Wrong Authority Approved Reopening; Section 263 Could Not Repair It

Varada Mercantile Pvt. Ltd. Vs PCIT (ITAT Mumbai)

Summary: A reassessment accepted the assessee’s explanation for its loans. The PCIT then sought to revise it for inadequate enquiry. But the Mumbai ITAT found a more basic defect: the reopening itself lacked approval from the authority specified by section 151.

In Varada Mercantile Pvt. Ltd. v. PCIT-4, ITA Nos. 6608 and 6609/Mum/2026, decided on 23 September 2026, the Mumbai Bench examined revision orders passed under section 263 for AYs 2016–17 and 2017–18. The case illustrates why a proposed addition cannot be considered in isolation from the jurisdiction under which the assessment was made.

The assessee had received loans from Aneri Fincap Ltd., formerly Farry Industries Ltd. Information received after a search in the One World Group suggested that the lender was engaged in providing accommodation entries. On that basis, the Department reopened both assessments. The transactions examined were ₹42.45 lakh for AY 2016–17 and ₹3,37,23,177 for AY 2017–18, the latter figure including interest of ₹5,78,177.

During reassessment, the assessee furnished loan agreements, confirmations, ledger accounts, bank statements, cash-flow statements, the lender’s financial statements and income-tax particulars, its RBI registration certificate, disbursement letters and evidence of subsequent repayment. The AO recorded that he had verified the relevant documents, including receipt of the loans through banking channels and their repayment. He accepted the returned income in both reassessments dated 22 May 2023.

The PCIT took a different view. According to him, the AO had accepted the documents without making a meaningful enquiry into the search information, the lender’s creditworthiness and the genuineness of the transactions. Invoking Explanation 2(a) to section 263, he partly set aside both reassessments on 27 March 2026 and directed further verification.

Before the Tribunal, the assessee raised a point that went to the foundation of those proceedings. The orders under section 148A(d) and the notices under section 148 had been issued in July 2022. By then, more than three years had elapsed from the end of each relevant assessment year. Under section 151 as it stood at that time, approval was therefore required from the higher specified authority under section 151(ii). The assessee argued that the approvals had instead been obtained under section 151(i) from the office of the Principal Commissioner.

For AY 2016–17, the record showed approval by the Principal Commissioner on 28 July 2022. The Tribunal held that this did not satisfy section 151(ii). The AY 2017–18 approval required closer examination: the officer who signed it was described as a Chief Commissioner (OSD) holding charge of the Principal Commissioner’s office. The Revenue argued that her rank made the approval valid under section 151(ii).

The Tribunal examined the contemporaneous record rather than the officer’s designation alone. The proposal had been processed through the Principal Commissioner’s office, the approval bore that office’s reference number, and the order under section 148A(d) expressly recorded approval from the Principal Commissioner under section 151(i). Further, section 151(ii), as then worded, permitted a Chief Commissioner to act only where there was no Principal Chief Commissioner or Principal Director General. The Revenue produced no contemporaneous material establishing that condition. A departmental explanation issued years later could not change the capacity in which approval had originally been sought and granted.

Relying on the Supreme Court’s decision in Union of India v. Rajeev Bansal, the Tribunal held that approval by the correct specified authority is a jurisdictional precondition. The earlier notices issued on 30 June 2021, the extension under TOLA, and the Supreme Court’s directions in Ashish Agarwal did not dispense with the approvals required for the July 2022 orders under section 148A(d) and notices under section 148. Nor could a CBDT instruction enlarge the authority prescribed by the statute. The assessee’s participation in reassessment could not confer jurisdiction where it was absent.

That led to the important section 263 question: could the assessee challenge the reopening while appealing only against the PCIT’s revision orders? The Tribunal answered yes, for the limited purpose of testing whether the reassessment orders provided a lawful foundation for revision. Section 263 requires an order that is both erroneous and prejudicial to the interests of the Revenue. The PCIT could not cure a defect in the original approval by directing the AO to make further enquiries under that section. Even if the reassessments were viewed as erroneous, prejudice could not be established through further proceedings founded on the same jurisdictionally deficient reopening.

The Tribunal accordingly quashed both section 263 orders and allowed the assessee’s appeals. It was careful about the scope of its decision: the reassessment orders themselves were not under appeal, and the Tribunal did not formally annul them. Its finding on section 151 was made to decide whether the PCIT could validly revise those orders.

Author’s comment: This decision is useful where a favourable reassessment is later reopened through section 263. The assessee may examine whether the reassessment had the jurisdictional foundation needed to support revision, even though it had no occasion to appeal an order accepting its return. Equally, the ruling should be cited with its precise limit: the relief granted was against the section 263 orders, while the challenge to the underlying approval supplied the reason those revision orders could not stand.

Cases Discussed

• Union of India v. Rajeev Bansal, [2024] 469 ITR 46 (SC) — Followed as binding authority that sanction by the appropriate specified authority under section 151 is a jurisdictional precondition and that the authority competent to sanction is linked to the period elapsed from the end of the relevant assessment year.
• Anumita Infrastructure Private Limited v. PCIT, ITA No. 2555/Mum/2025, order dated 29.01.2026 (ITAT Mumbai) — Followed for permitting a jurisdictional objection to the underlying reassessment in an appeal against a section 263 order and for holding that a jurisdictionally void reassessment cannot provide the foundation for revision.
• Shailesh Asalraj Jain v. PCIT, ITA No. 2559/Mum/2025, order dated 24.02.2026 (ITAT Mumbai) — Relied upon for holding that sanction obtained from the PCIT instead of the authority contemplated by section 151(ii) was invalid and that consequential section 263 proceedings could not survive.
• Jignesh Mahesh Gohel v. DCIT, ITA No. 2708/Mum/2025, order dated 18.09.2025 (ITAT Mumbai) — Considered for the broader principle that a section 263 order cannot survive where the foundational reassessment is jurisdictionally invalid; the Tribunal distinguished the precise defect there as one concerning limitation.
• PCIT v. Badal Prakash Jindal, [2023] 150 taxmann.com 483 (Orissa High Court) — Relied upon for the proposition that where the original reassessment itself was not validly passed, the subsequent revisionary order under section 263 was also invalid.
• Keshab Narayan Banerjee v. CIT, [1998] 101 Taxman 512/[1999] 238 ITR 694 (Calcutta High Court) — Relied upon for holding that section 263 proceedings cannot validly originate from reassessment orders rendered bad in law for failure to satisfy a jurisdictional condition precedent.
• Westlife Development Ltd. v. PCIT, [2017] 88 taxmann.com 439 (ITAT Mumbai) — Extensively discussed for the distinction between primary assessment proceedings and collateral revisionary proceedings and for permitting examination of an inherent jurisdictional defect in the foundational assessment while adjudicating section 263 proceedings.
• PCIT v. Shree Nilkanth Quarry Works LLP, [2026] 188 taxmann.com 696 (Gujarat High Court) — Relied upon for the proposition that revision under section 263 cannot survive where the foundational assessment or reassessment is non-est.
• R.N. Gosain v. Yashpal Dhir, (1992) 4 SCC 683 (Supreme Court) — Revenue relied upon the doctrine against approbation and reprobation; distinguished because estoppel, participation or acquiescence cannot confer statutory jurisdiction where the prescribed jurisdictional conditions are absent.
• CIT v. Sun Engineering Works (P.) Ltd., [1992] 198 ITR 297 (Supreme Court) — Revenue relied upon it for the principle that a precedent is authority for what it actually decides; the Tribunal applied that principle while confining Anumita Infrastructure to its actual ratio.
• N. Mani v. Sangeetha Theatres, (2004) 12 SCC 278 (Supreme Court) — Distinguished. The rule that citation of a wrong statutory provision does not invalidate an exercise of power applies only where the authority otherwise possesses that power; here the requisite jurisdictional competence itself was not established.
• Union of India v. Ashish Agarwal, [2022] 444 ITR 1 (Supreme Court) — Considered on the transition to the substituted reassessment regime; held not to dispense with the approval requirements applicable to orders under section 148A(d) and notices under section 148.
• Kiran Singh v. Chaman Paswan, AIR 1954 SC 340 (Supreme Court) — Discussed through Westlife Development for the fundamental principle that an order passed without jurisdiction is a nullity and the defect may be raised even in collateral proceedings.
• Sushil Kumar Mehta v. Gobind Ram Bohra, (1990) 1 SCC 193 (Supreme Court) — Discussed through Westlife Development for the proposition that an inherently jurisdictionless decree remains a nullity notwithstanding that it was not earlier contested.
• Indian Bank v. Manilal Govindji Khona, (2015) 3 SCC 712 (Supreme Court) — Referred to through Westlife Development in the discussion concerning inherent want of jurisdiction.
• Mavany Brothers v. CIT, Tax Appeal No. 8 of 2007, order dated 17.04.2015 (Bombay High Court, Goa Bench) — Referred to for the proposition that an objection concerning inherent lack of jurisdiction may be raised when the order is subsequently relied upon.
• Superintendent of Taxes v. Onkarmal Nathmal Trust, AIR 1975 SC 2065 (Supreme Court) — Discussed for the principle that statutory restrictions on revenue jurisdiction are matters of public policy and cannot be waived by an assessee.
• Dasa Muni Reddy v. Appa Rao, AIR 1974 SC 2089 (Supreme Court) — Discussed for the principle that estoppel or res judicata cannot confer jurisdiction where none exists.
• P.V. Doshi v. CIT, [1978] 113 ITR 22 (Gujarat High Court) — Discussed for holding that finality, waiver or estoppel cannot validate reassessment proceedings that were not validly initiated.
• Indian Farmers Fertilizers Co-operative Ltd. v. Joint CIT, [2007] 105 ITD 33 (ITAT Delhi) — Referred to for permitting the jurisdictional validity of reassessment to be questioned in subsequent rectification proceedings.
• Dhiraj Suri v. Addl. CIT, [2006] 98 ITD 87 (ITAT Delhi) — Referred to for permitting the validity of a foundational block assessment to be questioned in an appeal against consequential penalty proceedings.
• Inventors Industrial Corporation Ltd. v. CIT, [1992] 194 ITR 548 (Bombay High Court) — Referred to for permitting a reassessment jurisdiction objection in a later round even though it had not been raised earlier.
• Soaltee Finance & Leasing Ltd. v. Pr. CIT-8, ITA Nos. 2494 and 2495/Del/2017, order dated 07.09.2022 (ITAT Delhi) — Contrary view examined in detail. The Tribunal accepted its limitation against formally annulling an assessment not under appeal but distinguished that from examining whether the assessment could legally sustain section 263 jurisdiction.
• SBS Realtors (P.) Ltd. v. ITO, ITA No. 2996/Del/2017, order dated 06.04.2021 (ITAT Delhi) — Considered while discussing the contrary reasoning in Soaltee Finance & Leasing Ltd. concerning collateral challenge to the jurisdiction of the foundational reassessment.
• Malabar Industrial Co. Ltd. v. CIT, [2000] 243 ITR 83 (Supreme Court) — Followed for the settled requirement that the conditions of an order being both erroneous and prejudicial to the interests of the Revenue are cumulative for section 263.

FULL TEXT OF THE ORDER OF ITAT, MUMBAI BENCH

These two appeals by the assessee are directed against two separate orders, both dated 27.03.2026, passed by the learned Principal Commissioner of Income-tax-4, Mumbai [hereinafter referred to as “the PCIT”], under section 263 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for A.Ys. 2016-17 and 2017-18. Since the appeals involve the same assessee, arise from substantially similar facts and raise common legal issues, they were heard together and are being disposed of by this consolidated order.

2. The material facts giving rise to both appeals are substantially common. The assessee filed its returns of income for the respective assessment years declaring Nil income after reporting current-year 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	22.05.2023 under section 147 read with section 144B	22.05.2023 under section 147 read with section 144B
Result of reassessment	Returned income accepted	Returned income accepted

4. During the reassessment proceedings, the Assessing Officer issued notices under sections 143(2) and 142(1). The assessee furnished detailed explanations and documentary evidence concerning the lender and the impugned transactions. The material furnished included the loan agreements, ledger accounts, confirmations, bank statements, cash-flow statements, lender’s income-tax particulars, RBI registration certificate, financial statements, disbursement letters and evidence of subsequent repayment. In A.Y. 2017-18, the assessee also furnished particulars concerning the interest paid on the loans. The reassessment orders themselves reproduce the replies filed by the assessee and record the nature of the documents submitted.

5. After examining the material so furnished, the Assessing Officer recorded that the relevant bank statements, registration certificate, cash-flow statements, confirmations and ledger accounts had been verified. The Assessing Officer further noted the receipt of the respective loans through banking channels and their subsequent repayment. On such verification, the reassessments for both years were completed on 22.05.2023 under section 147 read with section 144B by accepting the returned income.

6. The learned PCIT thereafter initiated revisionary proceedings under section 263 by issuing show-cause notices dated 10.03.2026. According to the learned PCIT, although the assessee had furnished documentary evidence concerning the loans, the Assessing Officer had failed to undertake meaningful enquiry into the information received from the Investigation Wing and the statement recorded during the search proceedings. The learned PCIT held that the Assessing Officer had accepted the transactions without adequately examining the genuineness of the loans, the creditworthiness of the lender and the implications of the material gathered during the search.

7. The learned PCIT invoked clause (a) of Explanation 2 to section 263 and held that the reassessment orders were erroneous insofar as they were prejudicial to the interests of the Revenue. Consequently, by two separate orders dated 27.03.2026, the reassessment orders were partly set aside to the file of 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.

ITA No. 6609/Mum/2026, A.Y. 2017-18

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 and interest transaction aggregating to Rs. 3,37,23,177/- 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.

9. During the course of hearing before us, the learned Authorised Representative (AR) submitted that the orders passed by the learned PCIT under section 263 are liable to be quashed both on jurisdictional grounds and on the merits of the revisionary proceedings. He submitted that the facts and legal issues involved in both assessment years are substantially similar, the material difference being the quantum of the loan transactions. He first addressed the arguments with reference to A.Y. 2016-17 and adopted the same submissions for A.Y. 2017-18, subject to the year-specific amounts and documents.

10. The learned AR submitted that the reassessment orders dated 22.05.2023, which formed the very foundation of the proceedings under section 263, were invalid and non-est in law because the mandatory approval contemplated under section 151 had not been granted by the competent specified authority.

11. With reference to A.Y. 2016-17, the learned AR submitted that the order under section 148A(d) and the notice under section 148 were issued on 30.07.2022. Inviting our attention to paragraph 14 of the order under section 148A(d), placed at pages 3 to 6 of Paper Book-1, he submitted that the approval was stated to have been granted on 28.07.2022 by the Principal Commissioner of Income-tax-4, Mumbai, under section 151(i).

12. The learned AR submitted that the relevant assessment year was A.Y. 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 contemplated under the applicable clause of section 151 could not confer jurisdiction upon the Assessing Officer to pass an order under section 148A(d) or issue a notice under section 148.

15. In support of this contention, the learned AR relied upon the decision of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal [167 taxmann.com 70]. He submitted that the Hon’ble Supreme Court had recognised the mandatory character of the limitation and sanction requirements governing the reassessment proceedings. According to him, where more than three years had elapsed from the end of the relevant assessment year, the approval had necessarily to emanate from the specified authority contemplated under section 151(ii).

16. The learned AR contended that the defect in obtaining approval from an incompetent authority went to the root of the jurisdiction assumed by the Assessing Officer. It was not a procedural irregularity capable of being cured by subsequent participation of the assessee in the reassessment proceedings. Consequently, the orders under section 148A(d), the notices under section 148 and the reassessment orders dated 22.05.2023 were void ab initio and non-est in law.

17. The learned AR then submitted that the learned PCIT could not validly assume jurisdiction under section 263 in respect of an assessment order which was itself void and non-est. According to him, the exercise of revisionary jurisdiction necessarily presupposed the existence of a valid assessment order capable of being revised. Where the foundational assessment order was without jurisdiction, the subsequent proceedings under section 263 could not impart validity to it.

18. The learned AR submitted that the invalidity of the foundational reassessment orders necessarily vitiated the superstructure erected thereon in the form of proceedings under section 263. He relied upon the following decisions of the Coordinate Benches, wherein, according to him, orders under section 263 were quashed after the underlying reassessment proceedings were held to be invalid in light of the principles laid down in Union of India v. Rajeev Bansal:

i. Anumita Infrastructure Pvt. Ltd. v. PCIT, ITA No.2555/Mum/2025, order dated 29.01.2026;

ii. Shailesh Asalraj Jain v. PCIT, ITA No.2559/Mum/2025, order dated 24.02.2026; and

iii. Jignesh Mahesh Gohel v. DCIT, ITA No.2708/Mum/2025, 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). The reassessment orders were, therefore, non-est in law and could not constitute valid subject matter of revision under section 263. He prayed that the impugned orders dated 27.03.2026 passed under section 263 for both assessment years be quashed and the appeals of the assessee be allowed.

22. The learned Departmental Representative relied upon the written submissions placed on record as well as the departmental communications and approval documents furnished during the course of hearing. He submitted that the assessee’s challenge was confined to the competence of the authority granting approval under section 151 of the Act and the consequential validity of the proceedings under section 263.

23. At the outset, the learned DR raised a preliminary objection to the assessee’s challenge to the validity of the reassessment proceedings in the present appeals arising from orders passed under section 263. He submitted that the assessee had accepted the reassessment proceedings, filed returns in response to the notices under section 148, participated in the proceedings without raising any jurisdictional objection and did not independently challenge the reassessment orders by filing appeals. According to him, having accepted and acted upon the reassessment orders, the assessee could not subsequently contend, in the appeals against the orders under section 263, that the very same assessment orders were non est.

24. The learned DR further submitted that the assessee had taken mutually inconsistent positions. While assailing the jurisdiction under section 263, the assessee relied upon the inquiries made and the view taken by the Assessing Officer in the reassessment orders; at the same time, it contended that those orders were void for want of approval by the competent authority. Relying upon the decision of the Hon’ble Supreme Court in R.N. Gosain v. Yashpal Dhir [(1992) 4 SCC 683], he contended that a litigant could not be permitted to approbate and reprobate in relation to the same order.

25. The learned DR fairly acknowledged that the Coordinate Bench in Anumita Infrastructure Pvt. Ltd. v. PCIT, ITA No.2555/Mum/2025, order dated 29.01.2026, had permitted a jurisdictional objection to the underlying assessment order to be raised in an appeal arising from proceedings under section 263. He, however, submitted that the said decision did not consider the distinct 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 departmental communication dated 18.09.2026 specifically confirmed that formal approvals for passing the orders under section 148A(d), in respect of both assessment years, had been obtained in July 2022 from the competent specified authority and that the consequential notices under section 148 were thereafter issued in the same month.

28. Elaborating upon the approval for A.Y. 2017-18, the learned DR drew attention to the approval dated 18.07.2022 issued on the letterhead of the “Office of the Chief Commissioner of Income-tax (OSD) I/C Principal Commissioner of Income-tax-4”. The approval was signed by Dr. Suchismita Palai in the capacity of “CCIT (OSD) in the charge of Pr. Commissioner of Income-tax-4, Mumbai”. He submitted that the officer who granted the approval held the substantive rank of Chief Commissioner of Income-tax, which rank is specifically included in the expression “specified authority” under section 151(ii) of the Act. Merely because such officer was also holding charge of the office of Principal Commissioner of Income-tax-4, the officer did not cease to hold the rank of Chief Commissioner.

29. According to the learned DR, the purpose underlying section 151(ii), as explained by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal [(2024) 469 ITR 46 (SC)], was to ensure independent scrutiny of the proposal by a sufficiently senior income-tax authority where more than three years had elapsed from the end of the relevant assessment year. That requirement stood fulfilled because the approval had, in substance, been granted by an officer holding the rank of Chief Commissioner of Income-tax.

30. The learned DR submitted that the decisions relied upon by the assessee, including Anumita Infrastructure Pvt. Ltd. and the other decisions following Rajeev Bansal, proceeded on the factual premise that approval had been granted only by a Principal Commissioner of Income-tax. Those decisions did not examine whether an approval granted by an officer holding the rank of Chief Commissioner, while additionally holding charge of the office of a Principal Commissioner, would satisfy section 151(ii). The said decisions were, therefore, distinguishable on facts.

31. The learned DR also addressed the reference in paragraph 14 of the order under section 148A(d) for A.Y. 2017-18 to the approval having been obtained from the “Pr. CIT-4, Mumbai” under 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 the approvals and the consequential reassessment proceedings could not be treated as invalid.

33. The learned DR thus submitted that the approvals were granted by the competent specified authority and that the reassessment orders were valid and subsisting orders. Consequently, the Principal Commissioner possessed jurisdiction to examine and revise those orders under section 263 of the Act. He accordingly prayed that the jurisdictional challenge raised by the assessee be rejected and the impugned orders under section 263 for both assessment years be upheld. In the alternative, he requested that all the aforesaid contentions of the Revenue be expressly recorded and preserved.

34. We have carefully considered the rival submissions and perused the orders passed under sections 148A(d), 147 read with section 144B and 263 of the Act, the approval documents placed on record, and the judicial precedents relied upon by both sides. At the time of hearing, the learned AR confined his arguments to the validity of the approvals obtained under section 151 and the consequential validity of the orders passed under section 263. The other grounds were not pressed.

35. The controversy before us has two interconnected facets. The first is whether the assessee is entitled, in appeals directed against the orders under section 263, to question the jurisdictional competence of the foundational reassessment proceedings. The second is whether, upon such limited collateral examination, the reassessment orders could constitute legally sustainable orders capable of revision under section 263. In examining these questions, we are conscious that the reassessment orders dated 22.05.2023 are not independently under appeal before us. Our examination of their jurisdictional foundation is, therefore, confined to determining whether the learned PCIT validly assumed jurisdiction under section 263 and whether the cumulative conditions of error and prejudice contemplated by that provision stood satisfied.

Particulars	A.Y. 2016-17	A.Y. 2017-18
Expiry of three years from the end of the assessment year	31.03.2020	31.03.2021
Original notice under erstwhile section 148	30.06.2021	30.06.2021
Approval for order under section 148A(d) and notice under section 148	28.07.2022	18.07.2022
Authority from whom approval is recorded as having been obtained	Principal 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 assessment year.

38. Thus, the statute created a time-linked hierarchy. Approval under section 151(i) could be granted by the Principal Commissioner or Commissioner only where three years or less had elapsed from the end of the relevant assessment year. Where more than three years had elapsed, approval was required under section 151(ii) from the Principal Chief Commissioner or Principal Director General or, where such authority was not available, from the Chief Commissioner or Director General.

39. The issue is now authoritatively governed by the decision of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal [2024] 469 ITR 46 (SC). In paragraphs 73, 75 and 76, the Hon’ble Supreme Court explained the nature and consequence of the requirement under section 151 as follows:

“Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under Section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments.” (para 73)

“Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under Section 151 of the new regime.” (para 75)

“Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under Section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under Section 151 affects their jurisdiction to issue a notice under Section 148.”

40. The Hon’ble Supreme Court in para 81 of the judgement of Rajeev Bansal further clarified that the directions issued in Union of India v. Ashish Agarwal (supra) did not dispense with the approvals required at the stages of passing an order under section 148A(d) and issuing a notice 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 those notices. It was therefore submitted that the authority contemplated under section 151(i) continued to be competent.

43. We are unable to accept this contention. In Rajeev Bansal, the Hon’ble Supreme Court specifically dealt with the impact of TOLA upon section 151. It held:

“The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has an extended time till 30 June 2021 to grant approval.” (para 114 – d.)

44. The Court illustrated the position with specific reference to A.Y. 2017-18:

78. For example, the three year time limit for assessment year 2017-2018 falls for completion on 31 March2021. It falls during the time period of 20 March 2020 and 31 March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till 30 June 2021.

45. The approvals in the present cases were granted in July 2022, long after 30.06.2021. Therefore, even on application of TOLA, the extended competence of the authority under section 151(i) had expired. The reference in the orders under section 148A(d) to paragraph 6.2(ii) of CBDT Instruction No.01 of 2022 cannot override the statutory prescription or the interpretation subsequently placed upon it by the Hon’ble Supreme Court. An administrative instruction cannot enlarge the jurisdiction conferred by section 151.

46. The reliance of the Revenue upon Ashish Agarwal is also misplaced. The said decision converted the notices issued under the erstwhile section 148 into show-cause notices under section 148A(b), but expressly preserved the defences available to the assessees under the substituted provisions. It required the Revenue to proceed under the substituted reassessment regime. As subsequently clarified in Rajeev Bansal, the requirements of approval under sections 148A(d) and 148 were never dispensed with.

47. In A.Y. 2016-17, the material on record shows that approval was obtained from the Principal Commissioner of Income-tax-4, Mumbai on 28.07.2022 and the order under section 148A(d) and notice under section 148 were issued on 30.07.2022. The period of three years from the end of A.Y. 2016-17 had expired on 31.03.2020. 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 Commissioner, the approval must be treated as one granted by a Chief Commissioner under section 151(ii), notwithstanding that she was holding charge of the office of Principal Commissioner.

52. We have considered this submission. The Revenue is correct to the limited extent that the precise question concerning an officer described as “CCIT (OSD) in the charge of Pr. Commissioner” was not examined in Anumita Infrastructure Pvt. Ltd. or Shailesh Asalraj Jain. The matter, therefore, requires examination from the approval document itself and the language of section 151(ii). The statutory record does not support the Revenue’s attempt to retrospectively characterise the approval as one granted under section 151(ii). The following circumstances are material:

– The proposal was addressed to and processed through the office of Principal Commissioner of Income-tax-4.

– The approval bears the number “Pr.CIT-4/148A(d)/Approval/2022-23”.

– The officer signed the approval specifically as “CCIT (OSD) in the charge of Pr. Commissioner of Income-tax-4”.

– The order under section 148A(d) records that approval was obtained from “Pr. CIT-4, Mumbai”.

– The Assessing Officer expressly records that the approval was obtained under section 151(i).

53. Thus, on the face of the contemporaneous statutory record, the approval was sought from and granted through the office of the Principal Commissioner under section 151(i). The subsequent departmental communication dated 18.09.2026, stating generally that approval was obtained from the competent specified authority, cannot alter the capacity in which the approval was granted or cure a jurisdictional deficiency in the original record.

54. There is yet another difficulty in accepting the Revenue’s contention. At the relevant time, a Chief Commissioner was included in section 151(ii) only “where there is no Principal Chief Commissioner or Principal Director General”. Neither the approval nor any contemporaneous document records that there was no Principal Chief Commissioner or Principal Director General available. No notification, order of appointment, allocation of statutory functions or other evidence has been placed before us to establish satisfaction of this statutory condition. The mere personal designation of the officer as “CCIT (OSD)” cannot dispense with the express condition incorporated 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 present case, however, the deficiency is not merely an incorrect recital of the provision. The approval was sought from the office of the Principal Commissioner, granted by the officer while holding charge of that office, and expressly treated by the Assessing Officer as an approval from the Principal Commissioner under section 151(i). Further, the condition upon which a Chief Commissioner could act under section 151(ii) has not been demonstrated. The existence of the requisite jurisdictional power itself has, therefore, not been established. The decision in N. Mani does not assist the Revenue.

58. The learned DR next contended that the assessee had filed returns pursuant to the notices under section 148, participated in the reassessment proceedings and did not challenge the reassessment orders independently. According to him, the assessee could not challenge the validity of those orders for the first time in the appeals against the orders under section 263.

59. The objection is no longer res integra. In Anumita Infrastructure Pvt. Ltd. v. PCIT, ITA No.2555/Mum/2025, order dated 29.01.2026, the Coordinate Bench held:

“The assessee’s failure to file an appeal against the reassessment order does not validate a jurisdictionally void order.… While section 263 empowers the Principal Commissioner to revise an order which is erroneous and prejudicial to the interest of the Revenue, the exercise of such power necessarily presupposes the existence of a valid assessment order in the eyes of law.” (para 25)

60. The Coordinate Bench concluded:

“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.” (para 26)

61. The same principle was earlier considered in considerable detail by the Coordinate Bench in Westlife Development Ltd. v. PCIT [2017] 88 taxmann.com 439 (Mumbai Tribunal). In paragraphs 8 to 8.9 of the order, the Coordinate Bench examined whether an assessee, while challenging an order passed under section 263, could question 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 clear distinction between an order which is merely erroneous on merits and an order which is void for want of jurisdiction. In the latter case, the validity of the foundational order can be examined at a subsequent stage, but only for the limited purpose of determining whether the collateral proceedings have been initiated upon a legally sustainable foundation. The Bench observed that denial of such examination could result in an enforceable tax liability being created without authority of law.

64. The Coordinate Bench thereafter referred, in paragraph 8.2, to the decision of the Hon’ble Supreme Court in Kiran Singh v. Chaman Paswan AIR 1954 SC 340. The relevant principle reproduced by the Coordinate Bench reads:

“It is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties.”

65. In paragraph 8.3, the Coordinate Bench referred to Sushil Kumar Mehta v. Gobind Ram Bohra [1990] 1 SCC 193, wherein the Hon’ble Supreme Court applied the same principle even at the stage of execution. It was held that where the court passing the decree inherently lacked jurisdiction, the decree was a nullity and did not become binding merely because it had remained uncontested. Such a decree could not operate as res judicata. The Coordinate Bench drew support from this decision for the proposition that an inherently void order does not acquire legality merely because it has not been challenged in the primary proceedings.

66. In paragraph 8.4, reference was made to Indian Bank v. Manual Govindji Khona [2015] 3 SCC 712 and the decision of the Hon’ble Bombay High Court, Goa Bench, in Mavany Brothers v. CIT, Tax Appeal No.8 of 2007, order dated 17.04.2015. These authorities were noticed for the proposition that an objection relating to inherent lack of jurisdiction can be raised whenever the order is sought to be enforced or relied upon, including at the appellate or execution stage.

67. In paragraph 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 principle that:

“Finality or conclusiveness could only arise in respect of orders which are competent orders with jurisdiction and if the proceedings of reassessment are not validly initiated at all, the order would be a void order as per the settled legal position which could never have any finality or conclusiveness. If the original order is without jurisdiction, it would be only a nullity confirmed in further appeals.”

69. Paragraphs 8.7 and 8.8 of Westlife Development Ltd. considered the application of the above doctrine in proceedings arising under the Income-tax Act. In Indian Farmers Fertilizers Co-operative Ltd. v. Joint CIT [2007] 105 ITD 33 (Delhi), the jurisdictional validity of a reassessment order was permitted to be questioned in proceedings under section 154, even though the assessee had not appealed against the reassessment order. The Tribunal reasoned that where rectification proceedings were founded upon the assumed validity of the reassessment order, the assessee had to be permitted to protect its interest by demonstrating that the foundational reassessment itself was without jurisdiction.

70. Similarly, in Dhiraj Suri v. Addl. CIT [2006] 98 ITD 87 (Delhi), the validity of a block assessment was permitted to be questioned in an appeal against the consequential penalty. The Tribunal held that if the block assessment itself was without jurisdiction, no penalty could validly be levied on the basis of such assessment. Thus, the jurisdictional validity of the primary proceedings could be examined to determine the legality of the consequential proceedings.

71. In paragraph 8.9, the Coordinate Bench also referred to the decision of the Hon’ble Bombay High Court in Inventors Industrial Corporation Ltd. v. CIT [1992] 194 ITR 548 (Bombay). It was noted that the assessee was permitted to challenge the jurisdiction of the Assessing Officer to initiate reassessment in the second round of proceedings, even though such objection had not been raised before the Assessing Officer or in the earlier appeal.

72. The principle emerging from the aforesaid analysis is that the finality attaching to an assessment order does not prevent examination of an inherent jurisdictional defect when that order is subsequently relied upon as the legal foundation for collateral proceedings. Such examination does not amount to reopening, modifying or annulling 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 condition was not satisfied, the reassessment orders, irrespective of their continued formal existence on the departmental record, could not furnish a legally sustainable foundation for the exercise of revisionary jurisdiction under section 263. Our examination is confined to this collateral consequence.

75. We have also considered the contrary view expressed by the Delhi Bench of the Tribunal in Soaltee Finance & Leasing Ltd. v. Pr. CIT-8, ITA Nos.2494 and 2495/Del/2017, order dated 07.09.2022, concerning A.Ys. 2009-10 and 2010-11. In that case also, the assessee contended that where the reassessment order was itself without jurisdiction and, therefore, non est, revisionary jurisdiction under section 263 could not be exercised upon such an order. The assessee therein relied upon the decision of the Coordinate Bench in SBS Realtors (P.) Ltd. v. ITO (ITA No. 2996/Del/2017, dated 06.04.2021).

76. In paragraphs 20.2 to 20.7 of the order, the Delhi Bench examined the issue from the standpoint of the object and scope of section 263. It observed that section 263 is a supervisory provision enacted to correct an order which is erroneous and prejudicial to the interests of the Revenue. According to the Bench, the revisional power under section 263 cannot be equated with ordinary appellate jurisdiction and must be exercised only for safeguarding the interests of the Revenue.

77. The Delhi Bench further observed that the Principal Commissioner, while acting under section 263, may enhance or modify an assessment or cancel the assessment and direct a fresh assessment. In each of these situations, the assessment either survives with modification or is replaced by a fresh assessment. On this reasoning, the Bench held that complete annulment of the assessment order on the ground of inherent lack of jurisdiction would fall outside the purpose and scope of section 263.

78. The relevant reasoning in paragraphs 20.5 and 20.6 of the decision is that the revisionary authority cannot place the Revenue in a worse position or pass an order for the benefit of the assessee in the guise of revision. It was consequently held that the remedy against the alleged nullity of the reassessment order lay elsewhere. The Delhi Bench further held that since the revisionary authority itself could not annul the reassessment on the ground of lack of jurisdiction, the Tribunal, in an appeal against 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 Tribunal from examining whether the order sought to be revised possessed the legal attributes necessary to sustain the assumption of jurisdiction under section 263. An appeal against an order under section 263 necessarily requires the Tribunal to determine whether the statutory conditions governing the exercise of revisionary jurisdiction existed. For this limited purpose, the jurisdictional foundation of the order sought to be revised cannot be treated as immune from examination.

82. There is a material distinction between formally annulling the reassessment order and declining to recognise it as a legally sustainable foundation for the subsequent proceedings under section 263. The former would amount to granting direct appellate relief against the reassessment order. The latter is only an examination of the legality of the order actually under appeal, namely, the order passed under section 263. The relief sought by the assessee in the present appeals is of the latter nature.

83. Section 263 can be invoked only where the order passed by the Assessing Officer is both erroneous and prejudicial to the interests of the Revenue. These two conditions are cumulative. As held by the Hon’ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), if either condition is absent, recourse cannot be had to section 263(1).

84. In the present cases, the primary difficulty lies in the jurisdictional foundation of the orders sought to be revised. Approval by the specified authority under section 151(ii) was a condition precedent for the Assessing Officer to assume jurisdiction under sections 148A(d) and 148. Where compliance with that condition is not established, the resultant reassessment order cannot furnish a legally sustainable foundation for consequential revisionary proceedings.

85. This conclusion is supported by the decisions in Keshab Narayan Banerjee v. CIT, PCIT v. Badal Prakash Jindal and PCIT v. Shree Nilkanth Quarry Works LLP. These decisions proceed on the principle that where the foundational assessment or reassessment was not validly made, the consequential order under section 263 could not be sustained.

86. Alternatively, even if the reassessment orders are assumed, only for examining the requirements of section 263, to be “erroneous” on account of the jurisdictional defect, the second statutory condition of prejudice must 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 cumulative requirement of prejudice to the interests of the Revenue, capable of lawful correction under section 263, has not been established.

90. The factual circumstances also explain why the assessee did not independently challenge the reassessment orders. Those orders accepted the returned income and did not create any immediate grievance requiring appellate redress. The adverse consequence arose only when the learned PCIT sought to use those orders as the foundation for further proceedings under section 263. The present appeals constituted the first effective occasion for the assessee to resist that collateral consequence.

91. The present case is, therefore, not one where the assessee seeks to reopen a concluded assessment on merits or obtain direct relief against the income determined therein. The reassessment orders are examined only to determine whether the learned PCIT could validly treat them as orders satisfying both the statutory conditions of error and prejudice and direct further assessment on their foundation.

92. To this limited extent, the decision in Soaltee Finance & Leasing Ltd. does not preclude consideration of the jurisdictional objection. At the same time, we accept that the operative relief in the present appeals must remain confined to the orders passed under section 263. No direct appellate relief can be granted against the reassessment orders dated 22.05.2023, which are not the subject matter of these appeals.

93. At this stage we also feel appropriate to take note of the other decisions relied upon by the assessee. In Keshab Narayan Banerjee v. CIT [1998] 101 Taxman 512/[1999] 238 ITR 694 (Calcutta), the Hon’ble High Court held:

“Since, admittedly the service of such notices was a necessary pre-requisite, a condition precedent for passing of the orders under section 147, we also have no hesitation in holding that such orders were bad in law, and, therefore, proceedings under section 263 admittedly originating from such orders could not be initiated against the appellants.” (para 19)

94. In PCIT v. Badal Prakash Jindal [2023] 150 taxmann.com 483 (Orissa), the Hon’ble High Court rejected an identical objection of the Revenue and held:

“Indeed, if the original re-assessment order itself was not validly passed, the subsequent revisional order by the PCIT was required to be held invalid.” (para 12)

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 on the doctrine of election which postulates that no party can accept and reject the same instrument…”

98. The doctrine is inapplicable to the present controversy for more than one reason. First, the assessee has confined its arguments to the jurisdictional defect under section 151 and has not pressed the alternative grounds relating to adequacy of inquiry or adoption of a possible view by the Assessing Officer. There is, therefore, no surviving inconsistent plea requiring an election.

99. Secondly, the doctrine of approbation and reprobation is a species of estoppel. It cannot confer statutory jurisdiction upon an authority where the jurisdictional conditions prescribed by the Act have not been fulfilled. Participation in reassessment proceedings or failure to file a separate appeal cannot validate a notice issued without the approval mandated by section 151(ii). The decision in R.N. Gosain cannot override the settled principle that jurisdiction cannot be conferred by consent, waiver or acquiescence.

100. The learned DR relied upon CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297 (SC) to contend that Anumita Infrastructure Pvt. Ltd. and the other authorities should not be applied beyond the issues actually decided therein. The Hon’ble Supreme Court observed:

“A decision of this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a latter case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings.” (para 37)

101. We respectfully apply the above principle. The decision in Anumita Infrastructure Pvt. Ltd. is relied upon for the proposition actually decided therein, namely, that a jurisdictional defect in the reassessment proceedings may be examined for determining whether the consequential order under section 263 can be sustained. We do not treat that decision as authorising the formal annulment of a reassessment order which is not independently under appeal. The distinct factual contention concerning the designation “CCIT (OSD)” has been independently examined from the approval document and the language of section 151(ii). The reliance placed upon Sun 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 jurisdictional defect in that case related to limitation rather than the rank of the sanctioning authority. The decision nevertheless supports the broader principle that a revisionary order cannot survive where the foundational reassessment is jurisdictionally invalid.

106. Section 263 empowers the Principal Commissioner to revise an order passed by the Assessing Officer only where such order is erroneous insofar as it is prejudicial to the interests of the Revenue. The statutory expression requires the concurrent existence of both conditions. An order may suffer from an error, including an error affecting the jurisdiction of the Assessing Officer, but the existence of such error does not, by itself, establish prejudice to the interests of the Revenue within the meaning of section 263.

107. In both assessment years, more than three years had elapsed from the end of the relevant assessment year when the respective orders under section 148A(d) were passed and the notices under section 148 were issued. Approval was, therefore, required from the specified authority contemplated under section 151(ii).

108. For A.Y. 2016-17, the approval was obtained from the Principal Commissioner under section 151(i). Such approval did not satisfy the requirement of section 151(ii).

109. For A.Y. 2017-18, the contemporaneous statutory record describes the approval as one obtained from the Principal Commissioner under section 151(i). Although the officer signing the approval was described as “CCIT (OSD) in the charge of Pr. Commissioner of Income-tax-4”, the Revenue has not established the statutory condition upon which a Chief Commissioner could exercise the power under section 151(ii). The subsequent departmental explanation cannot alter the capacity in which the approval was contemporaneously sought, granted and recorded.

110. The requirement of obtaining approval from the specified authority under section 151(ii) was not dispensed with either by the decision in Union of India v. Ashish Agarwal, the provisions of TOLA or CBDT Instruction No.01 of 2022. The defect in the approval went to the jurisdiction of the Assessing Officer to proceed under sections 148A(d) and 148. The assessee’s participation in the reassessment proceedings and its failure to file independent appeals against the reassessment orders could not confer jurisdiction which was otherwise absent.

111. 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 then stood.

115. The defect went to the jurisdiction of the Assessing Officer to proceed under sections 148A(d) and 148. The learned PCIT could neither cure that defect through section 263 nor establish prejudice to the interests of the Revenue by directing further proceedings founded upon the same jurisdictionally deficient initiation.

116. We therefore hold that the reassessment orders could not furnish a legally sustainable foundation for the exercise of jurisdiction under section 263. Alternatively, even if they are regarded as erroneous, the cumulative requirement of prejudice to the interests of the Revenue has not been established.

117. Consequently, the orders dated 27.03.2026 passed by the learned PCIT under section 263 for A.Ys. 2016-17 and 2017-18 are quashed. Grounds 1 and 2 in both appeals are allowed.

118. We clarify that the reassessment orders dated 22.05.2023 are not the subject matter of the present appeals. Our examination 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. No direct appellate relief against, or formal annulment of, the reassessment orders is granted by this order.

119. Grounds 3 and 4 in both appeals were not pressed by the learned AR and are accordingly dismissed as not pressed. The general ground seeking leave to amend the grounds requires no separate adjudication.

120. In the result, both appeals filed by the assessee are allowed.

Order pronounced in the open court on 23.09.2026.