Revision under section 263 by the Principal Commissioner or Commissioner against void-ab-initio order or against a non-existent entity
If an order is passed by the Assessing Officer against a non-existent entity, e.g. against an Amalgamating Company or against a Dissolved Firm, such an order is void-ab-initio and no revision can be made under section 263 against such a void-ab-initio order.
High Court states that, when the department was aware of the dissolution of assessee’s companies, it was incumbent upon the Ld. Pr. CIT to take notice of this fact and substitute the successor company while passing the impugned order, after giving opportunity of hearing to amalgamated company as envisaged under section 263 of the Act. And since the aforesaid action has not been admittedly done by the Ld. Pr. CIT, the impugned order passed against the non-existing entities, which ceased to exist on the date of the impugned order is void. Relying on the decision of the Hon’ble Apex court in Maruti Suzuki (Supra) and Spice Infotainment Ltd Spice Infotainment Ltd. v. CIT (Delhi) (2012) 247 CTR 500 (affirmed by the Apex Court vide order dated 02.11.2017), High Court note that the impugned order passed under section 263 of the Act by the Ld. Pr. CIT against the amalgamating companies which were not in existence on the date of the impugned order is a nullity and, therefore, they are inclined to quash all the impugned orders as shown in the captioned appeals. (Related Assessment Year : 2012-13) – [Durja Vinimay (P) Ltd. v. PCIT – Date of Judgement : 22.11.2019 (ITAT Kolkata)]
Pune ITAT quashes Commissioner’s exercise of jurisdiction under section 263 when assessment order passed by Assessing Officer was void for Assessment Year 2010-11. Notes that Assessing Officer, in the present case, had not disposed off assessee’s objections against reassessment under section 147 by separate speaking order but had had dealt with the objections in the reassessment order itself. HC Observes that CIT had himself admitted that the assessment order was void by opining that ‘since, the copy of reasons recorded for re-opening of the assessment were not furnished to assessee till date of completion of assessment, the order of the Assessing Officer is void’. High Court further opines that “… In case the order is void, then the same cannot be held to be erroneous and prejudicial to the interest of revenue”; Thus, ITAT concludes that “where the Commissioner himself has given a finding that the re-assessment proceedings have not been correctly carried out against the assessee and the Assessing Officer has failed to fulfill his obligation, then under such circumstances revisionary jurisdiction cannot be exercised against such order. (Related Assessment Year : 2010-11) – [Pioneer Distilleries Ltd. v. PCIT, Aurangabad – Date of Judgement : 10.06.2019 (ITAT Pune)]
Proceedings under section 147 has been equated to primary proceedings and the proceedings under section 263 passed equated to collateral proceedings. It has further been held based on various judicial pronouncements of the Hon’ble Supreme Court that if the primary proceedings are non-est in law or void on the ground of lack of jurisdiction then the validity of such proceedings can be challenged even in an appeal arising out of collateral proceedings.
The original assessment order passed under section 143(3) dated 24.10.2013 was null & void in the eyes of law as the same was passed upon a non-existing entity and, therefore, the Ld. CIT could not have assumed jurisdiction under the law to make revision of a non est order and, therefore, the impugned order passed under section 263 by the Ld. CIT is also nullity in the eyes of law and therefore the same is hereby quashed. (Related Assessment Year: 2011-12) – [Westlife Development Ltd. v. PCIT – Date of Judgement : 24.06.2016 (ITAT Mumbai)]
As the order of the Assessing Officer passed under section 147 / 143(3) was itself void, the order of CIT passed under section 263 for quashing this order was without jurisdiction. – [Inder Kumar Bachani (HUF) v. ITO (2006) 101 TTJ 450 (ITAT Lucknow)]
Commissioner cannot exercise his power of revision under section 263 in respect of original assessment order which already stood rectified under section 154
It is not in dispute that on the date March 21, 1989, when the Commissioner sought to exercise his suo motu revisional powers under Section 263 of the Act against the assessment order dated March 13, 1987, the same was already rectified by the Assessing Officer on March 14, 1989, under Section 154 of the Act. In this view of the matter, the Commissioner had no jurisdiction to set aside that order which stood already rectified. In other words, the Commissioner could at best have invoked his suo motu powers under Section 263 of the Act as against the order dated March 14, 1989, passed by the Assessing Officer and not the one already passed and rectified, i.e., original assessment order dated March 13, 1987.
Once the original order stands rectified then it loses its identity at least to the extent it stood rectified. In such circumstances, the Commissioner should have invoked his suo motu powers under Section 263 of the Act against the subsequent rectified order dated March 14, 1989, if he was of the view that the same is erroneous and prejudicial to the interests of the Revenue. We are, therefore, of the view that the Tribunal made no mistake in coming to the conclusion that the order of the Commissioner passed under Section 263 of the Act which had the effect of setting aside the assessment order dated March 13, 1987, is without jurisdiction. (Related Assessment year : 1984-85) – [Kalyan Solvent Solvent Extraction Extraction Ltd. (2005) 276 ITR 154 : 197 CTR MP 475 (MP)]
Commissioner exercised power under section 263 of the Act against the order passed under section 147 of the Act, wherein the condition precedent of service of notice was not fulfilled, held that such orders were bad in law and therefore, the proceedings under section 263 of the Act, admittedly, originating from such orders could not be initiated against the appellants. – [Keshab Narayan Banerjee v. CIT (1999) 238 ITR 694 (Cal.)]
In view of above mentioned judicial precedents, it can safely be concluded that if the Original Assessment Order passed by the Assessing Officer is “an order passed against a non-existent entity is invalid/void-ab-initio, then revisionary jurisdiction under section 263 cannot be exercised against such order.