Consequential Assessment Annulled: ITAT Mumbai Rules Reassessment Invalid After Section 263 Revision Quashed
In a significant ruling upholding the principles of judicial discipline and the doctrine of merger, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has dismissed the Revenue's appeal in the case of ITO Vs Pantime Finance Company Pvt Ltd. The Tribunal held that once a revisionary order passed under Section 263 of the Income Tax Act, 1961 is quashed by a coordinate bench, all subsequent proceedings—including reassessment orders passed to give effect to that revision—automatically lose their legal footing.
The ruling clarifies that the mere pendency of a Revenue appeal before the High Court against a Tribunal order does not operate as a stay, nor does it validate consequential orders based on the set-aside revision.
Factual Matrix and Procedural History
The dispute for the Assessment Year 2012–13 originated from the return of income filed by the assessee. The chronological sequence of events is crucial to understanding the legal controversy:
- Original Filing: The assessee filed its original return on March 4, 2013, declaring a total loss of INR 57,42,766.
- First Reassessment: Based on information alleging that the assessee had routed funds amounting to INR 15 lakh from M/s Anunay Sales Private Ltd, the Assessing Officer (AO) initiated proceedings under Section 147. The assessee complied by filing a return on April 23, 2018, revising the loss to INR 19,07,954.
- Conclusion of Reassessment: The AO completed the assessment vide an order dated November 20, 2018, under Section 143(3) read with Section 147, accepting the returned loss without making additions.
Intervention by the Principal Commissioner (PCIT)
Subsequent to the reassessment, the Principal Commissioner of Income Tax-5, Mumbai (learned PCIT), exercised jurisdiction under Section 263 of the Income Tax Act, 1961. In an order dated March 30, 2021, the learned PCIT set aside the reassessment order.
The revision was grounded on the allegation that the AO had failed to conduct necessary inquiries and verification. Specifically, the learned PCIT contended that the AO had not adhered to the Standard Operating Procedures (SOP) issued by the Central Board of Direct Taxes (CBDT) regarding "Penny Stocks." Consequently, the PCIT directed the AO to pass a de novo assessment order.