Assessee can challenge the validity of any order in the collateral proceedings though the same has not been challenged before the appellate authority – ITAT
In a recent judgment, ITAT Guwahati has held that assessee can challenge the validity of any order in the collateral proceedings though the same has not been challenged before the appellate authority. When the appeal against the appellate order is pending before ITAT, then the assessee can legitimately challenge the revisionary order passed by the PCIT setting the assessment order which was subjudice before the CIT(A).
ABCAUS Case Law Citation:
4846 (2025) (11) abcaus.in ITAT
The appellant assessee filed the return of income showing total income at nil by claiming exemption u/s 10(26) of the Income Tax Act, 1961 (the Act). The Return was processed u/s 143(1) of the Act.
The case of the assessee was thereafter selected for scrutiny and statutory notices u/s 143(2) of the Act duly served upon the assessee. Finally, the assessment was completed u/s 143(3) of the Act by making additions on several counts.
The said assessment order was challenged by the assessee before the CIT(A).
Thereafter the PCIT, Guwahati by exercising the revisionary jurisdiction u/s 263 of the Act revised the assessment passed u/s 143(3) of the Act by directing the AO to make the assessment afresh.
The Assessing Officer (AO) in a set aside proceedings framed the assessment u/s 143/ 263 of the Act making the same additions as were made in the assessment framed u/s 143(3) of the Act.
Subsequently, the CIT(A) passed the order u/s 250 of the Act confirming the additions made in the original assessment order passed u/s 143(3) of the Act which were already stood quashed by virtue of order passed u/s 263 of the Act and for which assessment was already completed by the AO u/s 143/ 263 of the Act.
The assessee challenged the order of the CIT(A) before the Tribunal and raised an an additional ground challenging the validity of the revisionary proceeding’s u/s 263 of the Act and the consequent order passed u/s 263 of the Act on the ground that in terms of clause (c) of explanation 1 to Section 263 of the Act, the exercise u/s 263 of the Act was barred.
It was argued that the PCIT had no jurisdiction to revise the assessment which was sub judice before the CIT(A) on the same issues at the relevant point of time.
In view of the judgment of the Hon’ble Supreme Court, the Tribunal opined that the assessee is at liberty to raise any legal issue before any appellate authority for the first time even when the same has not been raised before the lower authorities.
The Revenue argued that the assessee cannot be allowed to challenge the validity of the revisionary order u/s 263 of the Act as the same attained finality because no appeal was ever preferred by the assessee in the tribunal challenging the same.
The Tribunal opined that the assessee can challenge the validity of any order in the collateral proceedings though the same has not been challenged before the appellate authoirty.
The Tribunal placing reliance on the judgment of the Hon’ble Calcutta High Court and co-ordinate Bench and opined that the assessee can challenge the validity of any order in the co-lateral/consequential proceedings. It was held that the assessee was within its legitimate and lawful right to challenge the revisionary order u/s 263 of the Act even in the collateral proceeding/ consequential proceedings as has been held in the aforesaid decisions.
The Tribunal placing releianc eon the judgment of the Hon’ble Allahabad High Court observed that on the date of exercise of revisionary jurisdiction the assessee had already challenged the assessment order before the CIT(A) on the same issue. The Tribunal opined that the action of the PCIT in revising the said order was unsustainable and cannot be sustained in terms of clause (c) of explanation 1 to Section 263 of the Act.
Accordingly, the Tribunal held that the order passed by the PCIT u/s 263 of the Act as nullity, invalid as the same was passed without any valid jurisdiction in violation to clause (c) of explanation 1 to Section 263 of the Act.
The Tribunal held that in view of the ratio laid down in the decisions, when the appeal against the appellate order is pending before ITAT, then the assessee can legitimately challenge the revisionary order passed by the PCIT setting the assessment order which was subjudice before the CIT(A) and the CIT(A) affirmed the said order and the appeal is before ITAT.
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