Income Tax Appellate Tribunal on Invalid Reassessment and Revision under Section 263.

Headnote:

The Income Tax Appellate Tribunal (ITAT) quashed the revision order passed under Section 263 of the Income Tax Act, 1961, holding that the underlying reassessment order under Section 147 read with Section 144B was invalid. The Tribunal observed that once the reassessment itself is void, any revision based on it cannot survive. The reassessment was found invalid as the Assessing Officer failed to make additions on the issue for which the case was reopened and did not dispose of the assessee’s objections in accordance with law.

Background:

• The assessee, Sunita Saini, filed an appeal challenging the revision order passed by the Principal Commissioner of Income Tax (PCIT), Faridabad, under Section 263 dated 04.03.2024.

• The reassessment order under Section 147 r.w.s. 144B dated 10.03.2022 was reopened based on information from the Investigation Wing.

• The PCIT held that the reassessment was erroneous and prejudicial to the interest of the Revenue as the Assessing Officer failed to examine certain issues.

• The assessee contended that the reassessment order itself was invalid because:

– The AO did not make any addition on the issue for which reopening was initiated.

– The AO did not pass a speaking order while disposing of the objections to reopening.

– The PCIT relied on Explanation 2 to Section 263(1) in the final order without mentioning it in the show-cause notice.

Court’s Observations:

• The Tribunal relied on the rulings in Ranbaxy Laboratories Ltd. v. CIT (336 ITR 136) and CIT v. Jet Airways (I) Ltd. (331 ITR 236), which held that if no addition is made on the ground of reopening, the entire reassessment is invalid.

• The AO’s failure to pass a speaking order on objections was a violation of the Supreme Court’s judgment in GKN Driveshafts (India) Ltd. v. ITO (259 ITR 19).

• The PCIT exceeded jurisdiction by invoking Explanation 2 to Section 263 without giving prior notice, violating the principles of natural justice as held in PCIT v. Shree Ji Prints Pvt. Ltd. (2021) 130 taxmann.com 294 (SC).

• Consequently, since the reassessment was invalid, the revision order u/s 263 based upon it could not stand.

Legal Provisions Discussed:

• Section 147 – Income escaping assessment.

• Section 144B – Faceless assessment.

• Section 263 – Revision of orders prejudicial to revenue interest.

• Section 151 – Sanction for issue of notice.

• GKN Driveshafts (India) Ltd. v. ITO (259 ITR 19) – Requirement of speaking order on objections to reopening.

• Ranbaxy Laboratories Ltd. v. CIT (336 ITR 136) – Invalid reassessment if no addition made on original issue.

Citation: ITA No. 1877/DEL/2024

Case: Sunita Saini v. Income Tax Officer, Ward 1(4), Faridabad

Court: Income Tax Appellate Tribunal, Delhi Bench “G”

Coram: Shri Challa Nagendra Prasad (Judicial Member) & Shri M. Balaganesh (Accountant Member)

Assessment Year: 2016–17