DCIT Vs Asian Hotels [North] Limited (ITAT Delhi)
Once Section 263 Order Is Quashed, Fresh Assessment Cannot Survive: ITAT Dismisses Revenue Appeal as Infructuous
The Delhi ITAT dismissed the Revenue’s appeal in the case of Asian Hotels (North) Ltd. for AY 2016-17, holding that the reassessment framed under Section 143(3) read with Section 263 had become infructuous once the very foundation – the Section 263 revision order – was quashed by the Tribunal earlier.
The Tribunal noted that after the original assessment and partial relief by the CIT(A), the PCIT had invoked Section 263 and directed a fresh assessment, pursuant to which the AO made large additions on account of suppression of liquor sales, disallowance under Sections 43B and 69C, and short-term capital gains. However, the assessee had already succeeded before the ITAT in getting the Section 263 order itself quashed by order dated 26.11.2024.
In view of this, the Tribunal held that any assessment made in pursuance of a quashed Section 263 order automatically becomes non-existent and cannot be sustained. Since the very basis of the impugned assessment no longer survived, the Revenue’s appeal challenging deletion of additions by the CIT(A) was dismissed in limine. The appeal was thus dismissed in entirety as infructuous.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the Revenue is preferred against the order of the Ld. CIT(A)-27, Delhi dated 27.01.2025 pertaining to A.Y 2016-17.
2. The grievances of the Revenue read as under:
“1. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) is correct in allowing relief to the assessee without deciding the case on merits?
2. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) is correct in allowing relief to the assessee on order u/s 143(3) r.w.s. 263 of the Act by relying on the decision of Hon’ble ITAT, giving relief to the assessee against order u/s 263 of the Act passed in case of the assessee, without appreciating that the department is processing the filing appeal against the 263 order and if decision of the said appeal comes in favour of revenue then the revenue will be left with no remedy to pass a fresh order in pursuance to upheld order u/s 263 of the Act?
3. The Revenue has filed an application for condonation of delay on the ground that the authorization to file appeal before the ITAT was received late. Having perused the application for condonation of delay, we find that there is sufficient cause for filing the appeal belatedly by 35 days. We, therefore, condone the delay.
4. Briefly stated, the facts of the case are that the assessee is a limited company which filed its return of Income for A.Y 2016-17 on 29.09.2016 declaring loss of Rs 32,48,76,393. The assessee’s case was selected for scrutiny and an order under section 143(3) of the Act was passed wherein addition amounting to Rs 19,07,225/- was made and accordingly, the assessed income was computed to loss of Rs 32,29,69,168/-.
5. Aggrieved, the assessee went in appeal before the ld. CIT(A) who, allowed relief to the assessee computing the assessed income as loss of Rs 32,47,83,990/-.
6. Subsequently the PCIT set aside the said assessment order u/s 263 of the Act and directed the AO to pass a fresh order of assessment. The Assessing Officer passed the impugned order making additions amounting to Rs 6,48,41,747/- and raising the demand of Rs 13,07,31,628/-.
8. The additions made by the assessee pertains to the following:
a. Disallowance of Rs 5,30,00,000/- on account of suppression of sales of liquor;
b. Disallowance of deduction under section 43B of the Act amounting to Rs 99,72,168/-;
c. Disallowance under section 69C of the Act on account of unexplained expenditure amounting to Rs 18,69,579/-;
d. Added short term capital gain of Rs 54,93,70,062/- .
9. In appeal, the CIT(A) deleted the said additions. Being aggrieved the Revenue has preferred this appeal before us.
10. Before us, both the rival representatives reiterated what has been stated before the lower authorities.
11. At the very outset, we find from the order of the CIT(A) that the order u/s 263 of the Income-tax Act, 1961 [the Act, for short] has been quashed by the ITAT vide its order dated 26.11.2024. Therefore, the order made u/s 143 r.w.s 263 in pursuance of the said order u/s 263 of the Act becomes infructuous and no longer survives. Accordingly, the grounds of appeal raised by the Revenue stand dismissed.
12. In the result, appeal of the Revenue in ITA No. 3729/DEL/2025 is dismissed.
The order is pronounced in the open court on 16.01.2026.
