Invalidity of Consequential Assessment Following Annulment of Revisionary Proceedings: Analysis of ITAT Delhi Ruling
In the realm of income tax litigation, the doctrine of Sublato Fundamento Cadit Opus—meaning "when the foundation is removed, the superstructure falls"—plays a pivotal role. This legal principle dictates that if the jurisdictional basis for a proceeding is quashed, any subsequent orders passed in reliance upon that basis automatically become void. A recent adjudication by the Income Tax Appellate Tribunal (ITAT), Delhi Bench, in the case of DCIT Vs Asian Hotels [North] Limited, reinforces this doctrine. The Tribunal held that once an order passed under Section 263 of the Income Tax Act 1961 is set aside, the consequential assessment order framed under Section 143(3) read with Section 263 cannot survive independently.
Genesis of the Dispute
The controversy centers on the Assessment Year 2016-17. The assessee, a limited company, originally filed its Return of Income on September 29, 2016. In this return, the assessee declared a substantial loss amounting to Rs 32,48,76,393.
The case was initially selected for scrutiny under the standard assessment procedures. The Assessing Officer (AO) completed the assessment under Section 143(3) of the Act. During this initial round, the AO made a relatively minor addition of Rs 19,07,225, resulting in the assessed income being computed at a loss of Rs 32,29,69,168.
Following this, the assessee sought relief before the Commissioner of Income Tax (Appeals) [CIT(A)], who allowed the appeal and computed the assessed loss at Rs 32,47,83,990.