Ashok Kumar Jain Vs PCIT-20 (ITAT Delhi)
Summary: The Income Tax Appellate Tribunal, Delhi Bench ‘B’, in Ashok Kumar Jain Vs Pr. CIT-20, examined the legality of reassessment proceedings initiated for Assessment Year 2018-19 and the consequential revisionary proceedings under Section 263 of the Income-tax Act, 1961. The assessee challenged the Principal Commissioner’s order dated 29.03.2025 revising the reassessment order dated 16.03.2023 passed under Sections 147, 144 and 144B. The controversy originated from information received from the Central Board of Indirect Taxes and Customs concerning alleged bogus sales and purchase invoices issued by M/s RCI Industries and Technologies Ltd. The assessee was identified as a beneficiary of purchases amounting to Rs.22,19,108 during Financial Year 2017-18. The Assessing Officer had accepted the returned income after examining invoices, GST returns and ledger accounts. However, the Principal Commissioner considered the assessment erroneous and prejudicial to the interests of Revenue because the Assessing Officer had not obtained independent evidence establishing the physical movement and delivery of goods. According to the revisional authority, transportation records, lorry receipts, loading and unloading payment details and weighing receipts were necessary to substantiate the purchases, failing which the expenditure should have been examined under Section 69C.
The assessee challenged not only the revisionary order but also the jurisdictional validity of the underlying reassessment proceedings. The Revenue objected that the validity of the original assessment could not be questioned in an appeal arising from Section 263 proceedings. The Tribunal rejected this preliminary objection by following its coordinate Bench decision in Rahul Rastogi Vs PCIT, which had considered several judicial authorities, including Shobhit Goel (HUF) Vs PCIT and Westlife Development Ltd. Vs PCIT. The Tribunal reiterated that an assessee can challenge the jurisdictional foundation of an assessment order while contesting a subsequent revisionary order. Although an original assessment may have attained finality for ordinary appellate purposes, an order that is void for want of jurisdiction cannot provide a legally sustainable foundation for collateral proceedings. This distinction between primary assessment proceedings and consequential revisionary proceedings was supported by judicial principles concerning jurisdictional nullity, including the Supreme Court’s decision in Kiran Singh Vs Chaman Paswan and the Gujarat High Court’s decision in P.V. Doshi Vs CIT.
On examining the reassessment record, the Tribunal identified a material discrepancy between the allegations contained in the show-cause notice issued under Section 148A(b) and the findings recorded in the order passed under Section 148A(d). The show-cause notice was founded on information obtained through the Insight Portal under the Risk Management Strategy and alleged that the assessee had claimed fraudulent GST input tax credit amounting to Rs.22,19,108 on fake purchase bills, thereby suppressing taxable income. In contrast, the subsequent Section 148A(d) order proceeded on the allegation that the assessee had obtained accommodation entries in the form of bogus purchases from M/s RCI Industries and Technologies Ltd. The order referred to information received from CBIC, the involvement of intermediary entities, and the alleged absence of genuine purchases by the supplier. It concluded that the assessee’s purchases represented unexplained transactions and that income amounting to Rs.22,19,108 had escaped assessment. The Tribunal considered the change in the foundational allegation legally significant because the assessee had been called upon to answer one allegation, whereas the Assessing Officer ultimately proceeded on another.
The Tribunal, comprising Accountant Member S. Rifaur Rahman and Judicial Member Anubhav Sharma, held that the reasons contained in the Section 148A(b) notice were plainly at variance with those adopted in the Section 148A(d) order. While the show-cause notice concerned an alleged fraudulent input tax credit claim, the order determining that reassessment was warranted was based on alleged bogus purchases. The Tribunal therefore accepted the assessee’s jurisdictional objection and allowed ground No.1.1. Since the foundational reassessment proceedings were invalid, the subsequent revisionary proceedings under Section 263 could not survive. The Tribunal applied the established principle that an assessment order lacking jurisdiction cannot be revised as though it were a valid and subsisting assessment. The decision also demonstrates that the legality of an original assessment can be examined in an appeal against a consequential Section 263 order where the challenge concerns a fundamental jurisdictional defect rather than merely the merits of an addition.
Accordingly, the ITAT Delhi quashed the impugned reassessment and the consequential order passed under Section 263, allowing the assessee’s appeal. The Tribunal did not separately determine whether the disputed purchases were genuine or whether the Assessing Officer should have made an addition under Section 69C. Its decision rested on the jurisdictional defect arising from the difference between the basis of the Section 148A(b) notice and the Section 148A(d) order. The ruling reinforces the requirement that reassessment proceedings must remain consistent with the allegations disclosed to the assessee and that a jurisdictionally defective reassessment cannot be used as the foundation for revisionary proceedings. It also affirms the assessee’s right to challenge a non-est assessment in subsequent proceedings where the validity of the original assessment is essential to the legality of the consequential order.
Cases Discussed
1. Rahul Rastogi Vs PCIT (ITAT Delhi); ITA No. 844/Del/2024; 12/09/2025. Followed for the proposition that an assessee challenging a revisionary order under Section 263 can also question the jurisdictional validity of the foundational assessment order where the latter is alleged to be non-est.
2. Shobhit Goel (HUF) Vs PCIT (ITAT Delhi); ITA No. 2622/Del/2024; 27/02/2025. Discussed through the decision in Rahul Rastogi. The Tribunal recognised that jurisdictional defects in an assessment can be examined while deciding an appeal against a consequential revisionary order.
3. Westlife Development Ltd. Vs PCIT (ITAT Mumbai); (2016) 49 ITR (T) 406. Extensively discussed for the distinction between primary assessment proceedings and collateral revisionary proceedings. A jurisdictionally void assessment cannot provide a valid foundation for Section 263 revision.
4. Kiran Singh & Ors. Vs Chaman Paswan & Ors. (Supreme Court); [1955] 1 SCR 117. Discussed for the principle that an order passed without jurisdiction is a nullity and that the defect can be raised even in collateral proceedings.
5. Sushil Kumar Mehta Vs Gobind Ram Bohra (Supreme Court); (1990) 1 SCC 193. Discussed for the principle that an inherently jurisdictionally defective decree is a nullity and cannot acquire validity merely because it remained uncontested.
6. Indian Bank Vs Manual Govindji Khona (Supreme Court); (2015) 3 SCC 712. Referred to concerning jurisdictional defects and the ability to challenge orders lacking inherent jurisdiction.
7. Mavany Brothers Vs CIT (Bombay High Court); Tax Appeal No. 8 of 2007; 17/04/2015; (2015) 120 DTR (Bom) 286. Discussed for the principle that a jurisdictional objection may be raised at a subsequent stage of proceedings.
8. Superintendent of Taxes Vs Onkarmal Nathmal Trust (Supreme Court); AIR 1975 SC 2065. Discussed for the principle that statutory jurisdiction to assess or reassess cannot be created by consent or waiver.
9. Dasa Muni Reddy Vs Appa Rao (Supreme Court); AIR 1974 SC 2089. Discussed for the principle that estoppel and res judicata cannot confer jurisdiction where none exists.
10. P.V. Doshi Vs CIT (Gujarat High Court); (1978) 113 ITR 22. Discussed for the principle that jurisdictional objections cannot be defeated by waiver, estoppel or the apparent finality of an invalid reassessment.
11. Indian Farmers Fertilizers Co-operative Ltd. Vs JCIT (ITAT Delhi); (2007) 107 TTJ 98; 105 ITD 33. Discussed regarding the right to challenge jurisdictional defects in an assessment during consequential rectification proceedings.
12. Dhiraj Suri Vs Addl. CIT (ITAT Delhi); (2006) 99 TTJ 525; 98 ITD 87. Discussed for permitting a challenge to the jurisdictional validity of a block assessment in subsequent penalty proceedings.
13. Jainaravan Babulal Vs CIT (Bombay High Court); (1988) 170 ITR 399. Referred to in the discussion concerning challenges to the validity of foundational assessment proceedings.
14. Inventors Industrial Corporation Ltd. Vs CIT (Bombay High Court); (1992) 194 ITR 548. Discussed for permitting jurisdictional objections to reassessment proceedings even when not raised in the earlier round.
15. Aishwarya Rai Bachchan (ITAT Mumbai). Discussed for the principle that a reassessment which is void ab initio cannot be revised under Section 263.
16. CIT Vs Jet Airways (I) Ltd. (Bombay High Court); (2011) 331 ITR 236. Relied upon in the quoted decision concerning the validity of reassessment where the income forming the basis of reopening was not ultimately added.
17. Shri Jignesh Lilachand Shah Vs Pr. CIT (ITAT Ahmedabad); ITA No. 149/Ahd/2021. Discussed for holding that an assessment order which is null and void cannot be subjected to revision under Section 263.
18. Pioneer Distilleries Limited Vs Pr. CIT (ITAT Pune); ITA No. 479/PUN/2017. Referred to for the proposition that revisionary jurisdiction cannot be exercised against a void assessment order.
19. Inder Kumar Bachani (HUF) Vs ITO (ITAT Lucknow); (2006) 101 TTJ 450. Referred to for the proposition that Section 263 proceedings cannot validly revise an assessment order which is itself void.
Related TaxGuru Reading: ITAT Quashes Section 263 Revision Based on Time-Barred Reassessment Notice; Wrong Authority Approved Reopening; Section 263 Could Not Repair It; Reassessment Without Notice Under Section 143(2) Cannot Be Revised Under Section 263.
FULL TEXT OF THE ORDER OF ITAT DELHI
This is an appeal preferred by the assessee against the order dated 29.03.2025 of the Pr. Commissioner of Income-tax, Delhi-20 (hereinafter referred as Ld. PCIT) u/s 263 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) revising the order dated 16.03.2023 passed by the AO u/s 147 r.w.s. 144 r.w.s. 144B of the Act.
2. Heard and perused the records. On examination of assessment records, Ld. PCIT, as revisional authority exercising powers u/s 263 of the Act, observed that the AO had received information from CBIC that M/s RCI Industries and Technologies Ltd were involved in the practice of availing/ issuing bogus sales/ purchase bills. A list of beneficiaries to whom such bills were issued was also shared with the AO and from the said list, it was found by AO that the assessee had made bogus purchases from M/s RCI Industries and Technologies Ltd. amounting to Rs.22,19,108/- during the F.Y 2017-18. In view of above information, the revisional authority form a belief that AO was duty bound to make necessary enquiries. However, the AO accepted the returned income merely on production of copy of invoice, GST return and copy of ledger account with M/s RCI Industries & Technologies Ltd. Ld. revisional authority was o opinion that for claiming the impugned purchases, the assessee had to prove beyond doubt the actual transaction as well as the actual physical movement of the goods took place, which cannot be proved by producing invoices and payment by cheques. In this case, the assessee failed to provide evidence of taking delivery, lorry receipt, mode of payment for transportation, evidence of payment made for loading and unloading of goods, weighing receipt etc, which are essential to prove the actual movement of goods. In the absence of the same, AO should have added the entire bogus purchase as unexplained expenditure u/s 69C to the returned income.
3. On the aforesaid reasons, the assessee was show caused u/s 263 of the Act and, thereafter, the impugned order dated 29.03.2025 was passed for which the assessee is in appeal and now, before us, the assessee is not merely challenging the impugned order u/s 263 of the Act, but, vide ground No.1 and its sub-grounds has also even challenged the assessment order dated 16.03.2023 passed u/s 147/144 of the Act on the basis of wrongful assumption of jurisdiction and non-compliance of mandatory provisions of section 148A of the Act.
4. As with regard to these grounds being raised although the ld. DR has submitted that in these proceedings the assessee cannot challenge the original assessment order, however, we are of the considered view that if the assessee challenges the assessment order on the basis of wrongful assumption of jurisdiction leading to passing of a non est assessment order in subsequent and consequential proceedings like the present proceedings u/s 263 of the Act the assessee can also challenge the assessment order itself and reliance on this can be placed on the decision in Rahul Rastogi vs. PCIT, ITA No.844/Del/2024, order dated 12.09.2025 wherein the coordinate Bench in which both of us were in quorum has taken into consideration various judicial precedents to hold that the assessee has right to challenge a non est assessment order while challenging the impugned order u/s 263 of the Act. The relevant findings in para 3 are reproduced below:-
“3. The assessee in the appeal in his hand has not only challenged the impugned order u/s 263 of the Act dated 17.03.2022 but has also challenged the reopening proceedings itself on the assertion that there was no valid reason to believe and there was invalid sanction u/s 151 of the Act. As with regard to this aspect, whether while challenging the impugned order u/s 263 of the Act, the assessee can also raise the challenge to the original assessment order. We find that the Co-ordinate Bench of the Tribunal in the case of Shobhit Goel (HUF) vs PCIT in ITA No.2622/Del/2024, vide order dated 27.02.2025 has taken note of the decision of the Co-ordinate Bench of the Mumbai Tribunal Tribunal in the case of Westlife Development Ltd. reported in (2016) 49ITR (T) 406 (Mumbai) and held that while challenging the order u/s 263 of the Act, the assessee has locus to challenge the original assessment order also, where the validity of the order has been challenged. As for convenience, we reproduce para-7 of the order dated 27.02.2025 (supra):-
“7. We have heard the rival submissions and perused the materials available on record. At the outset, the issue raised by the AR in additional ground of appeal is with regard to the validity of the reassessment proceedings and legality of consequent order passed u/s 147 r.w.s 144B of the Act dated 28/03/2022 from which the present revision proceedings u/s 263 of the Act originated. It is true that before us, assessee has challenged the order passed by the ld. Pr. CIT u/s.263 of the Act, however, since the assessee has raised the issue of validity of reassessment order, we first answer the question as to whether or not such legality of the re-assessment framed could be examined in appellate proceedings challenging the order passed u/s.263 of the Act. The coordinate bench of Mumbai Tribunal in the case of Westlife Development Ltd. reported in (2016) 49ITR (T) 406 (Mumbai) held that during the course of appellate proceedings against the order passed u/s.263 of the Act, the validity of the assessment order from which such proceedings have been originated could be examined. The relevant observations as made in the above decision of the Tribunal are as under:-
8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed under s. 263 : The first issue that arises for our consideration is – whether the assessee can challenge the jurisdictional validity of order passed under s. 143(3) in the appellate proceedings taken up for challenging the order passed under 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 under 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 can not 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 IT 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. vs. 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 objection as to valuation under s. 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 p. 121, a four Judge Bench of Hon’ble Supreme Court speaking through Vankatarama Ayyar, J. held that : “It is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties.”
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 quest ion 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) [reported at (2015) 120 DTR (Bom) 286—Ed.] 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. vs. 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 vs. 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 IT 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 resdicata 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 vs. CIT (1978) 113 ITR 22 (Guj). This case arose under the IT Act with reference to the provisions of s. 147 dealing with re-assessment. The facts were that the assessment was sought to be reopened under s. 147 and notice under s. 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 AO with some directions to reexamine the issue on merits. When the matter came back to the AO 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 AO was only the question whether the addition was justified on merits and the point regarding the jurisdictional aspect was not open before the AO. 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 judicata 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 AO 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. Jt. CIT (2007) 107 TTJ (Del) 98 : (2007) 105 ITD 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 under 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 quest ion even the validity of the reassessment proceedings ought to be given to it…….” (emphasis, italicised in print, supplied).
8.8. Similar view was taken in another decision of the Tribunal in the case of Dhiraj Suri vs. Addl. CIT (2006) 99 TTJ (Del) 525 : (2006) 98 ITD 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 (1988) 69 CTR (Bom) 201 : (1988) 170 ITR 399 (Bom) the bench held as that if the block assessment itself is without jurisdiction then there is no question of levy of any penalty under 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 (1991) 96 CTR (Bom) 206 : (1992) 194 ITR 548 (Bom) 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 AO 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 under s. 263 on the ground that the impugned assessment order was nonest and we hold accordingly. Further, the coordinate bench of Mumbai Tribunal in the case of Aishwarya Rai Bachchan (Supra), has held as under:-
4.1. One more excruciating fact that needs to be addressed in the instant case is that the learned Principal CIT herein is only seeking to revise the order passed by the learned AO under s. 143(3) r/w s. 147 of the Act dt. 12th Dec., 2018. In the said reassessment proceedings, the learned AO had not even made any addition despite the fact that he had reason to believe that income of Rs. 11,55,330 had escaped assessment in the hands of the assessee which was sought to be taxed under s. 56 of the Act as per the reasons recorded. Hence, when the very basis of reasons recorded by the learned AO was ultimately not added by the learned AO in the reassessment proceedings, then the primary reason to believe that income of the assessee had escaped assessment fails and such re-assessment cannot be treated as a valid order in the eyes of law. The same is to be declared as void ab initio. Reliance in this regard was rightly placed on the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Jet Airways (I) Ltd. (2011) 239 CTR (Bom) 183 : (2011) 52 DTR (Bom) 71 : (2011) 331 ITR 236 (Bom). When an assessment framed by the learned AO is unsustainable in the eyes of law, the said invalid and illegal order cannot be subject matter of s. 263 proceedings. On this count also, the revision order passed by the learned Principal CIT under s. 263 of the Act deserves to be quashed.
The coordinate bench of Ahmedabad Tribunal in the case of Shri Jignesh Lilachand Shah (supra), had an occasion to deal with this issue where the Tribunal in para 6 has observed as under:-
6. The next issue for consideration before us is that once it is held that the assessment order itself is null and void, can such assessment order be the subject matter of revision under section 263 of the Act. In our view, it is a well-settled principle of law that once the assessment order passed itself is null and void, the same cannot be the subject matter revision under section 263 of the Act. In the case of Pioneer Distilleries Limited Vs Pr. CIT ITA No. 479/PUN/2017(ITAT Pune) the ITAT held that revisionary jurisdiction cannot be exercised against Void order. In this case, the ITAT held that when the said order is void and did not stand in eyes of law, it cannot be held to be erroneous and prejudicial to the interest of revenue by the Commissioner. Again in the case of Westlife Development Ltd. v. PCIT vide order dated 24.06.2016 (ITAT Mumbai), the ITAT held that when an Assessment order passed under section 147 of the Act was illegal the CIT cannot invoke the jurisdiction under section 263 of the Act against such void or non-est order. In the case of Inder Kumar Bachani (HUF) v. ITO (2006) 101 TTJ 450 (ITAT Lucknow), the ITAT held that as the order of the Assessing Officer passed under section 147 / 143(3) was itself void, the order of PCIT passed under section 263 for quashing this order was without jurisdiction. In view of the above observations, we are of the considered view that since the assessment order passed by ITO Ward 3(3)(2), Ahmedabad itself was null and void, the same could not be the subject matter of revision under section 263 of the Act. In the result, we are Shri Jignesh Lilachand Shah vs. Pr. CIT allowing the appeal of the assessee on the ground of jurisdiction itself. We are accordingly not separately adjudicating into the merits of the case.
On careful reading of the observations made by the coordinate benches of the Tribunal in aforesaid cases, we are of the view that the validity of order passed u/s.263 of the Act on the ground that the re-assessment order from which the said proceedings emerged out was nonest, can be challenged in appellate proceedings against u/s.263 of the Act. Thus, respectfully following the above decisions of the coordinate benches of the Tribunal, we are of the considered view that in the present appellate proceedings against the order of the ld. Pr. CIT u/s.263 of the Act, the validity of the order passed u/s.147/143(3) of the Act can be examined.”
5. Now, with regard to ground No.1 and its sub-grounds challenging the assumption of jurisdiction of reopening, the first and foremost contention of the ld. counsel is that the material relied for reopening and the approval taken for reopening were not confronted to the assessee and that order u/s 148A(d) of the Act is at variance with the show cause notice u.s 148A(b) of the Act.
5.1 The ld. DR has defended these assertions on the basis that when objections were not raised before the AO for assumption for jurisdiction, at this stage the assessee cannot challenge the assumption of jurisdiction for the reasons that the assessment was in favour of the assessee and the AO had passed an order which was erroneous and prejudicial to the interests of the Revenue.
6. Appreciating the submissions and the material on record, it comes up that when notice was issued under clause (b) of section 148A of the Act, the assessee was required to show cause on the following:-
“Information received though Insight Portal (High risk Transaction on verification module of Insight Portal) under Risk Management Strategy in the case of ASHOK KUMAR JAIN, PAN : AAKPJ1872B for the A.Y. 2018-19 that the assessee has claimed bogus input tax credit (ITC) amounting to Rs.22,19,108/- on fake purchase bills and the same is forwarded to RCI Industries and Technologies Ltd, PAN: AAACR5727Q to claim fraudulent ITC claim and to dispose his output GST liability with the aid of fake input credit and to suppress his correct income during the FY 2017-18. In view of the same, it is submitted that the information is self sufficient and no inquiries are required u/s 148A(a). The assessee has submitted ITR for the AY 2018-19.”
7. However, when order under clause (d) of section 148A of the Act was passed, in paras 4 to 8, the AO observed as follows:-
“4. The reply submitted by the assessee is given due consideration and it is noticed that assessee is not justified in saying that the trading made with M/s RCI is genuine and the income declared by the assessee is on actual basis for the reasons given below:-
a. As per Information received in this office from CBIC wherein it was reported that the entities are involved in practice of availing/issuing bogus sales/purchase bills.
As per annexure of the letter of LS (lnv.ll), CBDT, the transactions are being facilitated through the chain of many entities. It was reported that the name of this entity i.e. M/s RCI Industries and Technologies also appears in the list. It is further stated in that letter that on perusal of the trail of these transactions, it was seen by the information forwarding authority that many intermediary entities are involved in this practice. Data of the purchase of subject company was examined and it is noticed that most of the entities from whom substantial purchases have been made are either non-filers or have declared negligible incomes. Out of these bogus purchases, sales have been made to beneficiary entities by the subject company.
b. From the facts mentioned at point 5.a. above it is clear that RCI Industries and Technologies is engaged in providing accommodation entries . To give it colour of genuine trade business RCI Industries and Technologies is showing purchase from those companies which are either non- existent or have declared negligible income. If the purchase of RCI Industries and Technologies is not genuine than the sale also cannot be genuine.
c. it is merely an accommodation entry and the assessee Shri. Ashok Kumar Jain Prop Reliance Enterprise has taken accommodation entry in the form of purchase of good.
6. In view of the above facts, the reply submitted by the assessee is not found to be tenable and in spite of the facts that huge transaction have been made by the assessee, it has shown very less income which does not commensurate with the information value
7. It is pertinent to mention here that the assessee has failed to include the said above income in his return of income for the relevant period. Thus, it is concluded that Rs. 22,19,108/- is income chargeable to tax which has escaped the assessment within the meaning of provision of section 147 of the IT Act, 1961 for the assessment year 2018-19. Therefore, the same is liable to be added to the total income of the assessee for AY 2018-19.
8. In light of the above facts and on the basis of material available on record, it is established that the transaction of Rs.22,19,108/- has remained unexplained. Therefore, this is a fit case for issuance of notice u/s 148 of the Act for AY 2018-19.”
8. Very apparently, the reasons to show cause are at variance with the order passed u/s 148A(d) of the Act. The show reasons mentioned fraudulent ITC claim to be foundation of show cause while order u/s 148A(d) of the Act mentions of bogus purchases of assesse.
9. In the light of the aforesaid, we are inclined to allow ground No.1.1 and allow the appeal of the assessee. The impugned assessment stands quashed. The consequential proceedings by way of the impugned order u/s 263 of the Act get vitiated and the same are also quashed.
Order pronounced in the open court on 26.11.2025.
