AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1377
X X X X Extracts X X X X
X X X X Extracts X X X X
....assed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 4) The PCIT failed to appreciate that there could not be any scope for setting aside an order of re-assessment passed in assuming incorrect jurisdiction in terms of Section 147 of the Act and ought to have appreciated that the consequential assumption of jurisdiction under Section 263 of the Act to revise an invalid order of re-assessment order should accordingly be reckoned as bad in law. 5) The PCIT failed to appreciate that the twin conditions prescribed for assuming jurisdiction under Section 263 of the Act were not satisfied concurrently on the facts and in the circumstances of the case and hence ought to have appreciated that the order of revision under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 6) The PCIT failed to appreciate that the findings in the impugned order were wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law and ought to have appreciated that the distinction between the concept of review and the concept of revision ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onal Assessing Officer, ITO, Ward 1, Tuticorin, upon receipt of the NMS information available in the Insight Portal for Assessment Year 2018-19 regarding the deposit of cash aggregating to Rs. 64,88,776/- in one or more accounts (other than current accounts), deposit of cash to the tune of Rs. 35,50,000/- in one or more accounts (other than current accounts and time accounts) and deposit of cash Rs. 35,50,000/- (other than current accounts and time accounts of a person), had issued the Show Cause Notice in terms of Section 148A(b) of the Act dated 23.03.2022 in DIN & Notice No. ITBA/AST/F/148A(SCN)/2021- 22/1041308081(1) in proposing to issue a notice u/s. 148 of the Act for the assessment year under consideration in view of there being an information suggesting income chargeable to tax for the assessment year under consideration had escaped assessment. 5. The said Show Cause Notice u/s. 148A(b) of the Act was stated to have been issued by the Assessing Officer after obtaining the approval of the PCIT, Madurai - 1 on 23.03.2022. The assessee had responded to the said Show Cause Notice issued in terms of Section 148A(b) of the Act vide reply dated 29.03.2022 having Acknowledgemen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Nazareth Urban Co-operative Bank Ltd viii) Explanatory submission 9. Further, the assessee had filed the following details on 05.07.2023 in support of the return of income filed in response to Notice u/s. 148 of the Act: (i) Schedule 18- Interest earned. (ii) Annexure to schedule 18-Interest received and accrued. (iii) Form no.14-Certificate of Registration (dated 28/09/ 2010) under Tamilnadu Co-Operative Society Act,1983. (iv) Schedule 19-Miscellaneous income received and accrued (Other income) (v) Profit and loss account for the assessment year 2018-19 (vi) Trading account for the assessment year 2018-19 (vii) Schedule Trade income (viii) Explanatory submission 10. The AO after taking into consideration the details furnished by the assessee during the course of re-assessment proceedings had proceeded to pass the re-assessment order dated 20.11.2023 in terms of Section 147 of the Act by accepting the claim of deduction made in terms of Section 80P of the Act forming part of the return of income dated 13.05.2022, filed in response to notice u/s. 148 of the Act dated 19.04.2022, in assessing the income at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terms of Section 80P of the Act in the body of re-assessment order dated 20.11.2023, thereby establishing the fact of there being complete enquiry by the AO on the claim of deduction u/s. 80P of the Act during the course of re-assessment proceedings. 15. Furthermore, the assessee placed reliance upon the decision of the Hon'ble Supreme Court in the case of Malabar Industries, wherein the Hon'ble Supreme Court had held that phrase "prejudicial to the interest of the revenue'' has to be read in conjunction with the term "erroneous" inasmuch it was submitted when the Assessing Officer had adopted one of the views permissible in law and it has resulted in loss to the revenue, with which the PCIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 16. The assessee submitted that the provisions in Section 80AC(ii) of the Act which mandated filing of return of income in terms of Section 139(1) of the Act for validly claiming deduction under Section 80P of the Act was introduced only vide Finance Act, 2018, with effect from 01.04.2018, i.e. Assessment Year: 2018 - 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ained after the expiry of 3 assessment years from the end of the assessment year under consideration, i.e. Assessment Year 2018-19, the proper authority for granting sanction for issuing such notice u/s. 148 of the Act is "Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General" as prescribed in terms of Section 151(ii) of the Act. 22. However, on the facts of the present case, the notice u/s. 148 of the Act dated 19.04.2022 came to be issued after obtaining sanction from the office of the PCIT, Madurai-1 on 18.04.2022, which sanctioning authority is prescribed in terms of Section 151(i) of the Act, i.e. competent authority for granting sanction in terms of Section 151 of the Act in instances where notice u/s. 148 of the Act is issued within 3 years from the end of the relevant assessment year. 23. Thus, the Ld. AR argued that notice u/s. 148 of the Act being issued for the assessment year 2018-19 on 19.04.2022, the competent authority to grant sanction in terms of Section 151 of the Act for the purpose of issuance of such notice u/s. 148 of the Act was t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Pvt. Ltd - Delhi High Court - 180 ITR 280 26. The Ld. AR submitted that without prejudice to his arguments on the issue of validity of the re-assessment proceedings in terms of Section 147 of the Act in the present appeal emanating from revision order passed in terms of Section 263 of the Act, that the provisions in Section 80AC(ii) of the Act warranting filing of return of income in terms of Section 139(1) of the Act for the purpose of claiming deduction in terms of Section 80P of the Act, ought to be reckoned as directory and not mandatory in view of the decision rendered by this Tribunal in ITA No. 945/CHNY/2019. 27. Furthermore, he argued that the Finance Act, 2018 had amended the said provisions, wherein the provisions in Section 80AC(ii) of the Act were amended so as to create a requirement for filing of return in terms of Section 139(1) of the Act for claiming deduction in terms of Chapter VIA of the Act including Section 80P of the Act and the said amendment was introduced with effect from 01.04.2018, i.e. A.Y.2018-19, inasmuch the A.Y. under consideration also being A.Y.2018-19, the said requirement provided for in such provision ought to be considered liberally in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ame to be erroneous in so far as it is prejudicial to the interest of the revenue, within the ambit of provisions in Section 263 of the Act and accordingly pleaded for dismissal of the appeal filed by the assessee in confirming the revision order passed in terms of Section 263 of the Act. 31. We have heard the rival contentions perused the material available on record and gone through the orders of the lower authorities along with judicial precedents relied on. This bench before examining the validity of the assumption of jurisdiction in terms of Section 263 of the Act on the facts of the present case, finds it necessary to adjudicate the preliminary argument raised by the Ld.AR, i.e. whether the validity of the re-assessment proceedings initiated and completed in terms of Section 147 of the Act can be questioned in the revisionary proceedings and the appellate proceedings arising therefrom, being the collateral proceeding? 32. The Ground No. 4 forming part of the Form No. 36 filed challenging the revision order dated 17.03.2025 reads as follows: "4. The PCIT failed to appreciate that there could not be any scope for setting aside an order of re-assessment passed in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....side the order of concealment and penalties, there is no concealment in the eyes of law and, therefore, the prosecution cannot be proceeded with by the complainant and further proceedings will be illegal and without jurisdiction. The Assistant Commissioner of Income-tax cannot proceed with the prosecution even after the order of concealment has been set aside by the Tribunal. When the Tribunal has set aside the levy of penalty, the criminal proceedings against the appellants cannot survive for further consideration. In our view, the High Court has taken the view that the charges have been framed and the matter is in the stage of further cross-examination and, therefore, the prosecution may proceed with the trial. In our opinion, the view taken by the learned Magistrate and the High Court is fallacious. In our view, if the trial is allowed to proceed further after the order of the Tribunal and the consequent cancellation of penalty, it will be an idle and empty formality to require the appellants to have the order of Tribunal exhibited as a defence document inasmuch as the passing of the order as aforementioned is unsustainable and unquestionable. 27. The same view as that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt against this judgment of the High Court in relation to penalty under section 271(1) (c) arising out of an assessment, wherein the addition of a loan has been cancelled by the High Court as reported in [1983] 144 ITR 352 : See [1990] 181 ITR (St. ) 19-Ed. ]" 6. CIT v. Agarwalla Bros. [1991] 189 ITR 786 (Pat.) "Held, (i) that the fact a particular construction had not been shown in the accounts of the assessee was not relevant since this circumstance had not been recorded as one of the reasons for initiating the proceedings under section 147(a) ; (ii) that the Tribunal had found, after examining the entire record, that there had been no failure to disclose primary facts on the part of the assessee. The reassessment was, therefore, not valid; (iii) that penalty had been imposed consequential to the reassessment. Since the reassessment had been set aside, the order of the Tribunal cancelling the penalty levied under section 271(1) (c) of the Act was also legal. " (p. 787) 7. Addl. CIT v. Badri Prasad Kashi Prasad [1993] 200 ITR 206 (All.) "Held, that the levy of penalty was based on the addition to income made by the Income-tax Officer. The addition was deleted by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The main question which arises for our consideration is whether the decree passed by the trial court can be said to be 'null and 'void'. In our opinion, the law on the point is well settled. The distinction between a decree which is void and a decree which is wrong, incorrect, and irregular or not in accordance with law cannot be overlooked or ignored. Where a court lacks inherent jurisdiction in passing a decree or making an order, a decree or order passed by such court would be without jurisdiction non est and void ab initio. A defect of jurisdiction of the court goes to the root of the matter and strikes at the very authority of the court to pass a decree or make an order. Such defect has always been treated as basic and fundamental and a decree or order passed by a court or an authority having no jurisdiction is nullity. Validity of such decree or order can be challenged at any stage, even in execution or collateral proceedings. 10. Five decades, in Kiran Singh & Ors. v. Chaman Paswan & Ors., [SCR p. 121) this Court declared; "It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity and that i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd. Firstly, 'the court will invalidate an order only if the right remedy is sought by the right person in the right proceedings and circumstances. The order may be a 'a nullity' and 'void' but these terms have not absolute sense: their meaning is relative, depending upon the court's willingness to grant relief in any particular situation. If this principle of illegal relativity is borne in mind, the law can be made to operate justly and reasonably in cases where the doctrine of ultra vires, rigidly applied, would produce unacceptable results.' (Administrative Law, Wade and Forsyth, 8th Edn., 2000, p. 308). Secondly, there is a distinction between mere administrative orders and the decrees of courts, especially a superior court. 'The order of a superior court such as the High Court must always be obeyed no matter what flaws it may be thought to contain. Thus, a party who disobeys a High Court injunction in punishable for contempt of court even though it was granted in proceedings deemed to have been irrevocably abandoned owing to the expiry of a time-limit.' (ibid., p. 312) 8 A distinction exists between a decree passed by a court having....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1989, if he was of the view that the same is erroneous and prejudicial to the interests of the Revenue. We are, therefore, of the view that the Tribunal made no mistake in coming to the conclusion that the order of the Commissioner passed under section 263 of the Act which had the effect of setting aside the assessment order dated March 13, 1987, is without jurisdiction. Accordingly, and in view of the aforesaid discussion, we answer the reference against the Revenue and in favour of the assessee." 36. Further, Hon'ble Delhi High Court in the case of CIT v. Software Consultants reported in 341 ITR 240 has held as under: "14. For exercise of power under Section 263 of the Act, it is mandatory that the order passed by the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue. In the present case, the Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice under Section 148 of the Act. This position is not disputed and disturbed by the Commissioner of Income Tax in his order under Section 263 of the Act. Sequitur is that the Assessing Officer could not have made an addition on account of share appl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stainable, in view of the provisions of law as reiterated by the Hon'ble Jurisdictional High Court as discussed herein above. Accordingly, we set aside the impugned order passed u/s. 263, as Ld. PCIT could not have revised the assessment order which itself is an invalid order. Accordingly, the appeal of the assessee is allowed on this score. The other grounds raised by the assessee are treated as academic in nature." 2). The Mumbai bench in yet another case of M/s Westlife Development Ltd Vs Principal Commissioner of (Successor to Wespoint Leisureparks Income-tax-5 Ltd) (supra) had proceeded to quash the revision order under identical circumstances by following as follows: "10. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the imp u g ned order u/s 263 to revise the non est assessment order: Having decided the aforesaid two issues, the next issue that is to be decided by us is about the validity of order passed u/s 263 by the Ld. CIT seeking to revise the assessment order which was nullity in the eyes of law. 10.1. We have discussed in detail in earlier ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he notice u/s 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the same was non est in the eyes of law. All proceedings subsequent to the said notice are of no consequence. Further, the decision of Hon'ble Madras High Court in the case of CIT Vs. Gitsons Engineering Co. 370 ITR 87 (Mad) clearly holds that the objection in relation to non service of notice could be raised for the first time before the Tribunal as the same was legal, which went to the root of the matter. 19. While exercising powers u/s 263 ld. Commissioner cannot revise an assessment order which is non est in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If ld. Commissioner revises such an assessment order, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended, because the provisions of limitation are provided in the statute." 5. The Kolkatta bench of the Income Tax Appellate Tribunal in the case....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the invalidity of the primary proceedings for lack of jurisdiction can be challenged even in appellate proceedings arising out of a collateral proceeding. In view of the aforesaid legal position we will now examine the legal issue. For doing that first of all we have to examine whether the AO in the present case, could have reopened the assessment of the assessee by issuance of notice under s. 148 of the Act (which ultimately resulted in AO order dt. 29th Dec., 2017)." 38. Thus, respectfully following the ratio laid down by Hon'ble High Court referred to in the preceding paragraphs, followed by co-ordinate benches of the Tribunal, this Tribunal agrees with the argument of the Ld.AR that the validity of the re-assessment proceedings can be challenged and raised in the appeal emanating from the revision proceedings initiated in terms of Section 263 of the Act. 39. Now, the issue to be considered and examined is whether the re-assessment proceedings initiated by way of issuance of notice u/s. 148 of the Act and the consequential re-assessment order passed in terms of Section 147 of the Act is bad in law as argued by the Ld. AR? 40. We find that the Show Cause Notice u/s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner or Director General 44. Now, let us examine the facts of the present case by keeping in mind the above legal position. The Show Cause Notice in terms of Section 148A(b) of the Act came to issue on 23.03.2022 after obtaining prior approval from the office of the PCIT, Madurai - 1 and thereafter the order in terms of Section 148A(d) of the Act came to be passed on 19.04.2022 along with the notice u/s. 148 of the Act being issued on the same day, i.e. 19.04.2022. We find that both the order passed u/s. 148A(d) of the Act as well as the notice u/s. 148 of the Act dated 19.04.2022 was issued after getting approval from the office of the PCIT, Madurai - 1. The assessment year under consideration being A.Y.2018-19, the notice u/s. 148 of the Act / order passed u/s. 148A(d) of the Act being issued / passed on 19.04.2022, it can be said that same were passed / issued after the expiry of 3 years from the end of the A.Y under consideration. 45. Hence, it can be said that the notice u/s. 148 of the Act was issued / order in terms of Section 148A(d) of the Act was passed without obtaining proper sanction from the competent authority as prescribed in terms of Section 151(1)(ii) of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e said that the said amendment would not come to the rescue of the revenue on the facts of the present case in view of the fact that the notice u/s. 148 as well the order u/s. 148A(d) of the Act being issued / passed well prior to the introduction of the said amendment, i.e. on 19.04.2022. 51. Before us, the Ld.DR argued that the said amendment introduced by Finance Act, 2023 ought to be reckoned as clarificatory and would have retrospective applicability, thereby validating the sanction accorded by the PCIT, Madurai - 1 on the facts of the present case. He further relied on the judgement of the Hon'ble Calcutta High Court in the case of Giriraj Commercial (P.) Ltd. v. Union of India reported in 169 taxmann.com 168 in support of his contentions. 52. This argument of the ld.DR is unable to be countenanced by us for the simple reason that the said amendment was introduced specifically with effect from 01.04.2023 and the plain reading of the notes on clauses as well as the memorandum to Finance Act, 2023 leave no room whatsoever to interpret it otherwise. Moreover, we are not inclined to accept the argument of the Department since the AO could not have foreseen such an amendment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....48 of the Act. 57. Furthermore, if the said argument were to be accepted, then the very purpose behind introduction of provisions in Section 148A of the Act by way of Finance Act, 2021 to grant an opportunity to the tax payer to demonstrate his case for dropping the proceedings before issuing notice u/s. 148 of the Act would stand defeated. 58. Thus, on the facts of the present case, we find that although the sanction was granted to the AO for issuing the Show Cause Notice u/s. 148A(b) of the Act, a separate sanction is to be granted for the purpose of issuance notice u/s. 148 of the Act as well as the passing of the order u/s. 148A(d) of the Act, in the event of the AO finding it fit to do so. Hence, we reject this argument of the ld.DR also. 59. We further find that the Hon'ble Madras High Court in the case of Core Logistic Company v. Assistant Commissioner of Income-tax, reported in 175 taxmann.com 453, had proceeded to quash the re-assessment order passed in terms of Section 147 of the Act on account of grant of sanction by the improper authority. The Hon'ble Madras High Court while quashing the said re-assessment order had held as follows: "9. A perusal of Se....