Once an assessment is re-opened by virtue of order passed by CIT U/s. 263, the initial order of assessment ceases to be operative

CA Sandeep Kanoi

It is not in dispute that after setting aside the assessment made under Section 143 (1) of the Act, by the Commissioner in exercise of his powers under Section 263 of the Act, the Assessing Officer made fresh assessment under Section 143 (3) of the Act. The Assessing Officer had, accordingly, issued a notice under sub-section (2) of Section 143 of the Act to the assessee. Further, it is not in dispute that while issuing the notice, previous approval of the Inspecting Assistant Commissioner was not sought. Therefore, the question raised is, whether the assessment under Section 143 (3) of the Act, would vitiate for want of previous approval of the Inspecting Assistant Commissioner.

 Sub-section (2) of Section 143 of the Act provides for issue of notice by the Assessing Officer, requiring the assessee, on the date to be therein specified, either to attend at the Assessing Officers office or to produce or to cause to be there produced any evidence on which the assessee may rely in support of the return. The first proviso to sub-section (2) provides that, in a case where an assessment has been made under sub-section (1), the notice under this sub-section, except where such notice is in pursuance of an application of the assessee under clause (a), shall not be issued by the Assessing Officer unless the previous approval of the Deputy Commissioner has been obtained to the issue of such notice. Thus, this provision would show that where the Assessing Officer has made the assessment under sub-section (1) of Section 143, he has power to make assessment under Section 143 (3) and for that, the issue of notice under sub-section (2) is a pre-condition. Opening words of the first proviso to sub-section (2) are in a case where the assessment has been made under sub-section (1).   A bare reading of this expression would show that where the Assessing Officer has made assessment under sub-section (1) and   he chooses to make reassessment under sub-section (3), he has no   powers to issue notice, unless the previous approval of the Inspecting Assistant Commissioner is obtained. The words Inspecting Assistant Commissioner in the first proviso were substituted by Deputy Commissioner by Act 4 of 1988, Section 2, w.e.f. 01.04.1988. The question is, where the assessment made under sub-section (1) of Section 143 of the Act is set aside by the revisional authority under Section 263 of the Act, whether the previous approval contemplated by sub-section (2) of Section 143 of the Act is necessary. In our opinion this question must be answered in the negative, since the original order under Section 143(1), having been quashed and set aside, it ceases to operate.

The revisional power, as per the provisions Section 263 is supervisory in nature and not like that of an appellate authority. For exercising this power, the only condition is that the order of the Assessing Officer should be erroneous insofar as it is prejudicial to the interests of the revenue. The provisions contained in this Section would also show that the Commissioner can call for and examine the order of any proceeding under the Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or canceling the assessment and directing a fresh assessment. Thus, he has options, viz., to pass such order as the circumstances of the case justify or an order enhancing the assessment or modifying the assessment or canceling the assessment and in the event of canceling the assessment, he has power to issue a direction for fresh assessment. In the present case, the Commissioner cancelled the assessment and directed fresh assessment.

It is well settled that once an assessment is re-opened by virtue of the order passed by CIT under Section 263 of the Act, the initial order of assessment ceases to be operative. The effect of re-opening of assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made of re-assessment. Thus, in the present case, in our opinion, after the previous assessment, which was set aside by the CIT in exercise of his power under Section 263 of the Act, the whole proceedings started afresh.

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