2024 (8) TMI 1124 - HC - Income Tax

Rectification order premised on original action u/s 148 - condition specified u/s 149 (1) (b) not fulfilled namely that income alleged to have escaped assessment should be Rs. 50, 00, 000/- or more - In the review petition it had been sought to be contended that since the correct order could not be uploaded complete facts could not be brought to the notice of the Court including that the income which had escaped assessment was in fact more than INR 50 lakhs but review petition dismissed with the Court observing that the so called corrected order had neither been issued nor served upon the assessee. HELD THAT - AO had clearly lost sight of the fact that once the orders under Section 148 had been quashed there existed no determination which could have been possibly revived rectified or corrected. We take note of the settled position in law that when a prerogative writ issues or an order comes to be quashed it would be deemed to have never existed in the eyes of law. See Church of South India Trust Association CSI Cinod Secretariat Madras 1992 (4) TMI 183 - SUPREME COURT We note that the power under Section 154 could have been invoked provided an order capable of rectification existed in the eyes of law. However once the original reassessment orders came to be quashed they would be deemed to have never existed. All that the review Court did was to accord liberty to the respondents to issue a fresh or rectified order. That would have necessarily entailed an order being framed anew and proceedings for reassessment commenced. In view of the aforesaid and the indisputable position in law which emerges we have no hesitation in coming to the conclusion that Section 154 could not have been possibly invoked. Consequently and for all the aforesaid reasons we find ourselves unable to sustain the order impugned. The writ petition is allowed and the impugned order is hereby quashed.

Summary

Issues:
Challenge to rectification order based on previous judgment quashing reassessment notices for AY 2013-14 due to income being below threshold of INR 50 lakhs, Review petition dismissal leading to AO invoking powers under Section 154 for rectification, AO's oversight of quashed orders not capable of rectification, Court's reliance on precedent to establish orders deemed to have never existed, Conclusion on Section 154 not applicable, Impugned order quashed, Respondents allowed to initiate other permissible proceedings.

Analysis:
The writ petition sought to quash the impugned order dated 22.11.2022 passed under section 154 of the Act and the prior approval granted by Respondent No. 2, along with reassessment proceedings for AY 2013-14 and related notices/orders. The challenge was based on a previous judgment where the Court allowed the petition due to income alleged to have escaped assessment being less than INR 50 lakhs, contrary to CBDT Instruction No. 01/2022. The Court quashed the impugned order under Section 148A(d) as it violated the CBDT Instruction, relying on legal precedents. The writ petition was allowed, and the reassessment notices were quashed.

The review petition filed by the respondents after the initial judgment was dismissed on 09.11.2022. The respondents contended that the income escaped assessment was actually more than INR 50 lakhs, but the Court observed that the corrected order was neither issued nor served. The Court rejected the review petition, emphasizing that without a corrected order, complete facts could not be considered. Subsequently, the Assessing Officer invoked Section 154 powers to issue the impugned notices, overlooking that the quashed orders were incapable of rectification as they were deemed to have never existed in law.

The Court referenced the settled legal position that when an order is quashed, it is as if it never existed. Citing a Supreme Court case, the Court highlighted that the passing of interim orders does not revive disposed proceedings. Therefore, the power under Section 154 could not be invoked as the original reassessment orders were quashed, requiring a fresh or rectified order to be issued. Consequently, the impugned order dated 22.11.2022 for AY 2013-14 was quashed, as Section 154 could not be applied in this scenario. The respondents were allowed to pursue other permissible proceedings as per law.