ACIT Vs Bombay Dyeing and Manufacturing Company Limited (ITAT Mumbai)
Summary: ITAT Mumbai dismissed the Revenue’s appeal and upheld the CIT(A)’s decision annulling the consequential assessment made pursuant to a revision order under Section 263 of the Income-tax Act, 1961. Bombay Dyeing and Manufacturing Company Limited, engaged in manufacturing and export of textiles and real estate development, had originally been assessed under Section 143(3) for AY 2015-16.
Subsequently, the Principal Commissioner invoked Section 263 of the Act, holding the assessment order to be erroneous and prejudicial to the interests of the Revenue and directing the AO to undertake fresh enquiries and verification. The assessee challenged the Section 263 order before the coordinate Bench, which quashed it. Meanwhile, the AO had already passed a consequential assessment order on 31.10.2021 pursuant to the revisionary directions. The CIT(A) held that once the foundational Section 263 order had been quashed, the consequential assessment could not continue to exist and accordingly annulled it.
The Tribunal found no infirmity in that conclusion. It observed that although the Revenue might not have accepted the coordinate Bench’s decision and might have challenged it before the High Court, that circumstance did not prevent disposal of the present appeal or preserve an assessment whose foundation had already been quashed. The Revenue did not point to any material independently supporting the consequential assessment. The CIT(A)’s order was therefore confirmed and the Revenue’s appeal dismissed. The order was pronounced on 08.09.2023. TaxGuru subsequently reported the Bombay High Court proceedings arising from this matter on the same principle.
