TaxTMI 
TaxTMI 
2026 (1) TMI 1692
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....was processed under section 143(1) and thereafter a regular assessment was completed under section 143(3) on 22.10.2019 by Central Circle-2(2), Mumbai, determining income at Rs. 19,370/-. 3. Subsequently, reassessment proceedings were initiated and notice under section 148 was issued on 29.07.2022. In response, the assessee filed return of income on 08.11.2022, again declaring income of Rs. 19,370/-. Notice under section 143(2) was issued on 23.11.2022. The reassessment proceedings were completed by the Assessing Officer vide order dated 28.02.2023, passed under section 147 read with section 143(3) and section 144B of the Act, assessing the total income at Rs. 19,370/-, i.e. the returned income. Interest under sections 234A, 234B and 234C was directed to be charged as applicable. 4. In the assessment order, the Assessing Officer recorded that the assessee company had earlier been assessed by Central Circle-2(2), Mumbai, pursuant to search proceedings, and it was held therein that the assessee was a conduit entity and that the real income arising from the activities of the assessee company was taxable in the hands of Shri Shirish C. Shah. The Assessing Officer further observed....
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....mmunication of approval under section 151. These submissions were elaborately recorded by the PCIT in the revisionary order. 9. The PCIT held that the reassessment order dated 28.02.2023 was passed without conducting proper enquiry into the alleged penny stock and accommodation entry transactions revealed during third-party search actions. According to the PCIT, mere reliance on the fact that income was taxed in the hands of Shri Shirish C. Shah, without independent verification of the transactions in the hands of the assessee, rendered the assessment order erroneous and prejudicial to the interest of the Revenue. On this reasoning, the PCIT invoked the provisions of section 263 and set aside the reassessment order with directions to the Assessing Officer. 10. Aggrieved by the revisionary order passed under section 263, the assessee has raised the following grounds of appeal: 1. "That the order passed by Ld. PCIT u/s 263 of the Act is bad in law and is passed in contravention of prevailing law as well as facts of the case, therefore liable to be annulled. 2. That the order passed by Ld. PCIT u/s 263 of the Act is illegal and not-tenable under the law as the ....
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....t four distinct and independent stages, namely: i. prior to conduct of enquiry by issue of notice under section 148A(a); ii. while providing opportunity of being heard to the assessee under section 148A(b); iii. prior to passing of order under section 148A(d); and iv. prior to issuance of notice under section 148 of the Act. 11.1. The learned AR invited attention to the factual matrix recorded in the paper book, demonstrating the sequence of approvals and actions undertaken by the Assessing Officer in the assessee's case. It was pointed out that: Sr. No. Particulars Date Observations 1. Approval for passing of order under section 148A(d) of the Act 26.07.2022 Approval obtained prior to passing of order under section 148A(d) 2. Order passed under section 148A(d) of the Act 29.07.2022 Order determining that it is a fit case for issuance of notice under section 148 3. Approval for issuance of notice under section 148 of the Act 26.07.2022 Approval granted prior to passing of order under section 148A(d) 4. Notice issued under section 148 of the Act 29.07.2022 Notice issued on the same dat....
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....se, the approval under section 151 was obtained from the Principal Commissioner of Income Tax-4, Mumbai, which is contrary to the statutory mandate. 11.7. Reliance was placed on the judgment of the Hon'ble Supreme Court in Union of India vs. Rajeev Bansal (2024) 167 taxmann.com 70 (SC), wherein it has been categorically held that sanction under section 151 is a jurisdictional condition, and sanction by an authority not prescribed under the Act renders the reassessment proceedings void. 11.8. The learned AR further submitted that it is now judicially well settled that the validity of reassessment proceedings can be examined even while adjudicating proceedings under section 263 of the Act, and if the reassessment itself is found to be void-ab-initio, the revisionary proceedings cannot stand independently. The learned AR placed reliance on various judicial precedents dealing with jurisdictional challenge in collateral proceedings. 11.9. In view of the above, the learned AR submitted that since the reassessment order passed under section 147 read with section 144B is itself void-ab-initio for want of valid approval under section 151, the very foundation for invoking section 26....
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.... and therefore, the assessee is estopped from raising such objections at this belated stage. 12.4. The learned DR submitted that the Revenue places reliance on the statutory provisions of the Act, and not merely on judicial precedents, which, according to him, are distinguishable on facts. It was argued that the judicial authorities relied upon by the assessee do not apply to the facts of the present case and therefore cannot be pressed into service to invalidate the revisionary proceedings. 12.5. In view of the above submissions, the learned DR urged that Ground Nos. 3, 4 and 5 raised by the assessee be rejected as not maintainable, and that the order passed by the learned PCIT under section 263 be upheld. 13. We have carefully considered the rival submissions advanced by the learned Authorised Representative for the assessee and the learned Departmental Representative, perused the orders of the Assessing Officer and the Principal Commissioner of Income Tax passed under section 263 of the Act, and examined the material placed on record, including the statutory provisions and judicial precedents relied upon by both sides. 14. The principal controversy which arises for o....
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....e Hon'ble Supreme Court has thus reaffirmed that the provisions relating to sanction and approval under section 151 are not procedural in nature but are substantive and jurisdictional, enacted as a statutory safeguard against arbitrary reopening of concluded assessments. The Court has further clarified that any reassessment proceedings initiated without strict adherence to the requirements of section 151 are invalid in law, and such jurisdictional defects are not curable by participation of the assessee or by subsequent proceedings. 19. In view of the binding law declared by the Hon'ble Supreme Court in Rajeev Bansal, it is evident that the validity of sanction under section 151, both in terms of the authority granting such approval and the stage at which such approval is obtained, assumes foundational significance, and any infirmity therein strikes at the very assumption of jurisdiction under section 148. Accordingly, the jurisdictional challenge raised by the assessee requires to be examined first, as the outcome thereof will determine whether the reassessment order sought to be revised under section 263 constitutes a legally sustainable foundation for invocation of the revisi....
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....goes to the legitimacy of the very assumption of authority. 22. This doctrine has been consistently applied across jurisdictions, including in income-tax proceedings, where the assumption of jurisdiction by the Assessing Officer is governed strictly by statutory pre-conditions. The Hon'ble Calcutta High Court, in Keshab Narayan Banerjee vs. CIT (238 ITR 694), applied this principle squarely in the context of income-tax law and held that absence of a valid notice under section 148, being a condition precedent for assumption of jurisdiction, renders the reassessment proceedings void in law. The High Court further held that where the reassessment itself is invalid, proceedings under section 263 seeking to revise such reassessment cannot be sustained, as the revisionary jurisdiction presupposes the existence of a valid and lawful assessment order. The Court thus clearly recognised that section 263 cannot operate on a void foundation and that jurisdictional defects in the original proceedings can be examined even while adjudicating the legality of revisionary action. 23. The aforesaid principles have been lucidly explained and reaffirmed by the Co-ordinate Bench in Westlife Develo....
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.... necessarily presupposes the existence of a valid assessment order in the eyes of law. Examination of whether such foundational validity exists does not enlarge the scope of section 263; rather, it determines whether section 263 can be invoked at all. Jurisdiction cannot be conferred by silence or inaction, and failure to object before the Assessing Officer does not cure non-compliance where the statute mandates adherence to specific jurisdictional conditions. 26. In view of the above discussion, and respectfully following the principles laid down in Kiran Singh, Keshab Narayan Banerjee, and Westlife Development, we hold that jurisdictional objections relating to the validity of reassessment proceedings are maintainable in an appeal arising from an order passed under section 263 of the Act; that such objections can be examined to determine whether the Principal Commissioner could validly assume revisionary jurisdiction; and that if the reassessment proceedings are found to be void ab initio for jurisdictional defects, the revisionary order under section 263 cannot be sustained. 27. Accordingly, the preliminary objection raised by the learned Departmental Representative regard....
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....s from an authority competent only under section 151(i), whereas the facts of the case squarely attracted section 151(ii).In light of the binding ratio of the Hon'ble Supreme Court in Rajeev Bansal, sanction by an authority not prescribed under the applicable clause of section 151 is not a curable irregularity but a jurisdictional defect. 34. Once the statute mandates approval from a higher authority after a particular time threshold, approval from a lower authority cannot be treated as substantial compliance. Jurisdiction, being a creature of statute, can be conferred only in the manner expressly provided by law. 35. Accordingly, the sanction obtained in the present case being contrary to section 151(ii), the Assessing Officer lacked jurisdiction to issue notice under section 148, and the entire reassessment proceedings culminating in the order passed under section 147 read with section 144B are rendered void-ab-initio and non est in the eyes of law. 36. Once the reassessment order itself is held to be void for want of valid jurisdiction, the inevitable corollary is that there exists no valid assessment order in the eyes of law. Consequently, the learned Principal Commiss....