Hemendra Agarwal Vs DCIT (ITAT Agra)
A Time-Barred Reassessment Cannot Be Revived Through Section 263: ITAT Quashes Revision
An Invalid Foundation Defeats the Revision
The Agra Tribunal quashed a revision order under Section 263 after finding that the reassessment sought to be revised was founded on a time-barred Section 148 notice.
Applying the Supreme Court’s decision in Union of India v. Rajeev Bansal, 469 ITR 46, the Tribunal held that the notice had been issued after expiry of the surviving limitation period. The consequential reassessment was therefore invalid and could not provide a lawful foundation for revision.
The ruling also recognises an important procedural principle: the jurisdictional validity of the underlying assessment may be challenged in an appeal against the subsequent Section 263 order. The assessee was not confined to arguing whether the AO had adequately examined the cash deposits.
Cash Deposits Were Accepted in Reassessment
The proceedings concerned substantial transactions in the assessee’s savings account with United Bank of India. The information initially relied upon referred to cash deposits of ₹12,26,58,051, accompanied by substantial withdrawals.
During reassessment, the assessee explained that the actual cash deposits were ₹2,00,30,000. He stated that unsecured loans had been obtained and cash withdrawn for a proposed purpose. Since that purpose did not materialise, the cash was redeposited and the loans repaid within the same financial year.
In support, the assessee furnished bank statements, a cash ledger, details of cash receipts and deposits, computation of income and written submissions.
The AO accepted the explanation and completed reassessment on 2 May 2023, without making an addition concerning the deposits.
PCIT Directed Further Enquiry
The PCIT subsequently considered the reassessment erroneous and prejudicial to the Revenue because the AO had not undertaken the enquiries considered necessary concerning the bank deposits.
By an order dated 27 February 2026, the PCIT cancelled the reassessment and directed the AO to pass a fresh order after giving the assessee an opportunity of hearing.
The assessee challenged the revision on several grounds. These included the adequacy of the AO’s examination, the absence of established prejudice to the Revenue, the allegedly inflated transaction figures and the validity of reopening itself.
The Tribunal first examined Ground No. 9, which challenged the Section 263 proceedings on the basis that the underlying reassessment notice was issued beyond limitation.
The Crucial Dates and the Surviving Period
The original notice under the old Section 148 regime was issued on 16 June 2021, during the period covered by the tax-law relaxation legislation, commonly referred to as TOLA.
Following Union of India v. Ashish Agarwal, a notice under Section 148A(b) was issued on 1 June 2022. The assessee submitted his response on 14 June 2022.
The AO thereafter passed the Section 148A(d) order and issued the fresh Section 148 notice on 29 July 2022.
The Tribunal’s computation identified 14 days of surviving time, being the balance between the original notice dated 16 June 2021 and 30 June 2021. Applying that balance from receipt of the assessee’s response, the Tribunal treated 28 June 2022 as the last permissible date.
The notice issued on 29 July 2022 consequently fell outside that period.
Rajeev Bansal Governed the Limitation Exercise
The Tribunal relied on the principles explained in Rajeev Bansal concerning notices affected by the legal fiction created in Ashish Agarwal.
Under that approach, the relevant excluded periods stop the limitation clock. After receipt of the assessee’s response, the AO must complete the required steps and issue the new-regime Section 148 notice within the surviving time available.
The Tribunal also followed its earlier decision in Sub Major Sub Bhadauria v. ITO, ITA No. 469/Agr/2026, dated 12 August 2026, involving a similar limitation issue.
On the dates before it, the Tribunal held that the Section 148 notice and the consequential reassessment were bad in law.
Jurisdiction Could Be Tested in the Revision Appeal
The next question was whether that invalidity could be examined while deciding the Section 263 appeal.
The Tribunal followed coordinate-bench reasoning that an invalid primary proceeding cannot support valid collateral proceedings. The underlying assessment’s jurisdictional foundation could therefore be tested to determine whether revision had been validly initiated.
The authorities discussed in that reasoning included Kiran Singh v. Chaman Paswan and P. V. Doshi v. CIT, 113 ITR 22 (Gujarat), emphasising that a fundamental absence of jurisdiction cannot be cured merely by consent, waiver or procedural finality.
Accordingly, the Tribunal held that the PCIT could not revise the non est reassessment. It quashed the Section 263 order, allowed Ground No. 9 and left the remaining grounds open as academic.
Author’s Comments
The decision provides a useful defence where revision seeks to reopen an assessment resting on an invalid jurisdictional foundation. Before debating the adequacy of enquiry, practitioners should verify whether the assessment itself was lawfully initiated.
For TOLA-related cases, the original notice date, supply of material, response date and subsequent notice date require careful examination. The surviving period must be calculated from the particular chronology.
The result here was quashing of revision on jurisdictional grounds. The Tribunal did not finally adjudicate the source of the cash deposits or whether the AO’s enquiry was otherwise sufficient. Section 263 could not supply a fresh opportunity to assess where the reassessment foundation had already failed.
Cases Discussed
- Union of India & Ors. v. Rajeev Bansal, 469 ITR 46 (SC)
- Union of India v. Ashish Agarwal, (2023) 1 SCC 617
- Sub Major Sub Bhadauria v. ITO, Ward 1(1)(2), Agra, ITA No. 469/Agr/2026, order dated 12.08.2026
- Ram Balram Buildhome Vs. ITO & Anr., 445 ITR 1 (Delhi)
- Westlife Development Ltd. v. PCIT-5, Mumbai, [2017] 88 taxmann.com 439 (Mumbai)
- Kiran Singh & Ors. v. Chaman Paswan & Ors., [1955] 1 SCR 117
- Sushil Kumar Mehta v. Gobind Ram Bohra, (1990) 1 SCC 193
- Indian Bank v. Manual Govindji Khona, 2015 (3) SCC 712
- P. V. Doshi v. CIT, 113 ITR 22 (Gujarat)
- Indian Farmers Fertilizers Co-operative Ltd. v. CIT, 105 ITD 33 (Delhi)
- Dhiraj Suri v. ACIT, 98 ITD 87 (Delhi)
- Inventors Industrial Corporation Ltd. v. CIT, 194 ITR 548 (Bombay)
- Krishna Kumar Saraf v. CIT, ITA No. 4562/Del/2011, order dated 24.09.2015
- Steel Strips Ltd. (ITAT Chandigarh)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AGRA
This appeal is directed against the impugned order dated 27.02.2026 passed in Revision No PCIT, Agra-1/Revision-263/100000977595/2026 by the Ld. Pr. Commissioner of Income Tax, Agra-1 u/s. 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2014-15, wherein ld. PCIT cancelled (set aside) the assessment order passed u/s 147 r.w.s 144 of the Act dated 02.05.2023 with the directions to the AO to pass fresh assessment order.
2. Brief facts of the case: In this case the Ld. PCIT passed an order u/s 263 of the Act setting aside the assessment order passed u/s 147 r.w.s 144 of the Act dated 02.05.2023. The assessment order passed u/s 147 r.w.s 144 of the Act dated 02.05.2023 was in consequence to the reopening notice u/s 148 of the Act dated 29.07.2022 for verification of cash deposits made in savings bank account number 0273010118910 opened by the assessee in United Bank of India amounting to Rs. 12,26,58,051/- and large amount of cash withdrawal from the said bank account. During the course of assessment proceedings, the assessee furnished reply on 25.04.2023 stating that total cash deposits during the year was Rs. 2,00,30,000/- which was sourced out of cash withdrawal from bank by taking unsecured loans for some purposes which was not fulfilled and therefore the same was redeposited in the aforesaid bank account. The AO after considering the explanation of the assessee about the cash deposits of Rs. 2,00,30,000/- accepted the explanation of the assessee about the cash deposits of Rs. 2,00,30,000/-. In this regard, the relevant findings of the AO in the assessment order are reproduced as under:
“3.1 Complete description of issues (issue wise) The assessee filed ITR for AY 2014-15 declaring total income of Rs.24,33,620/-. As per information received from Insight Portal, it was observed that the assessee has opened a Saving Account with the United Bank of India, bearing A/c No.0273010118910 and has frequently deposited a substantial cash amounting to Rs.12,26,58,051/- and at the same time, large amount of cash was being withdrawn from this account. Movement of high value cash in this account is suspicious and remained unexplained in the hands of the assessee. Therefore, the amount of Rs.12,26,58,051/- should be considered as unexplained income.
3.2 Synopsis of all submissions of the assessee relating to the issue and indicating the dates of submission. The assessee submitted details as called for vide notice u/s 142(1) of the Act as per the table supra.
3.3 Summary of information/evidence collected which proposed to be used against it (attach documents if required). No such information.
3.4 Reasons for inference drawn that no variation is required on this issue. The assessee in compliance to the notice furnished his reply on 25-04-2023 and stated that the total Cash deposited during the year was Rs.2,00,30,000/-. The assessee further stated, “he has withdrawn cash from bank by taking unsecured loans from various companies for the fulfillment of some purpose however the same was not fulfilled and therefore the assessee had deposited the same to the bank A/c and repaid the loan in the same financial year. All the cash deposits have been made from disclosed sources.”
In support of his claim the assessee furnished copies of all Bank Statement, Cash Ledger, Cash Receipt & Deposit into the Bank, computation of income and written submission.
Therefore, in the light of the discussion and reasoning provided in the preceding paras, the genuineness of claim, for which the case was reopened, by the assessee is found to be satisfactory and accordingly on the basis of material available on records, the submissions explanation of the assessee on the issue(s) is/ are accepted.”
2.1 Thereafter, the Ld. PCIT cancelled the said assessment order and set aside with directions to the AO to pass order accordingly after providing due opportunity being heard to the assessee. The relevant extracts of the order of the Ld. PCIT are reproduced as under:
“8. Therefore, in view of the above facts and circumstances, reply and documents filed by the assessee and after examining the material available on record, it is held that the order dated 02.05.2022 passed under section 147 read with sections 144 & 144B of the I.T. Act, 1961 by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue and has been issued without making enquiries which should have been made by the AO in respect of issue of cash deposits in the bank account, as discussed & mentioned in the foregoing paras of this order. Therefore, the said order dated 02.05.2023 passed u/s.147 r.w.s. 144/144B of the Act by the Assessing Officer is hereby Cancelled (Set Aside) with the directions to the Assessing Officer to pass order accordingly, after providing due opportunity of being heard to the assessee.”
3. Aggrieved with the said order the assessee has filed an appeal before us on the following grounds of appeal:
“Grounds of Appeal
1. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax erred in passing the order dated 27.02.2026 under Section 263 of the Income Tax Act, 1961, setting aside the reassessment order, without appreciating that the conditions precedent for exercise of revisionary jurisdiction under Section 263 were wholly absent in the facts of the present case, and as such the impugned order under Section 263 is bad in law, without jurisdiction, and is liable to be quashed.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT erred in passing the impugned order under Section 263 without appreciating that the twin conditions precedent to the exercise of revisionary jurisdiction namely, that the order of the Assessing Officer must be
(1) erroneous and
(ii) prejudicial to the interests of the Revenue were not cumulatively satisfied in the present case, and the absence of either condition is fatal to the exercise of jurisdiction under Section 263.
3. Without prejudice to the above, the Ld. CIT erred in not appreciating that the Assessing Officer in the reassessment proceedings had, after due examination, found that the cash deposits of Rs. 2,00,30,000/- were duly explained and the source was established to the satisfaction of the AO, thereby making no addition, such a finding is a lawful judicial outcome and cannot, in itself, render the order “erroneous” within the meaning of Section 263.
4. Without prejudice to the above, the Ld. CIT erred in not appreciating that an order cannot be said to be “erroneous” merely because the CIT holds a different view or disagrees with the conclusion of the Assessing Officer.
5. Without prejudice to the above, the Ld. CIT further erred in not establishing nor recording any independent finding, as to how precisely the reassessment order was “prejudicial to the interests of the Revenue,” it being insufficient to merely assert that no enquiry was made, without demonstrating actual or definite revenue loss.
6. On the facts and in the circumstances of the case and in law, the Ld. CIT erred in invoking Explanation 2(a) to Section 263(1) treating the reassessment order as “deemed erroneous” on the ground that the AO passed the order “without making inquiries or verifications which should have been made”, without appreciating that:-
(a) Explanation 2 does not confer unfettered revisionary powers on the CIT and does not override the requirement of establishing both erroneousness and prejudice in the specific facts;
(b) The cash deposits had in fact been examined and verified in the original scrutiny assessment, and no fresh inquiry from the bank was necessitated given this prior examination;
(c) Explanation 2(a) cannot be pressed into service where the AO did conduct an inquiry, even if the CIT considers such inquiry insufficient as “inadequacy of inquiry” falls outside the scope of Explanation 2;
(d) The Assessing Officer’s decision not to conduct a redundant bank inquiry on a deposit already verified in scrutiny was a legitimate exercise of judgment, not an omission attracting Explanation 2. 7. Without prejudice to the above, the Ld. CIT erred in invoking Section 263 solely on the ground that the Assessing Officer “did not make third party verifications” without appreciating that:-
(a) The deposit in question was only Rs. 2,00,30,000/- which had already been enquired into and accepted in the original scrutiny assessment;
(b) There existed no new or fresh material before the AO during reassessment that warranted fresh bank-level verification;
(c) The Assessing Officer had exercised his discretion not to direct further bank enquiry after reviewing all material which represents a plausible view and not an erroneous one.
8. Without prejudice to the above, the Ld. CIT further erred in setting aside an assessment without:-
(a) Recording an independent prima facie finding of erroneousness based on his own inquiry or examination of the record;
(b) Specifying the precise nature of the error and quantifying the consequential prejudice to Revenue;
(c) Forming an objective satisfaction, backed by reasons, on both twin conditions under Section 263 before exercising jurisdiction.
9. On the facts and in the circumstances of the case and in law, the Ld. CIT erred in exercising jurisdiction under Section 263 over the reassessment order without appreciating that the very notice under Section 148 upon which the reassessment was founded was issued after the expiry of the surviving period prescribed under the Income Tax Act read with TOLA, as authoritatively determined by the Hon’ble Supreme Court of India in its Constitution Bench judgment in Union of India & Ors. v. Rajeev Bansal [469 ITR 46 (SC) and the reassessment proceedings and the consequential Section 263 order are accordingly void ab initio.
10. On the facts and in the circumstances of the case and in law, the Ld. CIT erred in exercising jurisdiction under Section 263 over the reassessment order without appreciating that the very foundation of the reassessment, the notice issued under Section 148 of the Act was vitiated by a factually incorrect and grossly inflated figure of alleged escaped income.
11. Without prejudice to the above, the Ld. CIT further erred in not appreciating that the notice under Section 148 had been issued alleging that income of Rs. 10,26,28,051/- had escaped assessment on account of cash deposits in the bank account of the Appellant, whereas in fact, the actual cash deposits in the said bank account were only Rs. 2,00,30,000/-, and no cash deposit of Rs. 10,26,28,051/-existed at all.
12. Without prejudice to the above, the L d. CIT further erred in not appreciating that the “reason to believe” formed by the Assessing Officer u/s 147 was based on incorrect, unverified, and factually false information regarding the quantum of cash deposits, rendering the entire reason to believe a nullity in law, since the AO formed his belief without corroborating the alleged deposit figures with actual bank data.
13. Without prejudice to the above, the Ld. CIT further erred in not appreciating that a reassessment proceeding premised on a wholly incorrect and inflated figure of alleged escaped income is void ab initio, and the consequential reassessment order resulting therefrom cannot be subjected to revision under Section 263, as any order founded on a void and non-est foundation is equally void.
14. On the facts and in the circumstances of the case and in law, the Ld. CIT erred in not appreciating that in the original reassessment proceedings, the Assessing Officer had no tangible material establishing that the cash deposit of Rs. 10,26,28,051/- (or any part thereof) represented income from undisclosed sources that had escaped assessment, mere information regarding cash deposits, without more, does not constitute tangible material sufficient to form a valid “reason to believe” of escaped income.
15. Without prejudice to the above, the Ld. CIT erred in not appreciating that the link between the information relied upon by the AO (which itself was factually incorrect at Rs. 10,26,28,051/-) and the alleged escaped income was illusory and non-existent, and a “reason to believe” cannot be founded on no material or false material, and the subsequent reassessment order was consequently void, leaving nothing for Section 263 to operate upon.
16. On the facts and in the circumstances of the case and in law, the Ld. CIT erred in exercising jurisdiction under Section 263 over the reassessment order without appreciating that the reassessment proceedings under Section 147/148 were themselves bad in law, being an impermissible change of opinion on a matter that had been duly examined and decided in the original scrutiny assessment completed under Section 143(3) of the Act.
17. Without prejudice to the above, the Ld. CIT erred in not appreciating that the cash deposit of Rs. 2,00,30,000/- (the actual deposit) had been examined and enquired into during the original scrutiny assessment under Section 143(3), and after due consideration, no addition had been made by the Assessing Officer, thereby conclusively settling the issue in the Appellant’s favour.
18. Without prejudice to the above, where the reassessment itself was bad in law, the order resulting therefrom cannot be treated as an “order” susceptible to revision under Section 263, and the Ld. CIT lacked jurisdiction to revise a non-est or void order.
19. Because the appellant craves leave to add amend or change any ground or grounds of appeal at the time of hearing.”
4. At the outset the Ld. AR referring to ground 9 of the appeal submitted that the order passed u/s 263 of the Act was void ab initio since it was passed against the assessment order u/s 147 and 143(3) r.w.s 144 of the Act dated 02.05.2023 which was bad in law in view of the decision of the Hon’ble Supreme Court in the case of Union of India & Ors. v. Rajeev Bansal [469 ITR 46 (SC). In this regard, ground 9 of the appeal is reproduced as under:
“9. On the facts and in the circumstances of the case and in law, the Ld. CIT erred in exercising jurisdiction under Section 263 over the reassessment order without appreciating that the very notice under Section 148 upon which the reassessment was founded was issued after the expiry of the surviving period prescribed under the Income Tax Act read with TOLA, as authoritatively determined by the Hon’ble Supreme Court of India in its Constitution Bench judgment in Union of India & Ors. v. Rajeev Bansal [469 ITR 46 (SC) and the reassessment proceedings and the consequential Section 263 order are accordingly void ab initio.”
4.1 Since this ground of appeal challenges the validity of exercising jurisdiction under Section 263 of the Act and raises a legal ground, the same is adjudicated first before proceeding with the matter.
5. At the outset the Ld. AR filed the list of dates relating to the assessment proceedings initiated vide notice u/s 148 of the Act dated 29.07.2022 which is reproduced as under:
| Particulars | Date | Page no. of the paper book |
|---|---|---|
| First notice u/s 148 Old regime TOLA | 16-06-2021 | 26 |
| Notice u/s 148A(b) as per Apex Court decision in Ashish Agarwal | 01-06-2022 | 27-28 |
| Time granted to reply up to 16-06-2022 | 28 | |
| Reply filed in response to notice u/s 148A(b) | 14-06-2022 | 32 |
| Notice u.s 148A(d) and 148 | 29-07-2022 | |
| Time limits as per Apex Court decision in Rajeev Bansal (Para 112) | ||
| Time available to issue notice u/s 148 as per original notice (From 16-06-2021 till 30-06-2021) | 14 days | |
| Time to be excluded 22-05-2021 till 02-06-2022 as Stayed by court (Third proviso to section 149(1) | ||
| Time limit to issue notice u/s 148 (14 days from 14-06-2022) | 28-06-2022 | |
| Notice u/s 148 actually issued on 29-07-2022 | 41-42 |
5.1 In this regard, the Ld. AR submitted that in view of the decision of the Hon’ble Apex Court in the case of Union of India vs. Rajeev Bansal (supra) the notice u/s 148 of the Act issued on 29.07.2022 was bad in law and therefore the assessment order passed u/s 147 r.w.s 144 r.w.s. 144B of the Act dated 15.03.2023 in pursuance of the said invalid notice was also bad in law. The Ld. AR submitted that in view of the fact that the original order passed u/s 147 r.w.s 144 r.w.s. 144B of the Act dated 15.03.2023 was bad in law, no proceedings u/s 263 of the Act could have been initiated by the Ld. PCIT Agra-1 in respect of such an invalid assessment order. In this regard, the Ld. AR relied upon the order of the Co-ordinate Bench of the Tribunal Mumbai Bench, in the case of Westlife Development Ltd. Vs PCIT- 5, Mumbai. [2017] 88 taxmann. Com 439 (Mumbai).
6. On the other hand, the Ld. CIT DR strongly supported the aforesaid order of the Ld. PCIT. The Ld. CIT DR referring to the above contention of the assessee submitted that since the original order passed u/s 147 r.w.s 144 r.w.s. 144B of the Act dated 02.05.2023 had become final and no challenge was made in respect of the said assessment order, the assessee could not challenge the legal validity of the said assessment order when the Ld. PCIT was invoking the provision of section 263 of the Act by the Ld. PCIT.
7. We have both the parties and perused and material on record. The undisputed fact in this case is that the Ld. PCIT has invoked the provisions of section 263 of the Act in respect of the assessment order passed u/s 147 r.w.s 144 r.w.s. 144B of the Act dated 02.05.2023. In this regard the list of dates for the aforesaid assessment proceedings are reproduced as under:
| Particulars | Date | Page no. of the paper book |
|---|---|---|
| First notice u/s 148 Old regime TOLA | 16-06-2021 | 26 |
| Notice u/s 148A(b) as per Apex Court decision in Ashish Agarwal | 01-06-2022 | 27-28 |
| Time granted to reply up to 16-06-2022 | 28 | |
| Reply filed in response to notice u/s 148A(b) | 14-06-2022 | 32 |
| Notice u/s 148A(d) and 148 | 29-07-2022 | |
| Time limits as per Apex Court decision in Rajeev Bansal (Para 112) | ||
| Time available to issue notice u/s 148 as per original notice (From 16-06-2021 till 30-06-2021) | 14 days | |
| Time to be excluded 22-05-2021 till 02-06-2022 as Stayed by court (Period proviso to section 149(1)) | ||
| Time limit to issue notice u/s 148 (14 days from 14-06-2022) | 28-06-2022 | |
| Notice u/s 148 actually issued on | 29-07-2022 | 41-42 |
7.1 On similar facts, the Co-ordinate Bench of this Tribunal in the case of Sub Major Sub Bhadauria vs. ITO, Ward 1(1)(2), Agra in ITA no. 469/Agr/2026 vide order dated 12.08.2026 had quashed the assessment proceedings in pursuance of similar notice issued u/s 148 of the Act after the lapse of the surviving period between the date of original notice issued u/s 148 of the Act and the balance time remaining till 30.06.2021. In this regard, the relevant extracts of the order dated 12.08.2026 are reproduced as under:
“6. The various dates of actions and compliances required in light of decision dated 04.05.2022 of the Hon’ble Supreme Court in Ashish Agarwal (supra), have been tabulated by the assessee in the brief synopsis as under:
| Particulars | Date |
|---|---|
| First notice u/s 148 Old regime TOLA | 25-06-2021 |
| Notice u/s 148A(b) as per Apex Court decision in Ashish Agarwal | 26-05-2022 |
| Time granted to reply up to 09-06-2022 | |
| Reply filed in response to notice u/s 148A(b) | 10-06-2022 |
| Notice u.s 148A(d) and 148 | 30-07-2022 |
| Time limits as per Apex Court decision in Rajeev Bansal (Para 112) | |
| Time available to issue notice u/s 148 as per original notice (From 21-05-2021 till 30-06-2021) | 05 days |
| Time to be excluded 22-05-2021 till 02-06-2022 as Stayed by court (Third proviso to section 149(1)) | |
| Time limit to issue notice u/s 148 (05 days from 10-06-2022) | 15-06-2022 |
| Notice u/s 148 actually issued on | 30-07-2022 |
7. The factum of various dates with reference to the actions and compliances narrated hereinabove, are not in dispute. The very small issue that arises for consideration is as to whether the subsequent notice issued u/s. 148 of the Act on 30.07.2022 is beyond the period of limitation in light of the decision of Hon’ble Supreme Court in Rajeev Bansal (supra). The relevant paras are read as under:
“110. The effect of the creation of the legal fiction in Ashish Agarwal(supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149.
111. The clock started ticking for the Revenue only after it received the response of the assesses to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under Section 149A(c); (ii) take a decision under Section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under Section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income Tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under Section 148 of the new regime.
112. Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under Section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under Section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under Section 148 of the new regime will end on 18 August 2022.”
8. This issue was also subject matter of consideration by the Hon’ble Delhi High Court in the case of Ram Balram Buildhome Vs. ITO & Anr, 445 ITR 1 (Del) dated 30.01.2025. Relevant operative portion of the said order is reproduced herein below:-
“65. Thus, in the facts of the present case, the last date for issuance of notice under Section 148 of the Act for AY 2013-14 under the statutory framework, as was existing prior to 01.04.2021 was 31.03.2020, that is, six years from the end of the relevant assessment year.
66. By virtue of Section 3 (1) of TOLA time for completion of specified acts, which fell during the period 20.03.2020 to 31 12.2020 were extended till 30.06.2021 [Notification No.38/21 dated 27.04.2021]. Thus, the notice dated 01.06.2021 was issued twenty-nine days prior to the expiry of period of limitation for issuing a notice under Section 148 of the Act as was extended by TOLA. As noted above, the period from 01.06.2021, the date of issuance of notice, and 04.05.2022, being the date of decision of the Supreme Court in Union of India & Ors. v. Ashish Agarwal is required to be excluded by virtue of the third proviso to Section 149 (1) of the Act.
67. Additionally, the period from the date of decision in Union of India & Ors. v. Ashish Agarwal till the date of providing material, as required to the accompanied with a notice under Section 148A (b) of the Act. is required to be excluded. Thus, the period between 04.05.2022 to 30.05.2022, the date on which the AO had issued the notice under Section 148A (b) of the Act in furtherance of his earlier notice dated 01.06.2021, is also required to be excluded by virtue of the third proviso to Section 149 (1) of the Act as held by the Supreme Court in Union of India & Ors. v. Rajeev Bansal.
68. In addition to the above, the time granted to the petitioner to respond to the notice dated 30.05.2022-the period of two weeks-is also required to be excluded by virtue of the third proviso to Section 149 (1) of the Act. The petitioner had furnished its response to the notice under Section 148A (b) of the Act on 13.06.2022. Thus, the period of limitation began running from that date.
69. As noted above, by virtue of TOLA, the AO had period of twenty-nine days limitation left on the date of commencement of the reassessment proceedings, which began on 01.06.2021, to issue a notice under Section 148 of the Act. The said notice was required to be accompanied by an order under Section 148A (d) of the Act. Thus, the AO was required to pass an order under Section 148A (d) of the Act within the said twenty-nine days notwithstanding the time stipulated under Section 148A (d) of the Act. This period expired on 12.07.2022.
70. Since the period of limitation, as provided under Section 149 (1) of the Act, had expired prior to issuance of the impugned notice on 30.07.2022. The said is squarely beyond the period of limitation.
71. It is contended on behalf of the Revenue that the AO is required to pass an order under Section 148A (d) of the Act by the end of the month following the month on which the reply to the notice under Section 148A (b) of the Act was received. Thus, the order under Section 148A (d) of the Act as well as the notice under Section 148 of the Act (both dated 30.07.2022) are within the prescribed period. This contention is without merit as it does not take into account that proceedings under Section 148A of the Act necessarily required to be completed within the period available for issuing notice under Section 148 of the Act, as prescribed under Section 149 of the Act. Thus, the time available to the AO to pass an order under Section 148A (d) of the Act was necessarily truncated and the same was required to be passed on or before 12.07.2022. The fourth proviso to Section 149 of the Act did not come into play as the time period available for the AO to pass an order under Section 148A (d) of the Act was in excess of the seven days.
72. In view of the above, we find merit in Mr. Sehgal’s contention that the impugned notice dated 30.07.2022 has been issued beyond the period of limitation.
73. The petition is accordingly allowed and the impugned order dated 30.07.2022 passed under Section 148A (d) of the Act; the impugned notice dated 30.07.2022 Issued under Section 148 of the Act; and the assessment order dated 30.05.2023 framed under Section 147 of the Act pursuant to the notice dated 30.07.2022 for AY 2013-14, are set aside. Pending application is also disposed of.”
9. In view of the observations of the Hon’ble Apex Court in Rajeev Bansal (supra), in the instant case, the extended due date for issuance of notice u/s. 148 of the Act expired on 15.06.2022. Since the notice u/s. 148 of the Act was issued on 30.07.2022, the said notice has to be treated as barred by limitation consequentially, the reassessment would be liable to be quashed as void ab initio.
10. Since the reopening of the assessment has been quashed, the adjudication on other grounds raised by the assessee becomes academic in nature and are left open. 11. In the result, assessee’s appeal is allowed.”
7.2 Relying upon the above order, on similar facts in this case as per the list of dates tabulated above, we are of the considered view that the impugned notice u/s 148 of the Act dated 29.07.2022 issued in this case was bad in law and consequently the impugned assessment order dated 02.05.2023 passed u/s 147 r.w.s 144 of the Act in pursuance of the said notice was also bad in law against which the Ld. CIT (A) has invoked the provision of section 263 of the Act. On similar facts the Co-ordinate Bench of the Tribunal in the case of Westlife Development Ltd. vs. PCIT-5 (supra) has held that in such a situation proceedings u/s 263 of the Act cannot be
invoked against an assessment order which is not a valid assessment order in the eyes of the law. In this regard the relevant findings in para nos. 8 to 8.10 and para nos. 10 to 14 of the order in the case of Westlife Development Ltd. vs. PCIT-5 (supra) are reproduced as under:
“8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263: The first issue that arises for our consideration is – whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed u/s 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can be classified in a way as ‘primary proceedings’. These are, in effect, basic / foundational proceedings and akin to a platform upon which any subsequent proceedings connected therewith can rest upon. The proceedings initiated u/s 263 seeking to revise the original assessment order is off shoot of the primary proceedings and therefore, these may be termed as ‘collateral proceedings’ in the legal framework. The issue that arises here is whether any illegality/invalidity in the order passed in the ‘primary proceedings’ can be set up in the ‘collateral proceedings’ and if yes, then of what nature?
8.1. We have analysed this issue carefully. There is no doubt that after passing of the original assessment order, the primary (i.e. original proceedings) had come to an end and attained finality and, therefore, outcome of the same cannot be disturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If it is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an ‘enforceable’ tax liability without authority of law. Therefore, the Courts have taken this view that jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs.
8.2. In a matter that came up before Hon’ble Supreme Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors., [1955] 1 5CR 117 the facts were that the appellant in that case had undervalued the suit at Rs.2,950 and laid it in the court of the Subordinate Judge, Monghyr for recovery of possession of the suit lands and mesne profits. The suit was dismissed and on appeal it was confirmed. In the second appeal in the High Court the Registry raised the object ion as to valuation under Section 11. The value of the appeal was fixed at Rs.9,980. A contention then was raised by the plaintiff in the High Court that on account of the valuation fixed by the High Court the appeal against the decree of the court of the Subordinate Judge did not lie to the District Court, but to the High Court and on that account the decree of the District Court was a nullity. Alternatively, it was contended that it caused prejudice to the appellant. In considering that contention at page 121, a four Judge Bench of Hon’ble Supreme Court speaking through Vankatarama Ayyar, J. held that:
“ lt 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.”
8.3. This judgment was subsequently followed by Hon’ble Supreme Court in the landmark case of Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193, wherein an issue arose whether a decree can be challenged at the stage of execution and whether a decree which remained uncontested operates as res- judicata qua the parties affected by it. Hon’ble apex court, taking support from aforesaid judgment, observed as under:
“In the light of this position in law the question for determination is whether the impugned decree of the Civil Court can be assailed by the appellant in execution. It is already held that it is the Controller under the Act that has exclusive jurisdiction to order ejectment of a tenant from a building in the urban area leased out by the landlord. Thereby the Civil Court inherently lacks jurisdiction to entertain the suit and pass a decree of ejectment. Therefore, though the decree was passed and the jurisdiction of the Court was gone into in issue Nos. 4 and 5 at the ex-parte trial, the decree there- under is a nullity, and does not bind the appellant. Therefore, it does not operate as a res judicata. The Courts below have committed grave error of law in holding that the decree in the suit operated as res judicata and the appellant cannot raise the same point once again at the execution.”
8.4. Similar view has been taken by Hon’ble Supreme Court by following aforesaid judgments recently in the case of Indian Bank vs Manual Govindji Khona reported in 2015 (3) SCC 712. Further, similar view was emphasized by Hon’ble Bombay High Court (GOA Bench) in the case of Mavany Brothers vs CIT (Tax Appeal No 8 of 2007) in its order dt 17th April, 2015 wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution.
8.5. The aforesaid principles, enunciated by the Apex Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors, supra were reiterated by the Apex Court in the cases of Superintendent of Taxes vs Onkarmal Nathmal Trust (AIR 1975 SC 2065) and Dasa Muni Reddy v. Appa Rao (AIR 1974 SC 2089). In the first of these decisions it was pointed out that revenue statutes protect the public on the one hand and confer power upon the State on the other, and the fetter on the jurisdiction is one meant to protect the public on the broader ground of public policy and, therefore, jurisdiction to assess or reassess a person can never be waived or created by consent. This decision shows that the basic principle recognized in Kiran Singh (supra) is applicable even to revenue statutes such as the Income Tax Act. Dasa Muni Reddy (supra) is a judgment where the principle of ‘coram non judice’ was applied to rent control law. It was held that neither the rule of estoppel nor the principle of res judicata can confer the Court jurisdiction where none exists. Here also the principle that was put into operation was that jurisdiction cannot be conferred by consent or agreement where it did not exist, nor can the lack of jurisdiction be waived.
8.6. These judgments were subsequently noticed by Hon’ble Gujarat High Court in the case of P. V. Doshi 113 ITR 22(Gujrat). This case arose under the Income Tax Act with reference to the provisions of Section 147 dealing with re- assessment. The facts were that the assessment was sought to be reopened under Section 147 and notice under section 148 was issued. Validity of reopening was not challenged upto Tribunal and additions were challenged on merits only. The Tribunal restored the matter to the Assessing Officer with some directions to reexamine the issue on merits. When the matter came back to the assessing officer the assessee specifically raised the point of jurisdiction to reopen the assessment, contending that the notice of reopening was prompted by a mere change of opinion. The AO rejected plea of the assessee but the AAC accepted this ground and also held the reassessment to be bad in law on jurisdictional ground. Against the order of the AAC the Revenue went in appeal before the Tribunal and specifically raised the plea that the question of jurisdiction to reopen the assessment having been expressly given up by the assessee in the appeal against the reassessment order in the first round, the assessee was debarred from raising that point again before the AAC and the AAC was equally wrong in permitting the assessee to raise that point which had become final in the first round and in adjudicating upon the same. The plea of the Revenue impressed the Tribunal which took the view that after its earlier order in the first round of proceedings the matter attained finality with regard to the point of jurisdiction which was given up before the AAC and not agitated further and that in the remand proceedings what was open before the Assessing Officer was only the question whether the addition was justified on merits and the point regarding the jurisdictional aspect was not open before the Assessing Officer. According to the Tribunal, the assessee having raised the point in the first round and having given it up could not revive it in the second round of proceedings where the issue was limited to the merits of the additions. In this view, the Tribunal accepted the Revenues plea. The assessee thereafter carried order of the Tribunal in reference before the Gujarat High Court. The High Court after considering various judgments of the Supreme Court on the point of jurisdiction to reopen the assessment and also after specifically discussing the judgment of the Supreme Court in Onkarmal Nathmal Trust (supra) and Dasa Muni Reddy (supra) held that the Tribunal was in error in holding that the question of jurisdiction became final when it passed the earlier remand order. It was held that neither the question of res judicata nor the rule of estoppel could be invoked where the jurisdiction of an authority was under challenge. According to Hon’ble Gujarat High Court, the rule of res judiccitci cannot be invoked where the question involved is the competence of the Court to assume jurisdiction, either pecuniary or territorial or over the subject matter of the dispute. Hon’ble High Court further held that since neither consent nor waiver can confer jurisdiction upon the Assessing Officer where it did not exist, no importance could be attached to the fact that the assessee, in the first round of proceedings, expressly gave up the plea against the erroneous assumption of jurisdiction by the assessing authority. According to the Hon’ble Court, the “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’. In this view of the matter, Hon’ble High Court finally answered the reference in favour of the assessee.
8.7. It is further noted that many of these judgments were discussed and followed by the co-ordinate bench of the Tribunal in the case of Indian Farmers Fertilizers Co-operative Ltd vs KIT 105 lTD 33 (Del), wherein a similar issue had arisen. In this case, the issue raised before the bench was whether it is open to the assessee, not having appealed against the reassessment order, to set up or canvass its correctness in collateral proceedings taken for rectification thereof u/s 154. The bench minutely analysed law in this regard and applying the principle of ‘coram non judice’ and following aforesaid judgments of the supreme court, it was held that if an assessee seeks to challenge the reassessment proceedings as being without jurisdiction, when action for rectification is sought to be taken on the assumption of the validity of the reassessment order, then the assessee has to step in and protect its interests and the liberty to question even the validity of the reassessment proceedings ought to be given to it……. “
(emphasis supplied).
8.8. Similar view was taken in another decision of the Tribunal in the case of Dhiraj Suri vs ACIT 98 lTD 87 (Del). In the said case, appeal was filed by the assessee before the Tribunal against the levy of penalty. In the appeal challenging the penalty order, the assessee challenged the validity of block assessment order which had determined the tax liability of the assessee on the basis of which penalty was levied subsequently. The revenue objected with respect to the ground of the assessee raising jurisdictional issues of assessment proceedings in the appeal against the penalty order. After analysing the legal position, as clarified by Hon’ble Gujrat High Court in the case of P.V. Doshi, supra and Hon’ble Bombay High Court in the case of Jainaravan Babulal vs CIT. 170 ITR 399, the bench held as that if the block assessment itself is without jurisdiction then there is no question of levy of any penalty u/s. 158BFA(2) and therefore it is open to the assessee to set up the question of validity of the assessment in the appeal against the levy of penalty.
8.9. We also derive support from another judgement of Hon’ble Bombay High Court in the case of Inventors Industrial Corporation Ltd vs CIT 194 ITR 548 (Bombay) wherein it was held that assessee was entitled to challenge the jurisdiction of the AO to initiate re-assessment proceedings before the CIT(A) in the second round of proceedings, even though he had not raised it in earlier proceedings before the Assessing Officer or in the earlier appeal.
8.10. 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.
10. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impug ned order u/s 263 to revise the non est assessment order: Having decided the aforesaid two issues, the next issue that is to be decided by us is about the validity of order passed u/s 263 by the Ld. CIT seeking to revise the assessment order which was nullity in the eyes of law.
10.1. We have discussed in detail in earlier part of our order that an invalid order cannot give birth to legally valid proceedings. It is further noticed by us that some of the judgments relied upon by the Ld. Counsel have already addressed this issue. This issue has also been decided by the co-ordinate bench (Delhi Bench of Tribunal) in the case of Krishna Kumar Saraf vs CIT (supra). The relevant part of the order is reproduced below:
“17. There is no quarrel with the proposition advanced by Id. DR that the proceedings u/s 263 are for the benefit of revenue and not for assessee.
18. However, u/s 263 the Id. Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice U/S 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the some was non est in the eyes of law. All proceedings subsequent to the said notice are of no consequence. Further, the decision of Hon’ble Madras High Court in the case of CIT Vs. Gitsons Engineering Co. 370 ITR 87 (Mad) clearly holds that the objection in relation to non service of notice could be raised for the first time before the Tribunal as the some was legal, which went to the root of the matter.
19. While exercising powers u/s 263 Id. Commissioner cannot revise an assessment order which is non est in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If Id. Commissioner revises such an assessment order, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended, because the provisions of limitation are provided in the same.
20. In view of above discussion, ground no.3 is allowed and revision order passed u/s 263 is quashed.”
10.2. It is further noticed by us that similar view has been taken by Chandigarh Bench of the Tribunal in the case of Steel Strips Ltd (supra).
11. Thus, after taking into account all the facts and circumstances of the case, we find that in this case, the original assessment order passed u/s 143(3) dt 24-10- 2013 was null & void in the eyes of law as the same was passed upon a non- existing entity and, therefore, the Ld. CIT could not have assumed jurisdiction under the law to make revision of a non est order and, therefore, the impugned order passed u/s 263 by the Ld.CIT is also nullity in the eyes of law and therefore the same is hereby quashed.
12. Since we have quashed the impugned order passed u/s 263 by Ld. CIT on jurisdictional ground, we do not find it necessary to deal with, at this stage, other legal aspects and issues raised on merits of the impugned order.
13. We further clarify, at the cost of repetition, that our order shall have no bearing on the tax liability determined by the original assessment order dt. 24- 10-2013, if any.
14. In the result, the appeal filed by the assessee is allowed.”
(emphasis supplied by us)
7.3 As discussed above, we have already held in para no. 7.2 of this order that the notice u/s 148 of the Act dated 29.07.2022 was bad in law in
this case and consequently the impugned assessment order dated 02.05.2023 passed u/s 147 r.w.s 144 of the Act was also bad in law. Therefore, following the above order of the Co-ordinate Bench of the Tribunal, Mumbai, we hold that the order u/s 263 of the Act passed by the Ld. PCIT Agra-1 vide order dated 27.02.2026 is also bad in law since it has been passed against a non est order dated 02.05.2023. Accordingly, the impugned order passed u/s 263 dated 27.02.2026 in this case by the Ld. CIT is also nullity in the eyes of law and therefore the same is hereby quashed. Ground no. 9 of the appeal is allowed. In view of ground no. 9 of the appeal being allowed, the other grounds of appeal become academic and are left open in this case. 8. In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on- 29.09.2026
