[Opinion] Meaning of Set Aside in Income-Tax Proceedings

Shubham Jain– [2025] 177 taxmann.com 652 (Article)

In the field of taxation and litigation, terminology often carries significant weight. One such expression frequently encountered in judicial and quasi-judicial orders is “set aside.”

Although the words appear straightforward in ordinary parlance, their judicial interpretation has evolved through various pronouncements of Hon’ble Tribunal benchs , Hon’ble High Courts, and the Hon’ble Supreme Court

At a basic level, to set aside means to nullify, annul, or quash an earlier order or proceeding, thereby depriving it of any legal force. However, in practice, disputes often arise where Revenue authorities misinterpret the scope of the phrase, particularly in the context of whether “set aside” carries with it an implied direction to conduct a fresh assessment or whether it merely quashes the original order altogether.

1. Plain Meaning of “Set Aside”

The Black’s Law Dictionary (Sixth Edition, Page.1372) defines set aside
as:

“To reverse, vacate, cancel, annul or revoke a judgment, order, etc.”

Similarly, the word “annul” is defined (Page.90) as:

“To reduce to nothing; annihilate; obliterate; to make void or of no effect; to nullify; to abolish; to do away with. To annul a judgment or judicial proceeding is to deprive it of all force and operation, either ab initio or prospectively as to future transactions.”

Thus, the natural meaning of “set aside” is to render an order void, ineffective, and deprived of legal force. Once set aside, the earlier order cannot be relied upon or revived unless specifically permitted by the appellate authority.
Now Let us understand the Judicial Interpretation, What our Hon’ble Court says upon it.

Courts and Tribunals have consistently clarified that the effect of “set aside” depends upon the directions accompanying the order.

1. Set Aside with Directions to Re-do Assessment

If an appellate authority sets aside an assessment with a clear direction to redo the assessment, the Assessing Officer (AO) is duty bound to carry out a fresh assessment strictly within the parameters of such direction.

2. Set Aside without Directions

Where the order is set aside without any specific direction to conduct a fresh assessment, the legal consequence is that the earlier order ceases to exist, and the AO has no jurisdiction to pass another assessment order on the same issue. Any attempt to do so would be without authority of law.

2. Key Judicial Pronouncements

2.1 Seghu Buchhaiah Shetty v. ITO (52 ITR 532, SC)

The Hon’ble Supreme Court held that once an order is annulled or set aside without further direction, the earlier proceedings are obliterated entirely. The Revenue’s remedy lies in filing an appeal against such appellate order, rather than re-initiating assessment proceedings suo motu.

2.2 DCIT v. Jaya Publication (123 ITD 53, Chennai ITAT)

The Tribunal held that when the Commissioner of Income-tax (Appeals) [CIT(A)] sets aside an assessment without any express direction to redo, it amounts to quashing of the assessment itself. The AO has no jurisdiction to pass any further order in such circumstances.

2.3 Shri Jaya Prakash v. ITO, Ward-4(3)(5), Bangalore (ITAT Bangalore, 11 October 2022)

The Tribunal reiterated that the term “set aside” means to annul or cancel, depriving the order of all force and effect. Reliance was placed on Black’s Law Dictionary definitions to hold that unless the appellate order specifically directs a fresh assessment, the AO cannot assume such power merely from incidental observations.

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