Section 263 Assessment Cannot Survive After Original Order Is Quashed As Time Barred: ITAT Kolkata

On 8 July, the Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) held that a fresh assessment order passed pursuant to revision proceedings cannot survive once the original assessment has been quashed as time barred. It becomes “invalid and void ab initio” since the original assessment no longer exists in law.

Judicial Member Pradip Kumar Choubey and Accountant Member Rajesh Kumar allowed the cross objection filed by Dozco India Private Limited and dismissed the Revenue's appeal as infructuous. The Bench held:

“Since the order passed u/s 143(3) of the Act is become a non existence so any consequential order passed by the AO u/s 143(3)/263 of the Act is invalid and void ab initio.”

The Principal Commissioner of Income Tax had invoked Section 263 of the Income Tax Act, which allows tax authorities to revise an assessment order that is erroneous and prejudicial to the interests of the Revenue. Pursuant to the revision order, the Assessing Officer disallowed Dozco India's claim for foreign exchange loss.

Before the Tribunal, the company contended that the original scrutiny assessment had already been quashed by the Commissioner of Income Tax (Appeals) on the ground that it was time barred. The order was subsequently upheld by the Tribunal and the Calcutta High Court.

Accepting the company's contention, the Tribunal held that once the original assessment ceased to exist, any consequential assessment passed pursuant to the revision order could not survive. The Bench relied on the Calcutta High Court's decision in Keshab Narayan Banerjee v. CIT while allowing the cross objection.

Accordingly, the ITAT dismissed the Revenue's appeal as infructuous.