of the revision under section 263. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of assessment order passed under section 143(3) read with section 263 where the revision order under section 263 has been quashed Legal framework: The assessment provisions permit revision under section 263 where an order is erroneous and prejudicial to the interests of the revenue; consequential actions taken in assessment proceedings consequential to such revision derive efficacy from the validity of the revision order. Precedent Treatment: The Tribunal relied on the effect of a coordinate bench having previously quashed the revision order under section 263; the decision of that coordinate bench was treated as binding for present purposes in the absence of the Department challenging it further. Interpretation and reasoning: The Court observed that the Assessing Officer had passed an order under section 143(3) read with section 263 revising an earlier assessment in conformity with a revision order dated 25.06.2018. Since a coordinate bench of the Tribunal had quashed the revision order under section 263 (thereby nullifying the foundation for the subsequent assessment revision), the subsequent assessment order made pursuant to that revision could not stand independently. The Tribunal reasoned that when the revision order under section 263 is quashed, the consequential order passed under section 143(3) r.w.s.263 lacks the underlying legal foundation and therefore is vitiated. The Appellate Tribunal accepted the submission that the quashing of the section 263 revision order by the coordinate bench necessitated quashing of the subsequent assessment order passed in consequence thereof, and thus affirmed the CIT(A)'s order setting aside the assessment revision. Ratio vs. Obiter: Ratio - The operative principle (ratio) is that an assessment order passed under section 143(3) read with section 263 which is made consequential to a revision order under section 263 that has been quashed cannot survive independently and is liable to be quashed. Conclusions: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order setting aside the assessment order passed under section 143(3) r.w.s.263, holding that the subsequent assessment does not survive where the foundational section 263 revision order has been quashed by a coordinate bench and not challenged further by the Department. Issue 2: Condonation of delay in filing the appeal (2 days) Legal framework: Limitation for filing appeals under section 253(3) of the Act; tribunals have jurisdiction to condone minor delays upon hearing the parties. Precedent Treatment: The Tribunal exercised discretion to condone the minor delay after hearing the learned Departmental Representative. Interpretation and reasoning: Given the very short delay of two days and having heard submissions from the Revenue's representative on condonation, the Tribunal found the delay to be minor and justifiably condoned it. Ratio vs. Obiter: Ratio - Minor delays (here, two days) in filing appeals may be condoned in exercise of the Tribunal's discretion after hearing the parties. Conclusions: The minor delay of two days in filing the appeal was condoned and did not bar the appellate proceedings. Issue 3: Necessity to decide the substantive question on allowance of a second 100% deduction under section 80-IC on substantial expansion Legal framework: Section 80-IC as enacted governs eligibility and quantum of deduction for eligible undertakings; factual and legal questions arise where a unit claims a fresh initial period deduction following substantial expansion. Precedent Treatment: The assessee relied on a Supreme Court decision (Aarham Softronics) and argued that the issue was settled in its favour; the Revenue raised the question whether treating the year of substantial expansion as a fresh initial assessment year to allow a second period of 100% deduction contravened section 80-IC(6). However, the Tribunal did not adjudicate on the substantive question of section 80-IC's applicability in this appeal. Interpretation and reasoning: Because the coordinate bench had already quashed the revision under section 263, rendering the consequential assessment revision void, the Tribunal found it unnecessary to examine or decide the underlying substantive dispute concerning the permissibility of a second 100% deduction under section 80-IC following substantial expansion. The Tribunal expressly accepted the position that once the revision under section 263 was quashed, the order under section 143(3) r.w.s.263 'does not survive' and therefore refrained from determining the merits of the section 80-IC contention. Ratio vs. Obiter: Obiter - Any references to the Aarham Softronics decision and the substantive law on substantial expansion and second 100% deduction were not adjudicated as part of the Court's ratio; the Tribunal did not pronounce on whether that precedent governs the present facts. Thus, discussion of the section 80-IC point remains obiter and undecided in the present judgment. Conclusions: The Tribunal did not decide the substantive entitlement to a second 100% deduction under section 80-IC on the ground of substantial expansion because the foundational revision order under section 263 was quashed by a coordinate bench, which made consideration of that substantive issue unnecessary in the present appeal.