Once Appeal withdrawn & Revision allowed u/s 264, CIT(A) has no jurisdiction

Dr. Om Prakash Vs ACIT (ITAT Delhi)

Once Appeal withdrawn & Revision allowed u/s 264, CIT(A) has no jurisdiction – Revision u/s 264 prevails after appeal withdrawal – CIT(A) Order Invalid– ITAT Delhi

Delhi ITAT has held that once an assessment order is revised u/s 264 by PCIT, the said revision order becomes operative & the pending appeal before CIT(A) automatically becomes infructuous. Tribunal further observed that CIT(A) has no authority in law to sit in judgment over the validity of a revision order passed by PCIT.

Assessee, a medical practitioner, had filed his return declaring income of ₹16.16 lakh. AO completed assessment u/s 143(3) determining income by making two additions of ₹16.45 lakh & ₹72.15 lakh. Aggrieved, Assessee filed appeal before CIT(A). However, during pendency of the appeal, Assessee opted to pursue the alternative remedy of revision & accordingly filed a petition u/s 264 before PCIT.

On 14.03.2017, PCIT passed a revision order deleting both disputed additions. The said order was accepted by the Dept, as the AO also passed effect order on 25.08.2017 giving effect to the revision. In these circumstances, the appeal pending before CIT(A) had lost relevance, since the original assessment order had merged with the revision order.

Despite this, CIT(A) by order dated 03.11.2017, proceeded to dismiss Assessee’s appeal on merits & went a step further in branding the revision order of PCIT as having been obtained by “fraud”. CIT(A) held that Assessee had concealed pendency of the appeal & that PCIT had no jurisdiction to entertain the revision.

Tribunal found these observations wholly contrary to record. It was noted that Assessee had disclosed the withdrawal of appeal in his petition u/s 264 & PCIT was fully aware of the facts before passing the order. Once PCIT’s order had attained finality & was acted upon by AO, CIT(A) could not have declared the same as non est. Tribunal held that CIT(A)’s order was incompetent, superfluous & without jurisdiction. Allowing the appeal of assessee, Tribunal set aside the impugned order of CIT(A) & restored the relief granted by PCIT.

This decision reaffirms that once a revision order u/s 264 is passed by PCIT, the assessment merges into the revision & CIT(A) cannot override or nullify such revision order.

FULL TEXT OF THE ORDER OF ITAT DELHI

The appeal filed by assessee is against order dated 03.11.2017 of Learned Commissioner of Income-Tax (Appeals), Ghaziabad (hereinafter referred as “the Ld. CIT(A)”) under Section 250 of the Income Tax Act, 1961 ( hereinafter referred as “the Act”) arising out of assessment order dated 29.12.2016 of the Learned Assistant Commissioner of Income Tax, Circle-2, Ghaziabad (hereinafter referred as “Ld. AO”) under Section 143(3) of the Act for assessment year 2014-15.

2. Brief facts of case are that assessee engaged in business of medical practice, filed his return of income electronically on 29.09.2014 declaring total income of Rs.16,16,570/-. The case was selected for limited through CASS and notice under Section 143(2) of the Act dated 31.08.2015 was issued. Due to change of incumbent notice under Section 142(1) if the Act dated 10.06.2016 was issued. Notices under Section 142(1) of the Act were issued. Shri Manoj Jain, CA/AR of the assessee attended proceedings and furnished written explanation of the queries raised, produced books of account and computation of income along with supporting documents. On completion of proceedings, Ld. AO vide order dated 29.12.2016 made the additions of Rs.16,45,000/- and Rs.72,15,253/-.

3. Against order dated 29.12.2016 of Ld. AO, appellant/assessee preferred appeal before the Ld. CIT(A) which was dismissed vide order dated 03.11.2017.

4. Being aggrieved, appellant/assessee preferred present appeal with following grounds:

“1. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in arbitrarily confirming the assessment order passed by Ld AO in making additions of Rs. 88,65,253 comprising of two additions of Rs 16,45,000 and Rs 72,15,253 which stood already deleted by order of Pr CIT passed in revision proceedings u/s 264 of the Act making the appeal of CIT-A as incompetent and superfluous as order passed by Ld AO ceases to exist having merged into operative and existing revision order passed by Pr CIT u/s 264 of the Act.

2. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in arbitrarily confirming the assessment order passed by Ld AO in making additions of Rs 88,65,253 comprising of two additions of Rs 16,45,000 and Rs 72,15,253 without appreciating that appeal withdrawal request made vide letter dated 16/02/2017 was before perusing revision application u/s 264 (21/02/2017) and said appeal withdrawal application was decided effectively on 03/11/2017 by ld CIT-A after a inordinate gap of 9 months app..

3. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in arbitrarily confirming the assessment order passed by Ld AO in making additions of Rs 88,65,253 comprising of two additions of Rs 16,45,000 and Rs 72,15,253 without appreciating that ld CIT-A has no authority in law to decide whether Pr CIT was wrong or correct as it is settled law that a order remains operative and effective unless set aside by process known to law which procedure is not followed in present case qua Pr CIT revision order u/s 264 of the Act.

4. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in arbitrarily confirming the assessment order passed by Ld AO in making additions of Rs 88,65,253 comprising of two additions of Rs 16,45,000 and Rs 72,15,253 without appreciating that no where merits of the case are independent dealt by her objectively in light of the order passed by Pr CIT u/s 264 on self same issue.

5. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in making incorrect observations on appellants innocuous conduct treating it as “fraudulent” without respect to good faith presumption attached to legal order passed by Pr CIT u/s 264 of the Act that all official acts are presumed to be done in good faith.

6. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in not deleting the additions of Rs 88,65,253 comprising of two additions of Rs 16,45,000 and Rs 72,15,253 as addressed in our voluminous submissions before Pr CIT and in order passed by Pr CIT u/s 264 of the Act.

7. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in not appreciating that limited scrutiny was vaguely and wrongly converted to complete scrutiny without following due process of law and extant CBDT instructions thus rendering additions beyond limited scrutiny as bad in law.

8. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in not appreciating that qua addition of Rs 72,15,253 there has been grave and serious violations of principles of natural justice in as much as back material extensively used against appellant in assessment order is never confronted to assessee thus rendering the addition made a nullity.

9. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in not restoring the returned income declared by assessee in its return of income and thereby breaching rule of law enshrined in holy book-constitution of India”

5. Learned Authorised Representative for the appellant/assessee submitted that against assessment order dated 29.12.2016, appellant/assessee filed appeal before Ld. CIT(A) under Section 246A of the Act on 27.01.2017. Assessee filed letter dated 16.02.2017 opting to withdraw his appeal to go for revision application under Section 264 of the Act. On 21.02.2017, assessee filed revision under Section 264 of the Act with proper disclosure regarding filing of appeal and letter of withdrawal. On 14.03.2017, Ld. PCIT under Section 264 of the Act accepted revision. On 10.10.2017, assessee highlighted withdrawal of appeal and filing of revision which was allowed. Ld. CIT(A), Ghaziabad vide order dated 03.11.2017, erred in holding order of Ld. PCIT as non est initio. Hon’ble High Court of Delhi in CIT vs. Eurasia Publishing House Pvt. Ltd. 232 ITR 381 as followed by Co-ordinate Bench of this Hon’ble Tribunal in an identical case of National Neurosciences Centre Vs. ITO Exemption – ITA No.1128/Kol/2013 order dated 08.07.2016 holding that (para 13) Ld. CIT(A) order adjudicating appeal where assessment order is already cease to exist and stand merged with revision order of Ld. PCIT under Section 264, same has to be cancelled as incompetent and superfluous.

6. Learned Authorised Representative for the Department of Revenue relied on order of Ld. CIT(A).

7. From examination of record in light of above contentions, it is crystal clear that the undisputed facts that on 27.01.2017, first appeal filed by the assessee with Ld. CIT(A) under Section 246A of the Act. On 16.02.2017, assessee filed letter opting to withdraw his appeal to go for revision application under Section 264 of the Act. On 21.02.2017, revision petition was filed under Section 264 of the Act before the PCIT Ghaziabad with proper disclosure on above aspects of filing of appeal and withdrawal letter. On 14.03.2017, revision order passed under Section 264 by Ld. PCIT Ghaziabad page 7 of Ld. PCIT revision order is highlighted to show factum of disclosure on part of assessee on appeal filing/withdrawal etc. (deleting both the disputed additions).The PCIT’s order attained finality as revision effect order passed by Ld AO on 25.08.2017 accepting PCIT order under Section 264). On 03.11.2017, Ld. CIT(A), Ghaziabad passed impugned order under Sections 250/251 holding in illegal and unlawful manner that assessee has played fraud on PCIT, Ghaziabad and holding Ld. PCIT’s order under Section 264 of the Act to be invalid as non est (initio) and appellant’s request for withdrawal of appeal in light of PCIT order under Section 264 of the Act turned down.

8. CIT(A) in order dated 03.11.2017 in para nos. 5.4 xxxxxx & 5.7 has noted and observed as under:

“5.4 It is not in dispute that on the date the appellant prosecuted and obtained an order from the learned Pr. CIT u/s 264, the appeal of the appellant was pending before this office. Therefore, the appellant could not have invoked the jurisdiction of the learned Pr. CIT u/s 264 qua the impugned assessment order. However, it appears the appellant by concealing the material fact from the learned Pr. CIT has successfully prosecuted its petition u/s 264 before the leaned. Pr. CIT and has also obtained an order in its favor and which the appellant is now relying upon to evade the jurisdiction of this office.

x x x x x x

5.7 The appellant having filed the present appeal before this office has the material knowledge of pendency of its appeal before this office and was also obligated in law to disclose this material fact before learned Pr. CIT. However, the appellant concealed this material fact and obtained an order in its favour when there was no jurisdiction to pass such an order in the first place. The appellant successfully over came this disability in law by playing fraud upon the learned Pr. CIT”.

9. In revisionary order dated 14.03.2017 under Section 264 of the Act, in para 21, it is mentioned that “the assessee has filed a letter withdrawing the appeal filed appeal before Ld. CIT(A) and revision petition is well within time and maintainable”.

10. In view of above specific mention in the revision and the withdrawal of appeal, all the observations made by Ld. CIT(A) being contrary to material-facts are illegal. Ld. CIT(A) wrongly held playing/committing of fraud by assessee. Therefore, impugned order of Ld. CIT(A) is set aside.

11. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 20^th August, 2025.