Neelkamal Realtors Suburban Private Limited Vs DCIT (ITAT Mumbai)
Search Cannot Justify One Route for Reopening and Another for Scrutiny: Mumbai ITAT Quashes Three Assessments
Summary: A search was conducted on 7 October 2021 in the DB Realty/Dynamix group, covering Neelkamal Realtors Suburban Pvt. Ltd. as well. Assessments for three years followed. For AYs 2019-20 and 2020-21, the AO issued notices under section 148 but ultimately made only statutory disallowances unrelated to the search information cited for reopening. For AY 2021-22, the AO proceeded by ordinary scrutiny under section 143(3), without issuing a notice under section 148. The Mumbai ITAT quashed all three assessments, though for two distinct jurisdictional reasons. The distinction matters: in the first two years, the Tribunal examined the missing link between the reasons for reopening and the additions made; in the third, it examined the absence of the statutory notice required to initiate reassessment for a year preceding the search year.
AYs 2019-20 and 2020-21: What Was the Reopening Based On?
For the first two years, the AO reopened the assessments under section 147 on the basis of information gathered during the search. On examining the recorded reasons, the Tribunal found references to material indicating ₹4,86,26,37,075 of undisclosed income in the case of the DB Realty Group, along with cash and jewellery seized from them. The reasons, however, did not identify escaped income specifically belonging to Neelkamal Realtors.
After the assessee filed returns in response to the section 148 notices declaring nil income, the AO completed the reassessments under section 143(3) read with section 147. The only disallowances made were ₹3,52,439 for AY 2019-20 and ₹4,26,658 for AY 2020-21, under section 2(24)(x) read with section 36(1)(va). The assessment orders did not identify undisclosed income of this assessee unearthed in the search. The CIT(A) disposed of the appeals ex parte and upheld the assessments.
Before the Tribunal, the assessee argued that the eventual disallowances had no connection with the information used to reopen the assessments. The Department relied on the Explanation to section 147, contending that the AO could assess an issue even if it had not formed part of the recorded reasons.
An Unrelated Disallowance Could Not Sustain These Reassessments
The Tribunal found that the recorded reasons did not point to escaped income of the assessee and that the only disallowances actually made did not arise from those reasons. It followed the coordinate bench ruling in Chandrakant Mohanbhai Patel v. ITO, ITA No. 3431/Mum/2026, dated 30 June 2026.
That decision had applied the Bombay High Court’s ruling in CIT v. Jet Airways (India) Ltd. (2011) 331 ITR 236 (Bom.): where no addition is made on the issue forming the basis of reopening, reassessment cannot be sustained solely by an addition on another issue. The coordinate bench had also considered this principle under the reassessment provisions substituted from 2021.
Applying that reasoning, the ITAT held the reopenings for AYs 2019-20 and 2020-21 invalid. It quashed both assessment orders and set aside the corresponding CIT(A) orders. Since those appeals succeeded on jurisdiction, it did not decide the merits of the section 36(1)(va) disallowances.
AY 2021-22: The Search Year Was AY 2022-23
The third appeal presented a different issue. The search took place in FY 2021-22, corresponding to AY 2022-23. AY 2021-22 was therefore a year preceding the assessment year relevant to the search. Yet the AO initiated and completed its assessment as an ordinary scrutiny assessment under section 143(3), without invoking section 147 or issuing a notice under section 148.
The assessee contended that, under the framework applicable to searches conducted after 31 March 2021, proceedings for such a preceding year had to follow the reassessment route. The Tribunal examined Explanation 2 to section 148 and followed the coordinate bench decision in Rajesh Kumar Jain v. DCIT, ITA No. 4768/Mum/2026. It held that the AO could not proceed for this preceding year merely under section 143(3) when the statutory route required jurisdiction to be assumed under sections 147 and 148.
This was more than an incorrect section number in the final order. No notice under section 148 had been issued at all. Following the coordinate bench ruling, the Tribunal held the AY 2021-22 assessment invalid and quashed it too. The merits of that year’s assessment were consequently left undecided.
Author’s Comments
This order illustrates why the jurisdictional foundation must be checked year by year after a search. For AYs 2019-20 and 2020-21, section 148 notices existed, but the search information recorded for reopening did not identify escaped income of this assessee, and the eventual disallowances concerned wholly different issues. For AY 2021-22, the defect arose earlier: although that year preceded the AY 2022-23 search year, the AO did not issue a section 148 notice at all.
The first ruling is particularly relevant where a group search is followed by reopening of several entities. Information about undisclosed income of the group does not, by itself, identify escaped income of every group company. The second ruling concerns the statutory path used to assess a preceding year after a post-March 2021 search. A search may provide the occasion for action, but the AO must still initiate proceedings through the provision applicable to the particular assessment year.
The Tribunal allowed all three appeals on these legal grounds. Its order should not be read as a finding on the allowability of the employee contribution payments or on any other issue of taxable income.
Cases Discussed/Relied Upon
- Chandrakant Mohanbhai Patel Vs Income Tax Officer (ITAT Mumbai); ITA No. 3431/Mum/2026; Order dated 30/06/2026 — Followed. The Coordinate Bench held under the substituted reassessment regime that where no addition is made on the issue forming the jurisdictional basis of reopening, reassessment cannot survive merely for an addition on an unrelated issue.
- CIT Vs Jet Airways (India) Ltd. (Bombay High Court); (2011) 331 ITR 236 (Bom.) — Relied upon in Chandrakant Mohanbhai Patel and its ratio followed. The Bombay High Court held that the Assessing Officer must assess or reassess the income which formed the basis for reopening before the jurisdiction to assess “any other income” can operate. If no addition is ultimately made on the foundational issue, reassessment cannot be sustained merely for another issue.
- Milan Agency Vs ITO (ITAT Mumbai); ITA No. 5414/Mum/2024 — Relied upon in Chandrakant Mohanbhai Patel. The decision applied the binding ratio of Jet Airways (India) Ltd. under the substituted reassessment regime and held that where no addition is made on the issue for which reassessment was initiated, the Assessing Officer lacks jurisdiction to make an addition on another issue.
- Rajesh Kumar Jain Vs DCIT (ITAT Mumbai); ITA No. 4768/Mum/2026 — Followed. The Coordinate Bench held that for an assessment year preceding the assessment year relevant to a post-01/04/2021 search, jurisdiction was required to be assumed under sections 147 and 148. Selection of the existing return for compulsory scrutiny and issuance of notice under section 143(2) could not substitute the jurisdictional notice required under section 148.
- Torque Pharmaceuticals (P.) Ltd. Vs DCIT (ITAT Chandigarh); [2026] 185 taxmann.com 925 — Relied upon by the assessee; accepted by the Tribunal as expressing a similar view. The decision was cited in support of the jurisdictional challenge concerning the statutory route applicable to an assessment year preceding the assessment year relevant to a post-31/03/2021 search.
- Pilot Industries Ltd. & Ors. Vs DCIT (ITAT Delhi); ITA Nos. 6122 to 6127/Del/2025 and connected appeals — Discussed in Rajesh Kumar Jain. The Delhi Bench considered the post-01/04/2021 search regime and held that assessments of preceding years framed directly under section 143(3), without following the prescribed reassessment procedure, could not be sustained.
- Deepak Agarwal Vs DCIT (ITAT Delhi); 2025 (10) TMI 1101 — Discussed through the Pilot Industries line of decisions in Rajesh Kumar Jain. The decision was cited on the prescribed statutory manner of assuming jurisdiction for an assessment year preceding the assessment year relevant to a post-01/04/2021 search.
- Montage Enterprises Pvt. Ltd. Vs DCIT/ACIT (ITAT Delhi); ITA Nos. 5458 & 5906/Del/2025; [2026] 182 taxmann.com 11 — Discussed through the Pilot Industries line of decisions in Rajesh Kumar Jain. It held that where the statutory reassessment mechanism became applicable consequent to a post-01/04/2021 search, assessment could not simply continue under section 143(3) by bypassing the prescribed section 148 route.
- Malbros International Pvt. Ltd. Vs DCIT (ITAT Chandigarh) — Discussed through the Pilot Industries line of decisions in Rajesh Kumar Jain. The decision was cited in support of the jurisdictional requirement to follow the post-Finance Act, 2021 reassessment framework instead of completing the assessment directly under section 143(3).
- Jamna Dass Nikkamal Jain Saraf Pvt. Ltd. Vs DCIT (ITAT Chandigarh); ITA No. 403/Chd/2025 — Discussed through the Pilot Industries line of decisions in Rajesh Kumar Jain. The decision concerned the requirement to follow the special statutory reassessment mechanism for an assessment year preceding the assessment year relevant to a post-01/04/2021 search rather than proceeding merely under the ordinary scrutiny provisions.
- Homelife Buildcon (P.) Ltd. Vs DCIT (ITAT Chandigarh); [2025] 176 taxmann.com 614 — Discussed through the Pilot Industries line of decisions in Rajesh Kumar Jain. The decision was cited in support of the requirement to follow the special search-related statutory mechanism under the post-01/04/2021 reassessment regime.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Captioned appeals by the same assessee, arise out of three separate orders of learned Commissioner of Income Tax (Appeals) [in short, ‘ld. CITA’], Mumbai, pertaining to Assessment Years (A.Ys.) 2019-20, 2020-21 and 2021- 22. Since appeals relating to AYs 2019-20 and 2020-21 stand on similar footing, we propose to deal with them at the very outset.
2. The first common issue arising in these appeals relates to validity of reopening of assessment under Section 147 of the Income Tax Act, 1961 (in short, ‘the Act’).
3. Before we deal with this issue, it is necessary to briefly describe the relevant facts. The assessee is a resident corporate entity. As observed by the Assessing Officer, on 07.10.2021 a search and seizure operation under Section 132 of the Act was conducted on M/s DB Realty Group, Dynamix Group and other related entities. The assessee was also covered under the search and seizure operation. Based on information gathered at the time of search and seizure operation, the Assessing Officer reopened the assessment under Section 147 of the Act by issuing notice under Section 148 of the Act. In response to the notices issued under Section 148 of the Act, the assessee filed return showing Nil income. Ultimately, the Assessing Officer completed the assessment under Section 143(3) read with Section 147 of the Act, making disallowances of Rs.3,52,439/- and Rs.4,26,658/- u/s. 2(24)(x) r.w.s. 36(1)(va)of the Act for the Assessment Years 2019-20 and 2020-21, respectively.
4. The assessee challenged the assessment orders by filing appeals before learned First Appellate Authority, inter-alia questioning the validity of reopening of assessment under Section 147 of the Act. However, alleging non-compliance, learned First Appellate Authority proceeded to dispose of the appeals ex-parte upholding the assessments.
5. Drawing our attention to the reasons recorded, learned counsel appearing for the assessee submitted that they pertain to incriminating material found in case of M/s DB Realty Group, which does not relate to the assessee. He submitted, even the reasons recorded do not refer to any escaped income of the assessee. He submitted, ultimately, the Assessing Officer has made statutory disallowances under Section 36(1)(va) of the Act, which is not based on any incriminating material or information relating to escaped income found as a result of search. Thus, he submitted, the Assessing Officer has exceeded his jurisdiction while making addition in respect of an item of income not forming part of reasons recorded. In support of such contention, learned counsel relied upon the decision of the Coordinate Bench in case of ‘Chandrakant Mohanbhai Patel vs. Income Tax Officer’, ITA No. 3431/Mum/2026, vide order dated 30.06.2026. Thus, he submitted, the issue is squarely covered by the aforesaid decision.
6. Per contra, drawing our attention to the Explanation under Section 147 of the Act, learned Departmental Representative submitted, there is no restriction on the Assessing Officer to complete the assessment under Section 147 of the Act, in respect of any issue, which may or may not form part of reasons recorded.
7. We have considered rival submissions and perused the materials on record. On perusal of the reasons recorded for reopening of assessment, copy of which is placed on record, it is noticed that except referring to certain incriminating material revealing undisclosed income of Rs.4,86,26,37,075/- in case of DB Realty Group and cash and jewellery seized from them, the reasons recorded do not refer to any escaped income specifically relating to the assessee. Even, the impugned assessment orders do not refer to any undisclosed income of the assessee unearthed as a result of search. The only addition/disallowance made by the Assessing Officer is statutory disallowance under Section 36(1)(va) of the Act. Thus, it is crystal clear that neither the reasons recorded refer to any specifically escaped income of the assessee nor the ultimate additions/disallowances made by the Assessing Officer are with reference to reasons recorded. In case of ‘Chandrakant Mohanbhai Patel vs. Income Tax Officer’ (Supra), the Coordinate Bench, while dealing with similar issue, has held as under:
“6.2 In the present case, the notice issued under Section 148A(b), read with the order passed under Section 148A(d), reveals that the reassessment was proposed on account of the following information: (i) cash deposits in bank account; (ii) cash withdrawals; (iii) turnover reported in GST returns; (iv) TDS information; (v) depository transactions; and (vi) other information available through the Insight Portal. Significantly, the alleged unsecured loan of Rs.15,00,000 received from M/s. Vavya Enterprises, which ultimately formed the sole basis of addition under Section 68, does not find mention either in the notice issued under Section 148A(b) or in the order passed under Section 148A(d). Equally significant is the fact that while completing the reassessment under Section 147 read with Section 144B, the Assessing Officer has not made any addition whatsoever in respect of any of the issues forming the very basis of reopening. The only addition made is under Section 68 in respect of the unsecured loan received from M/s. Vavya Enterprises, which is admittedly an altogether distinct issue.
6.3 The issue is no longer res integra. The Hon’ble Bombay High Court in CIT v. Jet Airways (India) Ltd. (2011) 331 ITR 236 (Bom.) held that the expression “and also any other income” occurring in Section 147 cannot be read in isolation. The Hon’ble Court held that the Assessing Officer must first assess or reassess the income which formed the basis of the reasons recorded for reopening. It is only thereafter that he acquires jurisdiction to assess any other income which may come to his notice during the reassessment proceedings. The Hon’ble jurisdictional High Court further held that where the Assessing Officer ultimately does not assess the income which constituted the basis for reopening, the reassessment cannot be sustained merely for making additions on other issues discovered subsequently. In other words, the jurisdiction to assess “any other income” is merely incidental and supplemental to the jurisdiction validly exercised in respect of the income for which the assessment was reopened.
6.4 Although the present reassessment is governed by the substituted provisions introduced by the Finance Act, 2021, we are of the considered view that the ratio laid down in Jet Airways (India) Ltd. (supra) continues to hold the field. In fact, the substituted statutory framework reinforces, rather than dilutes, the principle laid down therein. Section 148A(b) mandates disclosure of the information suggesting escapement of income, while Section 148A(d) requires the Assessing Officer to record satisfaction with respect to such information before assuming jurisdiction under Section 148. Therefore, the jurisdiction itself is founded upon the specific information disclosed to the assessee. Where, ultimately, no addition is made on the very issue constituting the basis for assumption of jurisdiction, the substratum of the reassessment disappears. In such circumstances, permitting the Assessing Officer to sustain the reassessment solely for making an addition on an altogether unrelated issue would render the statutory safeguards introduced by Parliament under Section 148A wholly nugatory.
6.5 The Finance Act, 2021 has undoubtedly altered the procedural framework governing reassessment. However, the amendments merely strengthen the procedural safeguards available to the assessee by introducing a pre-notice enquiry under Section 148A. They do not enlarge the substantive jurisdiction of the Assessing Officer to assess issues wholly unconnected with the information forming the basis of reopening. Significantly, Parliament has not altered the substantive language of Section 147 in so far as it empowers the Assessing Officer to assess or reassess the escaped income and “also any other income” which comes to his notice during the course of reassessment proceedings. The expression “and also”, which formed the foundation of the interpretation adopted by the Hon’ble Bombay High Court in Jet Airways (India) Ltd. (supra), remains unchanged. It is a settled principle of statutory interpretation that where Parliament retains the same statutory language despite being aware of the judicial interpretation placed thereon, such interpretation must ordinarily be regarded as having received legislative approval.
6.6 Indeed, under the substituted regime, the jurisdictional foundation is even more clearly defined. Under the erstwhile provisions, the reassessment was founded upon the “reasons to believe” recorded by the Assessing Officer. Under the substituted provisions, the jurisdiction is founded upon the “information suggesting escapement of income” disclosed under Section 148A(b) and accepted in the order passed under Section 148A(d). Thus, although the form has changed, the jurisdictional foundation remains the same, namely, the existence of identified information indicating escapement of income. Consequently, where the Assessing Officer ultimately accepts, either expressly or by necessary implication, that no addition is warranted on the very issue forming the foundation of reopening, the reassessment loses its jurisdictional basis. Once the jurisdictional foundation fails, the consequential exercise of jurisdiction in respect of other independent issues cannot survive.
6.7 Any other interpretation would defeat the very object underlying the introduction of Section 148A. Parliament consciously introduced a pre-notice adjudicatory mechanism to ensure that reassessment proceedings are founded upon specific, tangible and disclosed information. If, after invoking jurisdiction on one set of information, the Assessing Officer is permitted to abandon that very foundation and sustain the reassessment solely on an altogether different issue discovered subsequently, the safeguards consciously incorporated by Parliament would become illusory. Such an interpretation would not only frustrate the legislative intent underlying the Finance Act, 2021 but would also permit reassessment proceedings to travel beyond the jurisdictional foundation on which they were initiated.
6.8 We also find that the Coordinate Bench of the Tribunal in Milan Agency v. ITO, ITA No. 5414/Mum/2024, after considering the substituted reassessment provisions and following the binding judgment of the Hon’ble Bombay High Court in Jet Airways (India) Ltd. (supra), held that where no addition is made on the issue for which the reassessment proceedings were initiated, the Assessing Officer lacks jurisdiction to make additions on any other issue. The relevant finding of the Tribunal is reproduced as under:-
“7. Before us, the ld. Counsel in respect of additional ground filed vehemently contended that no addition has been made on the issues raised in the reason provided in the notice issued u/s 148A(b) of the Act. He further made reliance on the decision of Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. (2011) 331 ITR 336 (Bombay). The ld. Counsel also filed paper book comprising copies of details and submission filed before the lower authorities. He submitted that as per accounting standard, the assessee was following an exclusive system and accordingly VAT collection and VAT liability and payment was accounted separately and was not formed part of P&L A/c and the lower authorities has not disputed the details and documentary evidences furnished.
8. On the other hand Id. DR supported the order of lower authorities.
9 Heard both the sides and perused the material on record. The case of the assessee was reopened on the basis of information from the CGST Authorities that M/s. Germanium Trading Pvt. Ltd. and M/s. Cannonball Trading Pvt. Ltd. have issued bogus invoices and the assessee has received such bogus invoices. The assessee was asked to submit the detail in respect of bogus invoices of Rs. 1,07,68,326/- received from the above entities and was also asked to show cause and explain by such bogus invoices of Rs. 1,07,68,328/- shall not be treated as unexplained money u/s 69 of the Act. However, the AO has not made any discussion verification and examination of this issue in the assessment order. On the other hand, the AO has made addition of Rs. 2,84,16,279/-on account of recalculation of the net profit on the basis of party wise sale amount of Rs. 36,24,13,765/- furnished by the assessee and purchase amount of Rs. 32,77,88,333/- shown n the trading account of the assesscc. It is noticed that without any reason the AO has ignored the corresponding party wise purchase amount of Rs. 34,89,13,119/- to the party wise sale and also not considered the sale amount of Rs. 33,24,60,256/- shown in the trading account. The AO has also not controverted the relevant material submitted during the course of assessment proceedings that the VAT paid on purchases as well as VAT collected on sales was separately accounted and not passed through P&L account. In respect of additional ground of appeal on the validity of order passed u/s 147 r.w.s. 144B of the Act, we have perused the the decision of Hon’ble Jurisdictional High Court in the case of Jet Airways (1) Ltd., 331 ITR 236 (Bombay) 2010 wherein held that effect of section 147 is that the AO has to assess or reassess such income that has escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings. Since in the case of the assessee the AO had not made addition on the issue of bogus invoices as alleged to be obtained from M/s. Cannonball Trading Pvt. Ltd. and M/s. Germanium Trading Pvt. Ltd. on the basis of which the case was reopened as escaped assessment therefore following the decision of Hon’ble Jurisdiction as discussed supra, the AO is not justified in making the other addition as discussed above in this order.”
6.9 Accordingly, respectfully following the binding decision of the Hon’ble jurisdictional High Court in CIT v. Jet Airways (India) Ltd. (2011) 331 ITR 236 (Bom.), whose ratio, in our considered opinion, continues to govern reassessment proceedings even under the substituted statutory regime, we hold that the reassessment framed in the present case is without jurisdiction and is liable to be quashed.”
8. The ratio laid down by the Coordinate Bench in the aforementioned decision squarely applies to the facts of the present appeals. No contrary decision has been brought to our notice by learned Departmental Representative. In view of the aforesaid, we have no hesitation in holding that the reopening of assessments u/s. 147 of the Act in the present appeals are invalid. Hence, we quash the impugned assessment orders. Consequently, the order of learned First Appellate Authority are set aside. Since, the appeals have been decided on the legal issue, the grounds raised on merits have become academic, hence, kept open. Accordingly, appeals are allowed.
9. Insofar as appeal relating to Assessment Year 2021-22, being ITA No. 3572/Mum/2026, is concerned, the assessee has raised a legal ground challenging the validity of the impugned assessment order. It is the case of the assessee that in terms of Section 147 read with Section 148 of the Act, assessment for years prior to the year of search are required to be completed under Section 143(3) read with Section 147 of the Act. Whereas, in the search year, it will be regular assessment under Section 143(3) of the Act. It is submitted, the Assessing Officer, without following the aforesaid statutory mandate, completed the assessment under Section 143(3) of the Act. In support of such contention, learned counsel relied upon the following decisions of the Coordinate Bench:
i. Rajesh Kumar Jain vs. DCIT, ITA No.4768/Mum/2026.
ii. Torque Pharmaceuticals (P.) Ltd. vs. DCIT [2026] 185 taxmann.com 925 (Chd. Trib).
10. Learned DR submitted, the assessment has been validly made.
11. We have considered rival submissions and perused the materials on record. Undisputedly, a search and seizure operation was conducted in the case of the assessee on 07.10.2021, falling in Financial Year 2021-22, corresponding to Assessment Year 2022-23. Whereas, the Assessing Officer has initiated assessment proceedings under Section 143(3) of the Act and completed under the said provision. A reading of the provisions contained in Section 148 of the Act and more particularly, Explanation-2, make it clear that while for the assessment year in which the search and seizure operation took place, the assessment is required to be completed under Section 143(3) of the Act, however, assessments for the preceding assessment years are required to be reopened under Section 147 of the Act. The aforesaid legal position gets further clarity in the Memorandum explaining the Finance Bill with reference to introduction of new provisions of assessments, reassessments or re-computation in cases where search and seizure operations under Section 132 of the Act were carried out after 31st March, 2021. The relevant part is extracted hereunder:
“i) The provisions of section 153A and section 153C, of the Act are proposed to be made applicable to only search initiated under section 132 of the Act or books of accounts, other documents or any assets requisitioned under section 132A of the Act, on or before 31st March 2021.
(ii) Assessments or reassessments or in re-computation in cases where search is initiated under section 132 or requisition is made under 132A, after 315 March 2021, shall be under the new procedure. (Emphasis by us)
(iii) Section 147 proposes to allow the Assessing Officer to assess or reassess or re-compute any income escaping assessment for any assessment year (called relevant assessment year).
(iii) Before such assessment or reassessment or re-computation, a notice is required to be issued under section 148 of the Act, which can be issued only when there is information with the Assessing officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year. Prior approval of specified authority is also required to be obtained before issuance of such notice by the Assessing Officer.”
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12. While dealing with an identical issue in case of Rajesh Kumar Jain vs. DCIT (Supra), the Coordinate Bench has held as under:
“7. We have heard the rival submissions and have carefully considered the material placed before us. Since the additional grounds challenge the very assumption of jurisdiction, it becomes necessary, before examining the validity of the course adopted by the Assessing Officer, to first ascertain the statutory regime which governed an assessment year preceding the year of search where the search under section 132 was initiated on 31.01.2023. This assumes significance because the law governing assessments consequent upon search underwent a fundamental legislative change with effect from 01.04.2021. Prior thereto, section 153A constituted a self-contained machinery for assessment in the case of a person searched under section 132. The provision opened with a non obstante clause overriding, inter alia, sections 139, 147, 148, 149, 151 and 153 and required the Assessing Officer, upon initiation of search, to issue notice calling for returns for the prescribed block of assessment years preceding the year of search and thereafter assess or reassess the total income of those years. However, the Finance Act, 2021 consciously marked the terminus of this regime for searches initiated after 31.03.2021. Section 153A, Rajesh Kumar Jain as amended, itself confined its operation to cases where search under section 132 was initiated, or requisition under section 132A was made, “on or before the 31st day of March, 2021.” Thus, for a search initiated on 31.01.2023, as in the present case, the Assessing Officer could not have resorted to the erstwhile machinery under section 153A. This is not merely an inference drawn from the amendment; the legislative material accompanying the Finance Act, 2021 makes it explicit that assessment or reassessment in cases where search or requisition was initiated or made on or after 01.04.2021 was brought within the new procedure governing income escaping assessment. The legislative change, therefore, did not leave a vacuum after the cessation of section 153A for post-31.03.2021 searches; it simultaneously relocated such assessments within the newly recast framework of sections 147 to 151. The subsequent legislative material also describes the Finance Act, 2021 as having restricted sections 153A and 153C to searches/requisitions initiated on or before 31.03.2021.
8. The starting point of the substituted regime is section 147. As substituted by the Finance Act, 2021 with effect from 01.04.2021, section 147 empowers the Assessing Officer, where income chargeable to tax has escaped assessment for any assessment year, subject to sections 148 to 153, to assess or reassess such income and also any other income Rajesh Kumar Jain chargeable to tax which has escaped assessment and comes to his notice subsequently in the course of proceedings. What is material for the present controversy is that the power under section 147 is expressly made subject to sections 148 to 153. The authority to assess escaped income and the statutory conditions governing the assumption and exercise of that authority thus operate together. Section 148, in turn, provides the jurisdictional mechanism by which proceedings under section 147 are set in motion. In its material part applicable to the statutory regime under consideration, it provided that before making assessment, reassessment or recomputation under section 147, and subject to section 148A, the Assessing Officer shall serve upon the assessee a notice requiring him to furnish a return for the relevant assessment year. The statutory command is therefore sequential: there must first exist the jurisdictional foundation contemplated by the reassessment provisions; the notice prescribed under section 148 must thereafter be issued in accordance with law; and the assessment or reassessment under section 147 follows upon valid assumption of such jurisdiction. A notice under section 148 is thus not an interchangeable procedural formality. It is the statutory instrument through which the jurisdiction contemplated by section 147 is invoked.
8.1 The significance of section 148 for a post-01.04.2021 search becomes even clearer from Explanation 2 thereto, which, insofar as relevant, provided:
“Explanation 2.–For the purposes of this section, where,–
(i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or
(ii) a survey is conducted under section 133A, other than under sub-section (2A) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or
(iii) the Assessing Officer is satisfied, with the prescribed prior approval, that money, bullion, jewellery or other valuable article or thing seized or requisitioned in the case of another person belongs to the assessee; or
(iv) the Assessing Officer is satisfied, with the prescribed prior approval, that books of account or documents seized or requisitioned in the case of another person pertain to, or information contained therein relates to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee…”
8.2. Thus, Parliament itself identified initiation of a search under section 132 on or after 01.04.2021 as a circumstance giving rise to the statutory deeming of information suggesting escapement of income. The provision is of considerable Rajesh Kumar Jain importance because it demonstrates the legislative bridge between a post-01.04.2021 search and the reassessment machinery. Under the earlier law, search itself activated section 153A. Under the substituted regime, section 153A ceased to apply to a search initiated after 31.03.2021 and Explanation 2 to section 148 brought the specified search circumstances within the jurisdictional architecture of reassessment. The Finance Act, 2021 Memorandum likewise explained that assessments/reassessments/recomputations in searches initiated after 31.03.2021 would fall under the new procedure.
9. At this stage, it is equally necessary to notice section 148A, because the architecture of the substituted law cannot be correctly understood by reading section 148 in isolation. Section 148A introduced a pre-notice enquiry and opportunity mechanism before issuance of notice under section 148. Broadly stated, it contemplated enquiry, if required, with prior approval; issuance of show-cause notice to the assessee; consideration of the assessee’s reply; and an order deciding whether it was a fit case for issuance of notice under section 148. However, the Legislature itself carved out specified cases from this pre-notice procedure. In the statutory regime relevant to the search before us, the proviso to section 148A excluded, inter alia, a case where a search was initiated under section 132 in the case of the assessee on or after Rajesh Kumar Jain 01.04.2021. Therefore, the legal consequence of a search in the assessee’s own case after 01.04.2021 was not that the reassessment regime became inapplicable; rather, the consequence was that the preliminary enquiry contemplated under section 148A was dispensed with in the specified search cases because the search itself supplied the statutory foundation contemplated by Explanation 2 to section 148. This distinction is material. The exception from section 148A cannot be read as an exception from section 148 itself. To do so would conflate two different stages of the statutory scheme. Section 148A dealt with the preliminary enquiry preceding the notice; section 148 was the provision for issuance of the notice through which proceedings under section 147 were initiated. Thus, where the Legislature intended to dispense with the pre- notice enquiry in search cases, it said so expressly; but the statutory framework did not, on that account, convert a preceding assessment year into an ordinary scrutiny assessment capable of being initiated solely under section 143(2). This distinction becomes particularly relevant in the present case because the assessee does not found his jurisdictional challenge upon non-compliance with section 148A; the challenge is more fundamental, namely that section 148 itself was never invoked.
10. The legislative scheme is further fortified by sections 149 and 151. Section 149 prescribes the limitation within which a Rajesh Kumar Jain notice under section 148 may be issued and, therefore, places a temporal boundary upon the jurisdiction to reopen an assessment. Section 151, in the statutory framework then applicable, identifies the “specified authority” whose approval is contemplated at the relevant stage of the reassessment proceedings. These provisions assume importance not because we are presently called upon to determine whether the limitation under section 149 had actually expired or whether a particular authority under section 151 did or did not grant approval in the assessee’s case. No such wider enquiry is necessary at this stage. Their relevance lies in demonstrating that Parliament did not confer an unstructured power to reopen years preceding a post- 01.04.2021 search. Once the assessment of such preceding year travels through the reassessment regime, the jurisdiction is circumscribed by the statutory conditions accompanying that regime, including the notice prescribed under section 148, limitation under section 149 and approval of the specified authority wherever statutorily required. Indeed, section 149 itself preserved the distinction between the old and new search regimes by providing separately for cases where notices under sections 153A/153C were required in relation to searches initiated on or before 31.03.2021. The legislative architecture, therefore, consistently recognises 31.03.2021/01.04.2021 as the dividing line between the Rajesh Kumar Jain erstwhile section 153A search-assessment mechanism and the substituted reassessment regime.
11. The statutory position was further rationalised by the Finance Act, 2022. Of particular relevance is the insertion, with effect from 01.04.2022, of section 148B, captioned “Prior approval for assessment, reassessment or recomputation in certain cases”. The provision, as applicable, reads:
“148B. No order of assessment or reassessment or recomputation under this Act shall be passed by an Assessing Officer below the rank of Joint Commissioner, in respect of an assessment year to which clause (i) or clause (ii) or clause (iii) or clause (iv) of Explanation 2 to section 148 apply except with the prior approval of the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director.”
11.1. The Memorandum explaining the Finance Bill, 2022 also stated that the proposed provision was intended to require prior approval for an assessment, reassessment or recomputation in an assessment year to which any of the four clauses of Explanation 2 to section 148 applied. This provision is important for two reasons. First, by expressly referring to each of the four clauses of Explanation 2 to section 148, section 148B reinforces that assessment years arising from the specified post-01.04.2021 search circumstances were being administered within the statutory framework built around section 148. Secondly, Parliament Rajesh Kumar Jain imposed an additional institutional safeguard at the stage of passing the assessment order where the Assessing Officer was below the rank specified therein. The safeguard under section 148B is conceptually distinct from the approval contemplated in relation to issuance of notice under section 148 read with section 151. One operates at the stage and in the manner contemplated for assumption/initiation of reassessment jurisdiction; section 148B operates at the stage of passing the eventual assessment, reassessment or recomputation order in the specified cases. The two cannot be collapsed into one another.
11.2. It is equally necessary to keep this distinction in view while examining the present assessment. As noticed earlier, the assessment order records that it was passed with prior approval of the Additional Commissioner of Income Tax, Central Range- I, Mumbai. We shall, therefore, not proceed on any assumption that the final order lacked every species of approval contemplated by the statute. The anterior question is different: whether the existence of an approval at the stage of passing the final order can substitute the statutory mode by which jurisdiction over the preceding assessment year was required to be assumed in the first place. That question shall be examined separately while applying the statutory scheme to the facts of the present case.
12. On a conjoint reading of the above provisions, the legislative progression becomes discernible. Until 31.03.2021, a search under section 132 attracted the special machinery contained in section 153A, which itself overrode the ordinary reassessment provisions. The Finance Act, 2021 drew a statutory line at that date: sections 153A and 153C continued for searches/requisitions initiated or made on or before 31.03.2021, whereas searches initiated thereafter were brought within the redesigned reassessment architecture. Section 147 supplied the substantive power to assess or reassess escaped income; section 148 prescribed the notice preceding such assessment or reassessment; Explanation 2 to section 148 statutorily treated the specified post-01.04.2021 search circumstances as information suggesting escapement of income; section 148A prescribed a preliminary enquiry but expressly dispensed with that preliminary stage in specified search cases; section 149 imposed the applicable limitation upon issuance of notice; section 151 supplied the approval architecture wherever attracted; and, from 01.04.2022, section 148B introduced a further safeguard before the passing of an assessment/reassessment/recomputation order by an Assessing Officer below the prescribed rank in cases falling within Explanation 2 to section 148. The official explanatory material accompanying the Finance Act, 2021 described the change in the same terms, and the subsequent explanatory material records that after the Finance Act, 2021, Rajesh Kumar Jain assessment or reassessment in search cases for relevant years prior to the search year was made under section 147.
12.1. What emerges from this statutory transition is that the Legislature did not merely change the nomenclature of a search assessment. It changed the jurisdictional route through which an assessment of the preceding years consequent upon a post- 01.04.2021 search was to be undertaken. The conditions embedded in that route cannot be treated as dispensable merely because the assessee had already filed a return under section 139 or because such return was otherwise capable of being selected for scrutiny. Whether, notwithstanding this statutory scheme, the Assessing Officer could validly select the assessee’s return for Assessment Year 2022-23 under the compulsory scrutiny category, issue only a notice under section 143(2), and complete the assessment under section 143(3), is the precise question which we now proceed to examine.
13. Having delineated the statutory framework, we now revert to the facts before us. The chronology assumes significance. The assessee had already filed his return of income for Assessment Year 2022-23 on 29.12.2022 declaring total income of Rs.2,40,15,770/-. Thereafter, search under section 132 was initiated on 31.01.2023. The search thus fell in the previous year relevant to Assessment Year 2023-24, whereas Rajesh Kumar Jain the year before us, namely Assessment Year 2022-23, is a year preceding the assessment year relevant to the previous year in which search was initiated. The Assessing Officer did not invoke section 147 and admittedly no notice under section 148 was issued. Instead, as the assessment order itself records, the return was selected for complete scrutiny under the “compulsory category” by placing reliance upon para 2.2 of the revised guidelines dated 26.09.2022 applicable to cases in which search and seizure action/requisition under sections 132/132A had been conducted on or after 01.04.2021. Notice under section 143(2) dated 28.06.2023 was thereafter issued and the proceedings culminated in the order dated 26.06.2024 passed specifically under section 143(3). These are not disputed facts; indeed, they emanate from the assessment order itself. The question, therefore, is not whether the Assessing Officer possessed information arising from the search, nor whether the case could otherwise attract examination by the Department. The question is anterior and jurisdictional: having regard to the statutory regime applicable to a search initiated on 31.01.2023, could jurisdiction for Assessment Year 2022-23 be assumed merely by selecting the existing return for compulsory scrutiny and issuing notice under section 143(2), without invoking section 147 and issuing notice under section 148?
14. In our considered opinion, the answer has to be in the negative. The distinction between selection of a return for scrutiny and assumption of jurisdiction consequent upon a search is fundamental and cannot be effaced. Section 143(2) operates upon a return furnished under section 139 or in response to a notice under section 142(1) and enables the Assessing Officer, where he considers it necessary or expedient to ensure that the assessee has not understated income, computed excessive loss or underpaid tax, to require the assessee to attend and produce evidence in support of the return. It is thus part of the ordinary assessment machinery. Sections 147 and 148, on the other hand, operate upon the statutory premise that income chargeable to tax has escaped assessment and prescribe the jurisdictional mechanism for bringing such escaped income to assessment or reassessment. In a case falling within Explanation 2(i) to section 148, Parliament itself has attached a specific legal consequence to initiation of search under section 132 on or after 01.04.2021: the Assessing Officer “shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment.” Once the statute itself identifies a post- 01.04.2021 search as the event giving rise to deemed information of escapement and places such event within section 148, it would be incongruous to hold that, for an assessment year preceding the search year, the Assessing Officer may disregard that statutory route altogether and Rajesh Kumar Jain achieve the same consequence merely by selecting the existing return for scrutiny under section 143(2). Such an interpretation would render the deliberate placement of post- 01.04.2021 searches within Explanation 2 to section 148 substantially otiose.
15. There is another facet which fortifies this conclusion. Under the pre-amendment regime, Parliament had enacted section 153A as a special machinery dealing with assessment consequent upon search. That provision expressly displaced, inter alia, sections 147 and 148 and prescribed its own jurisdictional route. With effect from 01.04.2021, Parliament consciously restricted section 153A to searches initiated on or before 31.03.2021 and, simultaneously, incorporated searches initiated on or after 01.04.2021 into the newly substituted section 148 through Explanation 2. The significance of this legislative transition cannot be diluted by treating it as a mere administrative rearrangement. If, despite the withdrawal of the section 153A regime for searches after 31.03.2021 and the simultaneous incorporation of such searches into Explanation 2 to section 148, the Assessing Officer could nevertheless assess the preceding years simply by issuing an ordinary notice under section 143(2), the legislative migration from one special jurisdictional mechanism to another would lose much of its content. The statutory provisions must be read so as to give meaningful Rajesh Kumar Jain operation to the change consciously brought about by Parliament. The new regime did not leave the Assessing Officer without authority in consequence of a post-01.04.2021 search; it identified the source and manner of exercising that authority differently. Therefore, the question is not whether income detected pursuant to such search could be brought to tax it undoubtedly could, subject to law but through which jurisdictional channel Parliament authorised it to be brought to tax.
16. This also answers the reliance placed in the assessment order upon the revised guidelines dated 26.09.2022 for compulsory selection of search cases. There can be no quarrel with the proposition that administrative guidelines may prescribe categories of returns which are required to be taken up for scrutiny and may regulate the internal process of selection. But such guidelines operate within the four corners of the statute. They cannot create a jurisdiction which the Act requires to be assumed in another manner; nor can an administrative prescription dispense with a statutory condition governing assumption of jurisdiction. There is a conceptual difference between a guideline which tells the Department which case should be examined and a statutory provision which determines the legal authority and manner in which that examination can be undertaken. The former regulates administrative selection; the latter constitutes the Rajesh Kumar Jain source and conditions of jurisdiction. The assessment order records that the case was selected for complete scrutiny under the compulsory category precisely because search had been conducted after 01.04.2021. But the very event which occasioned such compulsory selection namely the search dated 31.01.2023 is an event for which Parliament had already prescribed a specific consequence in Explanation 2 to section 148. An administrative guideline cannot be construed in a manner which permits that statutory consequence to be bypassed. If the guidelines are capable of operating consistently with the Act, they must necessarily be so read; they cannot become an alternative source of jurisdiction.
17. We also find substance in the assessee’s contention that the defect cannot be regarded as one merely of form or nomenclature. Had the Assessing Officer invoked section 147 by issuing a valid notice under section 148 and thereafter, upon completion of proceedings, merely employed an inaccurate description or omitted reference to one of the enabling provisions in the caption of the final order, an entirely different question might have arisen. That is not the factual situation before us. Here, the jurisdictional proceeding contemplated under section 148 was never initiated at all. No notice under section 148 was issued; there was consequently no return in response thereto; and the Assessing Officer proceeded throughout on the footing that the assessee’s Rajesh Kumar Jain existing return could be subjected to ordinary compulsory scrutiny under section 143(2). The distinction is substantive because the reassessment framework carries with it statutory conditions concerning initiation, limitation and approval. Section 149 places the exercise of jurisdiction under section 148 within legislatively prescribed temporal boundaries, while section 151 identifies the specified authority for the approval contemplated by the reassessment framework as applicable. Thus, issuance of notice under section 148 is not a dispensable ceremonial step which can be replaced by a notice under section 143(2). The two notices perform different statutory functions. A notice under section 143(2) cannot perform the office of a notice under section 148, just as participation in scrutiny proceedings cannot retrospectively supply the jurisdiction which the statute required to exist at their inception.
18. The Revenue’s reliance upon the approval of the Additional Commissioner recorded in the assessment order does not, in our view, answer this fundamental defect. We have already noticed that paragraph 9 of the assessment order records that the order was passed with prior approval of the Additional Commissioner of Income Tax, Central Range-I, Mumbai. We, therefore, do not rest our conclusion upon an assumption that no approval of any nature was obtained before passing the final order. Equally, however, the existence Rajesh Kumar Jain of such approval cannot be transposed backwards so as to supply an altogether absent assumption of jurisdiction under sections 147 and 148. Section 148B, as applicable from 01.04.2022, operates at the stage of passing the order in an assessment year falling within clauses (i) to (iv) of Explanation 2 to section 148 where the Assessing Officer is below the stipulated rank. The approval mechanism governing the initiation/issuance of notice under the reassessment provisions and the safeguard contained in section 148B operate at distinct stages and serve distinct statutory purposes. Compliance at a later stage cannot dispense with a jurisdictional requirement which ought to have been fulfilled at the threshold. Put differently, approval validates an act only within the jurisdiction which the statute otherwise permits to be exercised; approval by itself is not the source of that jurisdiction. Therefore, even assuming that the approval recorded in the assessment order satisfied the requirement operating at the stage of passing the final order, it cannot cure the anterior absence of proceedings initiated under section 148.
19. The aforesaid construction also finds support from the decisions of the Coordinate Benches relied upon by the learned counsel. In Pilot Industries Ltd. v. DCIT, ITA Nos.6124 & 6125/Del/2025, the Delhi Bench was confronted with assessments of years preceding the assessment year Rajesh Kumar Jain relevant to the search and examined the effect of the amended provisions governing post-01.04.2021 searches. After noticing Explanation 2 to section 148 and the statutory regime comprising sections 148, 148B and 151, the Coordinate Bench held that assessments framed directly under section 143(3) for the preceding years, without following the prescribed reassessment procedure, could not be sustained. The relevant conclusion reproduced in the assessee’s written submissions records that the assessments under section 143(3) were held to be bad in law because the assessment ought to have proceeded under the special statutory provisions governing section 148 and the prescribed approval mechanism. The assessee has also relied upon Deepak Agarwal v. DCIT, Montage Enterprises Pvt. Ltd. v. DCIT/ACIT, Malbros International Pvt. Ltd. v. DCIT, Jamna Dass Nikkamal Jain Saraf Pvt. Ltd. v. DCIT and Homelife Buildcon Pvt. Ltd. v. DCIT, which are stated to have taken a similar view and were also noticed in Pilot Industries. We do not consider it necessary to reproduce extensive passages from each of these decisions, for the conclusion which we have reached flows principally from the statutory scheme itself. The decisions relied upon reinforce that construction rather than constitute its foundation.
20. At this juncture, it is necessary to clarify the precise ambit of our conclusion. We are not laying down an abstract Rajesh Kumar Jain proposition that the expression “section 143(3)” can under no circumstances find place in an order ultimately made pursuant to reassessment proceedings, nor is the validity of an assessment to be determined merely from the label placed upon the final order. The infirmity in the present case lies much deeper. There was no invocation of section 147 and no notice under section 148 at all. The assessment was conceived, initiated and completed as an ordinary scrutiny assessment on the premise that compulsory selection of the existing return under the administrative guidelines was sufficient to confer jurisdiction. It is this course which cannot be reconciled with the statutory scheme governing the assessment of a preceding year consequent upon a search initiated after 31.03.2021. Likewise, we are not holding that proceedings were invalid because the Assessing Officer failed to undertake the preliminary enquiry under section 148A. As explained earlier, the statutory regime itself carved out specified search cases from that preliminary procedure. The jurisdictional defect is the failure to invoke section 148 itself, not the absence of an enquiry which the Legislature had otherwise dispensed with in the relevant category of search cases. This distinction is material because it confines our decision to the precise statutory infirmity arising on the undisputed facts before us.
21. Viewed cumulatively, therefore, the statutory position admits of little ambiguity in the facts of the present case. The search was initiated on 31.01.2023; section 153A was no longer the governing provision for such a search; Assessment Year 2022- 23 preceded the assessment year relevant to the previous year in which search was initiated; Explanation 2(i) to section 148 expressly treated such post-01.04.2021 search as giving rise to deemed information suggesting escapement of income; and the Act provided the jurisdictional machinery through sections 147 and 148, subject to the attendant statutory requirements applicable to that machinery. Yet the Assessing Officer did not invoke that jurisdiction at all. He instead proceeded from an administrative selection under the compulsory-scrutiny guidelines directly to a notice under section 143(2) and ultimately to an assessment under section 143(3). What has been omitted, therefore, is not an ancillary procedural formality capable of being viewed independently of the jurisdiction exercised. The statutory gateway itself was never entered. Once Parliament has prescribed the manner in which jurisdiction consequent upon a specified event is to be assumed, the authority exercising that jurisdiction must act within that prescription. Administrative convenience, participation by the assessee, or approval obtained at a subsequent stage cannot substitute the jurisdictional act which the statute required at the inception. We accordingly hold that the assessment proceedings for Assessment Year Rajesh Kumar Jain 2022-23, having been initiated without issuance of notice under section 148 and by resorting directly to section 143(2), cannot be sustained in law.
22. There is yet another reason why the aforesaid conclusion is important in the context of the statutory safeguards built into the amended regime. To treat the course adopted by the Assessing Officer as permissible would mean that, whenever a return for a preceding year happens to be available for scrutiny, the Revenue could choose between two parallel jurisdictional routes after a search–one under sections 147 and 148 carrying the conditions, limitation and approval architecture enacted by Parliament, and another through ordinary scrutiny under section 143(2) merely because the return was capable of selection. Nothing in the statutory scheme confers such an election. An interpretation producing such a result would make compliance with the reassessment safeguards dependent upon the fortuitous circumstance whether a return remained amenable to scrutiny and would permit an administrative mode of selection to determine whether statutory safeguards enacted specifically in the context of post-01.04.2021 searches are attracted. Such a construction cannot be accepted. The provisions have to operate harmoniously: section 143 continues to govern ordinary assessment of returns within its field, whereas sections 147 and 148, read with Explanation 2 and the allied Rajesh Kumar Jain provisions, govern assumption of jurisdiction over escaped income in the circumstances legislatively identified therein. In the peculiar and undisputed facts before us, the Department itself traces the selection of Assessment Year 2022-23 to the search conducted on 31.01.2023. Once that is so, the jurisdictional consequence statutorily attached to that search cannot be severed from the very assessment sought to be made pursuant thereto. The assessment framed by bypassing that statutory route is therefore legally unsustainable.
23. Before parting with the jurisdictional issue, we may briefly deal with the contention that the assessee had participated in the assessment proceedings pursuant to the notice issued under section 143(2) and had furnished the details called for by the Assessing Officer. In our opinion, such participation does not alter the conclusion reached hereinabove. The objection before us is not founded upon any irregularity in service of a notice which the Assessing Officer was otherwise competent to issue in exercise of the jurisdiction validly assumed by him. The objection goes to the anterior question whether the jurisdiction which was required to be assumed under the statutory framework governing a post-01.04.2021 search was ever assumed at all. Once the statute prescribed recourse to sections 147 and 148 for the assessment of the preceding year in the circumstances contemplated by Explanation 2 to section 148, participation in proceedings Rajesh Kumar Jain initiated under a different statutory route cannot supply the jurisdiction which was never assumed in the manner contemplated by law. Nor can the fact that the assessee had originally filed a return under section 139 enlarge the scope of section 143(2) so as to make it a substitute for the jurisdictional notice contemplated under section 148. The two provisions operate at different stages and for different statutory purposes. What is material here is that the very foundation upon which Assessment Year 2022-23 was taken up by the Assessing Officer was the search conducted on 31.01.2023; indeed, the assessment order itself records that the case was selected under the compulsory category because search and seizure action had been conducted after 01.04.2021. The Revenue cannot, therefore, draw jurisdictional consequences from the search for selecting and assessing the preceding year, and at the same time detach that assessment from the statutory regime which Parliament had specifically enacted for such post- 01.04.2021 searches.
24. We accordingly hold, on the peculiar and undisputed facts of the present case, that for Assessment Year 2022-23, which precedes the assessment year relevant to the previous year in which search under section 132 was initiated on 31.01.2023, the Assessing Officer could not have assumed jurisdiction merely by selecting the return for compulsory scrutiny and issuing notice under section 143(2). The legislative scheme Rajesh Kumar Jain brought into force from 01.04.2021 had confined the erstwhile section 153A regime to searches initiated on or before 31.03.2021 and had brought searches initiated thereafter within the redesigned reassessment framework. Explanation 2(i) to section 148 expressly treated initiation of search under section 132 on or after 01.04.2021 as a circumstance in which the Assessing Officer was deemed to possess information suggesting that income chargeable to tax had escaped assessment. The jurisdiction for the preceding year was, therefore, required to be assumed under sections 147 and 148, subject to the statutory conditions and safeguards forming part of that regime. Admittedly, no notice under section 148 was issued in the present case. The assessment was initiated only through notice under section 143(2) and was ultimately completed under section 143(3). The prior approval of the Additional Commissioner recorded in the final assessment order does not cure this anterior defect, because an approval obtained at the stage of passing an order cannot retrospectively create a jurisdiction which was required to be assumed at the inception of the proceedings. Equally, the compulsory-scrutiny guidelines could regulate administrative selection of cases, but could neither supplant nor dispense with the jurisdictional machinery enacted by Parliament. We, therefore, hold that the assumption of jurisdiction in the manner adopted by the Assessing Officer was not in accordance with the statutory Rajesh Kumar Jain scheme applicable to the search in question and, consequently, the assessment order dated 26.06.2024 cannot be sustained.”
13. The ratio laid down in the aforesaid decision squarely applies to the facts of the present appeal. Even, the other decision cited by learned counsel for the assessee expresses similar view.
14 Learned DR did not bring to our notice any contrary decision. Thus, respectfully following the decisions of the Coordinate Bench, we hold that the impugned assessment order, having not been passed in accordance with the statutory mandate, is invalid. Hence, we quash it. Consequently, the order of learned First Appellate Authority is set aside. In view of our decision on the legal issue, grounds raised on merits having become academic do not require adjudication.
15. In the result, appeal is allowed.
16 To sum up, all the appeals of the assessee are allowed.
Order pronounced in the open court on 25/09/2026.
