TaxTMI 
TaxTMI 
2026 (10) TMI 171
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....losses. Subsequently, actionable information was received through the Insight Portal pursuant to a search and seizure action conducted under section 132 in the case of the One World Group on 06.11.2019. The information referred to the statement of Shri Rajesh G. Mehta recorded on 08.11.2019 and alleged that M/s. Aneri Fincap Limited, formerly known as M/s. Farry Industries Limited, was engaged in providing accommodation entries. On this basis, the assessments for both years were reopened in respect of the loans received by the assessee from the said concern. 3. The year-specific particulars are summarised below: Particulars A.Y. 2016-17 A.Y. 2017-18 ITA No. 6608/Mum/2026 6609/Mum/2026 Date of original return 23.09.2016 12.10.2017 Returned income Nil Nil Current-year loss reported Rs.12,98,271/- Rs.26,95,532/- Loan from M/s. Aneri Fincap Limited Rs.42,45,000/- Rs.3,31,45,000/- Interest forming part of reopening Nil Rs.5,78,177/- Aggregate transaction under examination Rs.42,45,000/- Rs.3,37,23,177/- Order under section 148A(d) and notice under section 148 30.07.2022 27.07.2022 Reassessment order ....
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.... the Assessing Officer for making further verification and enquiry concerning the aforesaid loan transactions. 8. Aggrieved by the said orders, the assessee is in appeal before us raising following grounds of appeal: ITA No. 6608/Mum/2026, A.Y. 2016-17 1. The Ld. Pr. Commissioner of Income-tax has erred in law and in facts in issuing notice u/s 263 of the Act and passing the revision order u/s. 263 of the Act which is invalid and bad in the eyes of law. 2. The Ld. Pr. Commissioner of Income-tax has erred in law and in facts in passing the revision order without satisfying the mandatory conditions laid down u/s. 263 of the Act. 3. The Ld. principal Commissioner of Income-Tax has erred in law and in facts in passing the revision order in violation of principles of natural justice. 4. The Ld. Pr. Commissioner of Income-tax has erred in law and in facts in directing the assessing officer to make verification and enquiries relating to loan transaction of Rs. 42,45,000/- which is invalid and bad in the eyes of law. The appellant craves leave to add to, alter, amend and / or delete in all the foregoing grounds of appeal. IT....
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.... 2016-17 and, as on the date of the order under section 148A(d) and the notice under section 148, more than three years had elapsed from the end of the relevant assessment year. Consequently, the approval was required to be granted by the specified authority prescribed under section 151(ii) and not by the authority referred to in section 151(i). According to him, the approval granted by the Principal Commissioner of Income-tax under section 151(i) did not satisfy the mandatory statutory requirement applicable to a case falling beyond the period of three years. 13. In respect of A.Y. 2017-18, the learned AR submitted that the order under section 148A(d) and the notice under section 148 were issued on 27.07.2022. He contended that more than three years had similarly elapsed from the end of A.Y. 2017-18. Referring to the order under section 148A(d), he submitted that the approval was recorded as having been obtained from the Principal Commissioner of Income-tax-4, Mumbai, under section 151(i), whereas the approval was required to be granted by the specified authority prescribed under section 151(ii). 14. The learned AR submitted that an approval granted by an authority not conte....
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...., order dated 18.09.2025. 19. The learned AR further relied upon PCIT v. Badal Prakash Jindal [150 taxmann.com 483], rendered in ITA Nos.8, 7, 9 and 10 of 2023. He submitted that the Hon'ble High Court held that where the original reassessment order itself was not validly passed, the subsequent revisional order under section 263 was also required to be held invalid. 20. Reliance was also placed upon Keshab Narayan Banerjee v. CIT [101 Taxman 512] of the Hon'ble Calcutta High Court, Westlife Development Ltd. v. PCIT [88 taxmann.com 439] of the Mumbai Tribunal, stated to have been confirmed by the Hon'ble Bombay High Court in ITXA No.1168/2017 by order dated 28.07.2021, and PCIT v. Shree Nilkanth Quarry Works LLP [188 taxmann.com 696] of the Hon'ble Gujarat High Court. The learned AR submitted that these authorities supported the proposition that revisionary jurisdiction could not be exercised in relation to an assessment order which was without jurisdiction or void ab initio. 21. The learned AR accordingly submitted that the reassessment orders dated 22.05.2023 for both assessment years were founded upon approvals granted by an authority not competent under section 151(ii).....
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....inct objection that an assessee, while relying upon the underlying assessment order as a valid and plausible order, could not simultaneously describe that order as non est. Relying upon CIT v. Sun Engineering Works (P.) Ltd. [(1992) 198 ITR 297 (SC)], he submitted that a decision was an authority only for the proposition actually considered and decided therein. The preliminary objection of the Revenue was, therefore, specifically pressed and preserved. 26. On the merits of the objection under section 151, the learned DR relied upon the following year-wise particulars: Assessment year Date of order under section 148A(d)/notice under section 148 Date of approval relied upon by Revenue Department's contention 2016-17 30.07.2022 28.07.2022 Approval was duly obtained from the competent specified authority before passing the order under section 148A(d) and issuing the notice under section 148. 2017-18 27.07.2022 18.07.2022 Approval was granted by Dr. Suchismita Palai, described as "CCIT (OSD) in the charge of Pr. Commissioner of Income-tax-4, Mumbai", who held the rank of Chief Commissioner of Income-tax. 27. The learned DR submitted that the dep....
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....section 151(i). He submitted that this description merely referred to the office through which the proposal was processed and did not alter the rank or statutory competence of the officer who actually granted the approval. Likewise, an incorrect reference to section 151(i), instead of section 151(ii), would not invalidate an approval where the authority granting it otherwise possessed the requisite statutory power. For this proposition, reliance was placed upon N. Mani v. Sangeetha Theatres [(2004) 12 SCC 278]. 32. Without prejudice, the learned DR submitted that the original notices under section 148 had been issued on 30.06.2021 within the period extended under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. At the stage of issuance of those notices, the authority contemplated under section 151(i) was competent to grant approval. The subsequent proceedings under sections 148A(b), 148A(d) and 148 were only a continuation of the original proceedings in terms of the judgment of the Hon'ble Supreme Court in Union of India v. Ashish Agarwal and CBDT Instruction No.01 of 2022 dated 11.05.2022. On that basis also, the learned DR contended that ....
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....l Commissioner of Income-tax-4, Mumbai Principal Commissioner of Income-tax-4, Mumbai, under section 151(i) Order under section 148A(d) and notice under section 148 30.07.2022 27.07.2022 Reassessment order under section 147 read with section 144B 22.05.2023 22.05.2023 Order under section 263 27.03.2026 27.03.2026 36. It is undisputed that, on the dates on which the respective orders under section 148A(d) were passed and notices under section 148 were issued, more than three years had elapsed from the end of both assessment years. Consequently, the governing provision was section 151(ii), as it stood during July 2022. 37. Section 151, as applicable at the relevant time prescribed the following authorities: (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant as....
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....ce under section 148. The relevant conclusion reads: "Although this Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under section 148A(d) or issuing a notice under section 148. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable." 41. The position emerging from the above decision is unambiguous. The approval must be obtained from the authority specified under the substituted section 151, having regard to the period elapsed on the date of the action under sections 148A(d) and 148. The requirement is jurisdictional and cannot be treated as a mere procedural formality. 42. The learned DR contended that the original notices had been issued on 30.06.2021 during the period extended under TOLA and that the proceedings subsequently undertaken pursuant to Ashish Agarwal were only a continuation of t....
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..... The approval was, therefore, required under section 151(ii). The Principal Commissioner was an authority contemplated under section 151(i), and not the specified authority contemplated under section 151(ii). 48. The approval obtained for A.Y. 2016-17 was consequently not in conformity with section 151(ii). In view of the binding ratio in Rajeev Bansal, this defect affects the very jurisdiction of the Assessing Officer to pass the order under section 148A(d) and issue the notice under section 148. 49. In A.Y. 2017-18, the order under section 148A(d) expressly records: "The necessary approval for passing order u/s. 148A(d) and issuance of notice u/s 148 has been taken from Pr. CIT-4, Mumbai vide approval No/Pr.CIT-4/148A(d)/Approval/2022-23/ dtd 18.07.2022 as per the provisions of section 151(i)..." 50. The approval letter dated 18.07.2022 is issued from the office described as "Chief Commissioner of Income-tax (OSD) I/C Principal Commissioner of Income-tax-4" and is signed by Dr. Suchismita Palai as "CCIT (OSD) in the charge of Pr. Commissioner of Income-tax-4, Mumbai". 51. According to the learned DR, since the officer personally held the rank of Chief Commis....
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....ated in section 151(ii). 55. Since the approval is a jurisdictional precondition, its validity must be demonstrable from the statutory record itself. It cannot be reconstructed on the basis of an explanation furnished by the field officer more than four years later. We accordingly hold that the approval for A.Y. 2017-18 was also not shown to have been granted by the specified authority acting under section 151(ii). 56. The learned DR relied upon N. Mani v. Sangeetha Theatres (2004) 12 SCC 278 to contend that reference to section 151(i) instead of section 151(ii) would not invalidate the approval. The principle laid down therein is: "It is well settled that if an authority has a power under the law merely because while exercising that power the source of power is not specifically referred to or a reference is made to a wrong provision of law, that by itself does not vitiate the exercise of power so long as the power does exist and can be traced to a source available in law." 57. There can be no dispute with the above principle. It applies where the authority otherwise possesses the power and the defect is confined to an incorrect reference to its source. In the pre....
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....ion the jurisdictional validity of the underlying assessment order, even though such assessment order had not been independently challenged and had attained finality. 62. The Coordinate Bench first distinguished between the original assessment proceedings and the subsequent revisionary proceedings. It described the assessment proceedings as the "primary proceedings", being the basic or foundational proceedings upon which subsequent proceedings rest. The proceedings under section 263 were described as "collateral proceedings", since their validity and existence were dependent upon the subsistence of a legally valid assessment order. The Bench thus identified the precise question as to whether a jurisdictional illegality in the primary proceedings could be examined in the collateral proceedings. 63. In paragraph 8.1, the Coordinate Bench recognised that, ordinarily, once the assessment proceedings have concluded and the assessment order has not been challenged, the determination made therein attains finality. The assessee cannot use collateral proceedings as a means to reopen, erase or modify the tax liability determined under the assessment order. The Bench, however, drew a cl....
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....aph 8.5, the Coordinate Bench considered Superintendent of Taxes v. Onkarmal Nathmal Trust AIR 1975 SC 2065 and Dasa Muni Reddy v. Appa Rao AIR 1974 SC 2089. It noted that statutory restrictions upon the jurisdiction of a revenue authority are imposed as a matter of public policy and cannot be waived by the assessee. Neither consent nor acquiescence can create jurisdiction where the statute has not conferred it. Similarly, the principles of estoppel and res judicata cannot cure an inherent want of jurisdiction. 68. In paragraph 8.6, the Coordinate Bench examined the decision of the Hon'ble Gujarat High Court in P.V. Doshi v. CIT [1978] 113 ITR 22. In that case, the assessee had not pursued the jurisdictional challenge in the first round of reassessment proceedings and had contested the additions on merits. When the matter was restored and the jurisdictional objection was subsequently raised, the Revenue contended that the issue had attained finality. Rejecting that contention, the Hon'ble Gujarat High Court held that neither res judicata nor estoppel could be invoked where the competence of the authority to assume jurisdiction was in question. The Coordinate Bench reproduced the....
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....ling the assessment order on merits. It is undertaken only to determine whether the subsequent authority could validly exercise the jurisdiction which it purports to derive from that foundational order. Accordingly, in the present appeals, the reassessment orders may be examined only to the extent necessary for deciding whether they were legally capable of being revised under section 263. 73. After considering the aforesaid authorities, the Coordinate Bench concluded in paragraph 8.10 as follows: "Thus, on the basis of aforesaid discussion we can safely hold that as per law, the assessee should be permitted to challenge the validity of order passed u/s 263 on the ground that the impugned assessment order was non est and we hold accordingly." 74. The ratio of Westlife Development Ltd. answers the preliminary objection raised by the Revenue. The assessee is not seeking, in the present appeals, annulment or modification of the reassessment orders dated 22.05.2023. The challenge is confined to the competence of the specified authority whose approval was a statutory precondition for assumption of jurisdiction under sections 148A(d) and 148. If that jurisdictional conditio....
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....st the revisionary order, could not find fault with the order under section 263 on the basis of a jurisdictional defect which did not emanate from that revisionary order. 79. In paragraph 20.7, the Delhi Bench declined to follow SBS Realtors (P.) Ltd. on the ground that the aforesaid interpretation of the statutory scheme of section 263 had not been placed before the Coordinate Bench in that case. The Delhi Bench accordingly held that the assessee could not challenge the inherent lack of jurisdiction in the foundational reassessment order in an appeal arising from proceedings under section 263. 80. We have carefully considered the view expressed by the Delhi Bench in Soaltee Finance & Leasing Ltd. The concern underlying that decision is that proceedings under section 263 cannot be converted into a substitute appeal against the assessment order and that the Tribunal, while hearing an appeal against an order under section 263, should not formally annul an assessment order which is not itself under appeal. We respectfully agree with this limitation upon the nature of the relief which can be granted in the present appeals. 81. That limitation, however, does not preclude the Tr....
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.... still be independently established. Such prejudice must be capable of being lawfully remedied through the jurisdiction conferred by section 263. 87. Section 263 cannot substitute the approving authority prescribed under section 151(ii), validate an approval granted by an authority not shown to possess the requisite statutory competence, or confer reassessment jurisdiction retrospectively upon the Assessing Officer. Any further assessment pursuant to the directions of the learned PCIT would continue to derive its authority from the same jurisdictionally deficient initiation. 88. Consequently, the possibility that further enquiry may result in an addition cannot, in the circumstances of the present cases, constitute prejudice to the interests of the Revenue within the meaning of section 263. The alleged prejudice would depend upon continuation of the very reassessment jurisdiction which was not validly assumed at its inception. 89. We accordingly hold, primarily, that the reassessment orders did not furnish a legally sustainable foundation for the assumption of jurisdiction under section 263. In the alternative, even if those orders are regarded as erroneous, the second and....
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....95. More recently, the Hon'ble Gujarat High Court in PCIT v. Shree Nilkanth Quarry Works LLP [2026] 188 taxmann.com 696 upheld the decision of the Tribunal and observed: "In view of settled legal position that in absence of notice under section 143(2) of the Act, there is no assessment order and therefore, question of revision under section 263 of the Act of the nonest order would not arise as held by the Tribunal." (para 10) 96. The aforesaid decisions establish that the jurisdictional validity of the foundational assessment or reassessment proceedings may be examined in an appeal against a consequential order under section 263. Such examination is confined to determining whether the learned PCIT possessed a legally sustainable foundation for invoking section 263. It does not amount to entertaining a belated appeal against the reassessment order, nor does it authorise the Tribunal to grant direct appellate relief against an order which is not independently under appeal. 97. The learned DR relied upon R.N. Gosain v. Yashpal Dhir (1992) 4 SCC 683. The relevant principle is: "Law does not permit a person to both approbate and reprobate. This principle is based....
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....un Engineering Works does not, therefore, advance the case of the Revenue. 102. In Shailesh Asalraj Jain v. PCIT, ITA No.2559/Mum/2025, order dated 24.02.2026, the Coordinate Bench, after considering the sanction requirement under section 151, held: "Respectfully following the binding judicial precedents and the reasoning adopted therein, we hold that sanction obtained from the PCIT, instead of the PCCIT/CCIT, is not in conformity with section 151(ii). Consequently, the notice issued under section 148 is invalid in law." (para 6.3) 103. It further held: "Once the very initiation of reassessment proceedings is held to be void for want of proper jurisdictional sanction, the consequential revisionary proceedings under section 263 cannot survive." (para 6.4) 104. The ratio of the above decision directly supports the assessee insofar as the approval obtained from the Principal Commissioner under section 151(i) is concerned. 105. In Jignesh Mahesh Gohel v. DCIT, ITA No.2708/Mum/2025, order dated 18.09.2025, the reassessment notice was held time-barred in the light of Rajeev Bansal, and the consequential order under section 263 was set aside. The precise juri....
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....11. However, the reassessment orders dated 22.05.2023 are not the subject matter of the present appeals. We are, therefore, neither annulling those orders nor granting any direct appellate relief against them. Our consideration of the approval under section 151 is confined to determining whether those orders could furnish a legally sustainable foundation for the exercise of jurisdiction under section 263. 112. Applying the aforesaid principles, the approval required in both assessment years was an approval from the specified authority contemplated under section 151(ii), as that provision stood in July 2022. 113. For A.Y. 2016-17, the approval was obtained on 28.07.2022 from the Principal Commissioner under section 151(i). It did not satisfy the requirement of section 151(ii). 114. For A.Y. 2017-18, the contemporaneous record describes the approval as one obtained from the Principal Commissioner under section 151(i). Even if the officer signing the approval is regarded as holding the substantive rank of Chief Commissioner, the Revenue has not established the statutory condition upon which a Chief Commissioner could exercise the power under section 151(ii), as that provision....