2025 (3) TMI 401 - AT - Income Tax

ITAT Delhi quashes section 263 revisionary order after finding reassessment proceedings invalid due to improper section 148A procedures

SVR Creations Pvt. Ltd. Versus The PCIT, Delhi-7, New Delhi

ITAT Delhi held that validity of reassessment proceedings can be examined during appellate proceedings against orders passed under section 263. The ... Revision u/s 263 - validity of the initiation of reassessment proceedings and legality of consequent order passed u/s 147 r.w.s 144B - Whether or not such legality of the re-assessment framed could be examined in appellate proceedings challenging the order passed u/s. 263? - HELD THAT:- As decided in the case of Westlife Development Ltd.[2016 (6) TMI 1208 - ITAT MUMBAI] held that during the course of appellate proceedings against the order passed u/s. 263 of the Act, the validity of the assessment order from which such proceedings have been originated could be examined. Thus in the present appellate proceedings against the order of the ld. Pr. CIT u/s. 263 of the Act, the validity of the order passed u/s. 147 r.w.s.144B of the Act can be examined. Validity of reassessment proceedings - As the notice in the present case was dispatched/served upon the assessee on 01/04/2021, thus the same should be treated as notice u/s 148A(b) and AO should complete the consequent proceedings as provided u/s 148A - AO has proceeded to pass the order u/s 148 r.w.s 144B of the Act on the notice so issued u/s 148 on 31/03/2021 served upon the assessee on 01/04/2021. Thus, in view of the order of Suman Jeet Agarwal [2022 (9) TMI 1384 - DELHI HIGH COURT] we hold the order so passed without following the procedure prescribed u/s 148 of the Act is bad in law and is invalid. Accordingly, we quash the revisionary order passed u/s 263 of the Act as the re-assessment order passed u/s 147 r.w.s 144B of the Act is already held as invalid. Thus, grounds of appeal of the assessee is allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the legality of a reassessment order can be challenged in appellate proceedings against an order passed under Section 263 of the Income Tax Act.Whether the notice issued under Section 148, which was digitally signed before but served after the amendment date, should be governed by the amended provisions of Section 148A.Whether the reassessment order completed under Section 147 is invalid due to non-compliance with the amended procedure under Section 148A.Whether the revisionary order under Section 263 can stand if the reassessment order is found to be invalid.ISSUE-WISE DETAILED ANALYSIS1. Legality of Challenging Reassessment Order in Appellate Proceedings against Section 263 OrderThe relevant legal framework involves the interpretation of Section 263 and Section 147 of the Income Tax Act. The Tribunal considered precedents, notably the decision in Westlife Development Ltd., which established that the validity of an assessment order can be examined in appellate proceedings against a Section 263 order. The Court reasoned that if the original assessment order is deemed illegal or void due to jurisdictional defects, subsequent proceedings based on such an order would also be invalid. The Court cited several judgments, including those from the Supreme Court, to support the principle that jurisdictional defects can be raised at any stage, even in collateral proceedings.2. Applicability of Amended Provisions of Section 148AThe Court examined the amended provisions effective from April 1, 2021, which require a specific procedure before issuing a notice under Section 148. The Court considered the timing of the digital signature and service of the notice, noting that although the notice was signed on March 31, 2021, it was served on April 1, 2021. The Court referenced the decision in Union of India vs. Ashish Agarwal, which mandates that notices served after the amendment date should be treated as show cause notices under Section 148A(b).3. Validity of Reassessment Order under Section 147The Court found that the Assessing Officer failed to follow the amended procedure under Section 148A, rendering the reassessment order invalid. The Court relied on the jurisdictional High Court's decision in Suman Jeet Agarwal, which categorized such notices and provided guidance on their treatment. The Court concluded that the reassessment order was bad in law due to non-compliance with the procedural requirements.4. Impact on Revisionary Order under Section 263The Court held that since the reassessment order under Section 147 was invalid, the revisionary order under Section 263 could not stand. The Tribunal cited various cases where it was established that a void assessment order cannot be the subject of revision under Section 263, as it lacks a valid legal platform.SIGNIFICANT HOLDINGSThe Tribunal's significant holdings include:The validity of an assessment order can be challenged in appellate proceedings against a Section 263 order, especially if the original order is jurisdictionally defective.Notices served after the amendment date of April 1, 2021, must comply with the new procedural requirements under Section 148A.A reassessment order that does not follow the amended procedure is invalid and cannot support a revisionary order under Section 263.The principle that jurisdictional defects can be raised at any stage, even in collateral proceedings, was reaffirmed.The final determination was that the appeal of the assessee was allowed, and the revisionary order passed under Section 263 was quashed due to the invalidity of the reassessment order. The other grounds of appeal were deemed infructuous and not adjudicated upon.