When order u/s 263 is quashed, assessment order u/s 143(3) r.w.s. 263 has no legs to stand

When order u/s 263 is quashed, assessment order passed u/s 143(3) r.w.s. 263 has no legs to stand

In a recent judgment, ITAT Agra has held that when order u/s 263 of the Act is quashed, assessment order passed u/s 143(3) r.w.s. 263 has no legs to stand and, therefore, does not survive for consideration.

ABCAUS Case Law Citation:
4778 (2025) (10) abcaus.in ITAT

In the instant case, the Revenue filed an appeal before the Tribunal against the order of National Faceless Appeal Centre (NFAC)/ CIT(A) in holding that assessment order passed u/s 143(3) r.w.s. 263 of the Act had no legs to stand.

The original assessment order was partly set aside by the PCIT vide revisionary order passed under Section 263 of the Act.  Thereafter, the AO passed an order u/s 143(3) r.w.s. 263 of the Act, making additions to the returned income on account of unexplained cash credit and unexplained expenditure.

In the meantime, the assessee had challenged the order u/s 263 passed by the PCIT before the Tribunal. By a consolidated order the Tribunal quashed the order passed u/s 263 on the ground the PCIT had not arrived at any categorical finding on merits but passed the order under section 263 merely because of the fact that the corresponding show-cause notice(s) had gone un-responded.

Thereafter, against the order passed u/s 143(3) r.w.s. 263 of the Act, the assessee filed an appeal before the CIT(A), who allowed the appeal on the ground that the order u/s 263 of the Act  had already been reversed by the Co-ordinate Bench of the Tribunal and consequently, the assessment order passed u/s 143(3) r.w.s. 263 of the Act had no legs to stand and, therefore, does not survive for consideration.

Before the Tribunal, the Revenue submitted that CIT(A) had erred on fact and law in holding that the assessment order u/s 143(3) r.w.s. 263 of the Act did not survive for consideration after relying upon the order passed by the ITAT wherein the the revisionary order passed u/s 263 of the Act was quashed.

It was contended that CIT(A) failed to consider the fact that judicial finality had not been attained with respect to the order passed by the ITAT as the department continuous to retain the statutory right to file an appeal against the said ITAT’s order before the Hon’ble High Court and in the event the Department succeeds in such appellate proceedings, the impugned order passed by the CIT(A) would result in a substantial and irreversible loss of revenue to the Department.

The Tribunal held that in view of the fact that the impugned order u/s 263 of the Act passed had been set aside by the Co-ordinate Bench of the Tribunal, the consequential order u/s 143(3) /263 of the Act does not survive and therefore, the appeal of the assessee had been rightly allowed by the CIT(A) and no interference was called for in his order. 

Accordingly, the Tribunal dismissed the grounds of appeal filed by the Revenue.

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