Case Law Details
Manohar & Filaments Pvt. Ltd. Vs PCIT (ITAT Delhi)
Time-Barred 153C Can’t Be Revived Through 263: No Jurisdiction, No Revision: PCIT Order Quashed: Satisfaction Date Rules the Clock: Revenue Loses 263 Battle- Null Assessment Can’t Be ‘Repaired’ by Section 263
In Manohar & Filaments Pvt. Ltd. Vs. PCIT, ITA No.2644/Del/2025, AY 2016-17, order dated 31.12.2025, Delhi ITAT quashed revision u/s 263 holding that PCIT cannot revise a non-est assessment order.
Search u/s 132 was conducted in Alankit Group on 18.10.2019. In Assessee’s case, satisfaction note u/s 153C was recorded on 11.10.2022. AO, however, issued notice u/s 153C for AYs 2014-15 to 2020-21 by reckoning period from date of search, and completed assessment u/s 153C r.w.s. 143(3) for AY 2016-17. Thereafter, PCIT invoked section 263, alleging lack of enquiry into alleged non-genuine transactions of ₹5.38 crore.
Tribunal held that in view of SC in CIT Vs. Jasjit Singh (458 ITR 437), limitation for section 153C has to be computed from date of recording of satisfaction, not date of search. Since satisfaction was recorded in FY 2022-23 (AY 2023-24), only AYs 2017-18 to 2022-23 could be validly covered. Consequently, notice u/s 153C for AY 2016-17 was time-barred, rendering assessment void ab initio.
ITAT further held that section 263 proceedings are collateral proceedings, and an assessment which is itself without jurisdiction cannot be revised to make it valid. Relying on Suraj Pulses Pvt. Ltd. (Delhi ITAT) and settled law that a null order cannot be foundation for revision, Tribunal quashed PCIT’s order. Appeal was partly allowed with other grounds left open.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the assessee against the order of the Ld.PCIT (Central)-3, Delhi vide order dated 11.03.2025 for the A.Y. 2016-17 passed u/s.263 of the Act.
2. The assessee has raised following grounds of appeal :-
“1. On the facts and circumstances of case and in law, the Id. PCIT, Central 3, New Delhi erred in initiating proceedings under section 263 of Income Tax Act, 1961 (Act) by wrongly assuming jurisdiction under section 263 of the Act and hence, the order passed by the Ld. CIT under section 263 of Act is bad in law, without jurisdiction and barred by limitation.
2. On the facts and circumstances of case and in law, the Id. PCIT erred in setting aside the assessment and has also erred in holding that the original assessment order passed by the Assessing Officer under section 153C/143(3) of Act was erroneous and prejudicial to the interest of the revenue.
3. On the facts and circumstances of case and in law, the directions issued by the Ld. PCIT under section 263 of Act are erroneous, vague, ambiguous and untenable and, therefore the order u/s 263 of the Act passed by the Ld. PCIT is liable to be quashed.
4. On the facts and circumstances of the case and in law, the Id. PCIT erred in setting aside the assessment order without appreciating the fact that the same was passed after taking due approval u/s 153D of JCIT.
5. On the facts and circumstances of the case and in law, the Id. PCIT erred in stating that the assessment passed by the assessing officer was without making inquiries or verification which should have been made.
6. On the facts and circumstances of case and in law, the Ld. PCIT erred in invoking the provisions of section 263 of the Act and thereby directing the Assessing Officer to the carry out detailed enquiries on issue of alleged non-genuine transactions of Rs. 5,38,50,000/-.
7. On the facts and circumstances of case and in law, the order passed by PCIT u/s 263 is liable to be quashed as the original assessment order itself is bad in law and without jurisdiction.
8. On the facts and circumstances of case and in law, order passed by PCIT u/s 263 is liable to be quashed as the directions given by PCIT are beyond the scope of provisions of section 153C of the Act.”
3. The Ld. Counsel for the assessee at the outset submitted that the impugned assessment order passed by the AO u/s.153C which was sought to be revised by the Ld.PCIT u/s.263 of the Act, is itself bad in law and therefore, the Ld.PCIT could not have invoked the provisions of section 263 of the Act for holding such assessment which is bad in law, is erroneous and pre judicial to the interest of the revenue. The Ld. Counsel for the assessee submitted that there was a search in the case of Alankit Group on 18.10.2019 and pursuant to which a satisfaction note was recorded in the case of assessee on 11.10.2022. The AO issued notice u/s.153C for seven assessment years i.e. from 2014-15 to A.Y. 2020-21 based on date of search. The Ld. Counsel for the assessee submitted that in view of the decision of Hon’ble Supreme Court in the case of CIT Vs. Jasjit Singh 458 ITR 437, for initiation of proceedings u/s.153C the date has to be reckoned from the date of recording of satisfaction note. The Ld. Counsel for the assessee submitted that the date of recording of satisfaction note in the present case is 11.10.2022 i.e. F.Y. 2022-23 and A.Y. 2023-24 and the six years which could have been taken up for assessment u/s.153C are assessment years 2017-18 to 2023-24 and therefore, notice u/s.153C for the A.Y. 2016-17 could not have been issued by the AO as the same is barred by limitation and thus initiation of proceedings u/s.153C for the A.Y.s 2016-17 is without jurisdiction. The Ld. Counsel for the assessee, therefore, submitted that the proceedings initiated and assessment order passed u/s.153C for the A.Y.2016-17 is bad in law and void ab initio and consequently the Ld. PCIT could not have invoked the provision of section 263 of the Act to revise such invalid assessment order.
4. The Ld. Counsel for the assessee submitted that provision of Section 263 of the Act cannot be invoked in respect of assessment order which is itself is bad in law and non-est. The Ld. Counsel for the assessee submitted that assumption of jurisdiction u/s.263 of the Act in respect of an assessment which is non-est, bad in law and without jurisdiction is also bad in law.
5. The Ld. Counsel further stated that challenge to the validity of assessment order can be made even in the proceedings challenging the order u/s.263 of the Act for which reliance was placed on the following decisions :-
-M/s Shahi Exports Pvt Ltd versus the Pr. C.I.T, 2021 (3) TMI 1008 -ITAT DELHI
-Parveen Kumar Mittal, C/O Rajiv Goel & Associates Versus the PR. C.I.T., PANCHKULA., 2021 (11) TMI 856 – ITAT Chandigarh
-Maruti Clean Coal and Power Ltd. Versus PCIT, 2022 (10) TMI 1215 – ITAT Raipur
-M/s. Essar Shipping Limited Versus Pr. CIT-5, 2019 (12) TMI 253 -ITAT Mumbai
-Smt. Aruna Tiwari Versus PCIT 1, 2023 (7) TMI 1149 – ITAT Raipur
– -Mikado Realtors P. Ltd. Versus Pr. CIT, 2021 (5) TMI 722 – ITAT Delhi
-M/S Monarch & Qureshi Builders Versus ACIT., 2024 (1) TMI 968 -ITAT Mumbai
-Suraj Pulses Pvt. Ltd., Suraj Buildmart India Pvt. Ltd., Suraj Pulses Processors Pvt. Ltd., VERSUS PR. CIT-8, 2021 (8) TMI 1023 – ITAT Delhi
6. On the other hand the Ld. DR strongly objected on the contentions raised by the Ld. Counsel for the assessee.
7. Heard rival contentions and perused the orders of the authorities below. It is not in dispute that there was a search u/s. 132 of the Act in Alankit Group on 18.10.2019, pursuant to which satisfaction note was recorded in the case of the assessee on 11.10.2022 and notice u/s.153C was issued for the A.Y.s 2014-15 to 2020-21 based on the date of search. It is now settled law by the Hon’ble Supreme court in the case of CIT Vs. Jasjit Singh (supra), for initiation of proceedings u/s.153C the date has to be reckoned from the date of recording of satisfaction note and the date of recording of the satisfaction note in the case of the assessee is 11.10.2022 which falls in the F.Y. 2022-23 relevant to A.Y.2023-24, therefore, the six assessment years which could have been taken up for assessment u/s.153C are A.Y. 2017-18 to AY 2022-23. In these circumstances the notice issued u/s.153C for A.Y. 2016-17 is barred by limitation and consequently the assessment made u/s.153C for the A.Y.2016-17 is without jurisdiction, null and void.
8. We further observed that an identical issue whether the Ld. PCIT can invoke proceedings u/s.263 of the Act on an invalid and non-est assessment order came up for consideration before the coordinate Bench of Delhi Tribunal in the case of Suraj Pulses Pvt. Ltd. Vs. PCIT in ITA No.3009 to 3012/Del/2017 vide order dated 06.07.2021, wherein the coordinate Bench held that when the reopening of assessment u/s.147 of the Act and the assessment order passed u/s.143(3)/147 of the Act is bad in law/ null and void, the Ld.PCIT cannot exercise jurisdiction u/s.263 over such assessment order. The relevant extract of the Judgment is as under :-
“17. We have heard the rival submissions and perused the material referred to before us at the time of hearing and the written synopsis filed by both the parties. One of the main contentions raised by the ld. CIT-DR was that once the assessee has accepted the re-assessment order and has not challenged the validity of reopening u/s.147, then assessee is precluded from agitating this issue especially in the proceedings u/s.263 on the ground that assessment order itself is bad in law. The validity of re-assessment proceedings cannot be judged or challenged in revisionary proceedings. Thus, the main issue before is, firstly, whether the assessee can challenge the validity of assessment order during the revisionary proceedings and also the validity of reopening u/s.147 when it was not challenged by the assessee; and secondly, whether the reopening based on the reasons recorded by the Assessing Officer itself was bad in law or not.
18. This precise issue has been dealt in detail by the Coordinate Bench of ITAT Mumbai Bench in the case of M/s. Westlife Development Ltd. v. Pr. CIT as reported in 49 ITR (T) 406 wherein the Tribunal has observed and held 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 ITA. No.3009 to 3012/DEL/2017 31 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.
8.10 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. [Emphasis supplied].
19. Otherwise also, it is a well established jurisprudence laid down by the various Courts, including Hon’ble Apex Court, reiterating the fundamental principle that the decree or order passed by a Court without jurisdiction is a nullity and its validity could be challenged whenever it is sought to be enforced or relied upon, even at the stage of execution and in collateral proceedings. This principle has been laid down by the Hon’ble Apex Court in the following judgments:-
i) AIR 1954 SC 340 Kiran Singh and Others v. Chaman Pawan and Others.
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 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:
“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.”
ii) Balwant N. Viswamitra and Others v. Yadav Sadashiv Mul (dead) through IRS and Others reported in (2004) 8 SCC 706 has held as under:
“9 The main question which arises for our consideration is whether the decree passed by the trial court can be said to be ‘null and ‘void’. In our opinion, the law on the point is well settled. The distinction between a decree which is void and a decree which is wrong, incorrect, and irregular or not in accordance with law cannot be overlooked or ignored. Where a court lacks inherent jurisdiction in passing a decree or making an order, a decree or order passed by such court would be without jurisdiction non est and void ab initio. A defect of jurisdiction of the court goes to the root of the matter and strikes at the very authority of the court to pass a decree or make an order. Such defect has always been treated as basic and fundamental and a decree or order passed by a court or an authority having no jurisdiction is nullity. Validity of such decree or order can be challenged at any stage, even in execution or collateral proceedings.
10. Five decades, in Kiran Singh & Ors. v. Chaman Paswan & Ors., [SCR p. 121) this Court declared; “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 strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties.
11. The said principle was reiterated by this Court in Seth Hiralal Patni v. Sri Kali Nath. The Court said: (SCR pp. 751-52) “Competence of a court to try a case goes to the very root of the jurisdiction, and where it is lacking, it is case of inherent lack of jurisdiction.”
12. In Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman & Ors., [1871] 1 SCR 66, a decree for possession was passed by the Court of Small Causes which was confirmed in appeal as well as in revision. In execution proceedings, it was contented that the Small Causes Court had no jurisdiction to pass the decree and, hence, it was a nullity.”
13. Rejecting the contention, this Court stated: (SCC p. 672, para 6)
“a. Court executing a decree cannot go behind the decree : between the parties or their representatives it must take the decree according to its tenor, and cannot entertain any objection that the decree was incorrect in law or on facts. Until it is set aside by an appropriate proceeding in appeal or revision, a decree even if it be erroneous is still binding between the parties.
14. Suffice it to say that recently a bench of two-Judges of this Court has considered the distinction between null and void decree and illegal decree in Rafique Bibi v. Sayed Waliuddin,. One of us (R.C. Lahoti, J. as his Lordship then was), quoting with approval the law laid down in Vasudev Dhanjibhai Modi, stated: (SCC pp. 291-92, paras 6-8
“6 What is ‘void’ has to be clearly understood. A decree can be said to be without jurisdiction, and hence a nullity, if the court passing the decree has usurped a jurisdiction which it did not have; a mere wrong exercise of jurisdiction does not result in a nullity. The lack of jurisdiction in the court passing the decree must be patent on its face in order to enable the executing court to take cognizance of such a nullity based on want of jurisdiction, else the normal rule that an executing court cannot go behind the decree must prevail.
7. Two things must be clearly borne in mind. Firstly, ‘the court will invalidate an order only if the right remedy is sought by the right person in the right proceedings and circumstances. The order may be a ‘a nullity’ and ‘void’ but these terms have not absolute sense: their meaning is relative, depending upon the court’s willingness to grant relief in any particular situation. If this principle of illegal relativity is borne in mind, the law can be made to operate justly and reasonably in cases where the doctrine of ultra vires, rigidly applied, would produce unacceptable results.’ (Administrative Law, Wade and Forsyth, 8th Edn., 2000, p. 308). Secondly, there is a distinction between mere administrative orders and the decrees of courts, especially a superior court. ‘The order of a superior court such as the High Court must always be obeyed no matter what flaws it may be thought to contain. Thus, a party who disobeys a High Court injunction in punishable for contempt of court even though it was granted in proceedings deemed to have been irrevocably abandoned owing to the expiry of a timelimit.’ (ibid., p. 312)
8 A distinction exists between a decree passed by a court having no jurisdiction and consequently being a nullity and not executable and a decree of the court which is merely illegal or not passed in accordance with the procedure laid down by law. A decree suffering from illegality or irregularity of procedure, cannot be termed inexecutable by the executing court; the remedy of a person aggrieved by such a decree is to have it set aside in a duly constituted legal proceedings or by a superior court failing which he must obey the common of the decree. A decree passed by a court of competent jurisdiction cannot be denuded of its efficacy by any collateral attack or in incidental proceedings.”
From the above decisions, it is amply clear that all irregular or wrong decrees or orders are not necessarily null and void. An erroneous or illegal decision, which is not void, cannot be objected in execution or collateral proceedings.
15 From the above decisions, it is amply clear that all irregular or wrong decrees or orders are not necessarily null and void. An erroneous or illegal decision, which is not void, cannot be objected in execution or collateral proceedings.
……
20 In our considered opinion, such a decree, by no stretch of imagination, can be described nullity. If the decree is not null and void, as per settled law, appropriate proceedings will have to be taken by the persons aggrieved by such decree.
20. Similar view has been expressed by the judgments of Hon’ble Madhya Pradesh High Court in the case of CIT v. Kalyan Solvent Extraction Ltd. reported in 276 ITR 154 and Calcutta High Court in the case of Keshav Narayan Banerjee v. CIT reported in 238 ITR 694. Hon’ble Calcutta High Court in the case of Keshav Narayan Banerjee (supra) has held as under:
“We have, therefore, no hesitation in holding that the service by registered post of the notices allegedly sent to the appellant writ applicant, resulting in the passing of the order under section 147 of the Act was not properly effected or accomplished. Since, admittedly, the service of such notices was a necessary pre-requisite, a condition precedent for passing of the orders under section 147 of the Act, we also have no hesitation in holding that such orders were bad in law, and, therefore, the proceedings under section 263 of the Act, admittedly, originating from such orders could not be initiated against the appellants.”
Also, Hon’ble Madhya Pradesh High Court in the case of CIT v. Kalyan Solvent Extraction Ltd. (supra) has held as under:
“Once the original order stands rectified then it loses its identity at least to the extent it stood rectified. In such circumstances, the Commissioner should have invoked his suo motu powers under section 263 of the Act against the subsequent rectified order dated March 14, 1989, if he was of the view that the same is erroneous and prejudicial to the interests of the Revenue.
We are, therefore, of the view that the Tribunal made no mistake in coming to the conclusion that the order of the Commissioner passed under section 263 of the Act which had the effect of setting aside the assessment order dated March 13, 1987, is without jurisdiction.
Accordingly, and in view of the aforesaid discussion, we answer the reference against the Revenue and in favour of the assessee.”
21. Further, Hon’ble Delhi High Court in the case of CIT v. Software Consultants reported in 341 ITR 240 has held as under:
“14. For exercise of power under Section 263 of the Act, it is mandatory that the order passed by the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue. In the present case, the Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice under Section 148 of the Act. This position is not disputed and disturbed by the Commissioner of Income Tax in his order under Section 263 of the Act. Sequitur is that the Assessing Officer could not have made an addition on account of share application money in the assessment proceedings under Section 147/148. Accordingly, the assessment order is not erroneous. Thus, the Commissioner of Income Tax could not have exercised jurisdiction under Section 263 of the Act.
22. Ergo, it is incontrovertible that proceedings u/s. 263 are collateral proceedings of the assessment, because ld. CIT/PCIT exercise revisionary jurisdiction u/s.263 seeking to revise the assessment order on the ground that it is erroneous in so far as it is prejudicial to the interest of revenue. The edifice of the proceedings u/s 263 is the assessment order which is the original proceedings which has come to an end. However, if the original assessment order itself was invalid or illegal in terms of jurisdiction or was not in accordance with the provisions of the statute or was barred by limitation, then such an invalid order cannot be subject matter of further proceedings so as to validate the said assessment order in collateral proceedings like u/s 263. This precise principle has been reiterated by the Hon’ble Apex Court in several cases which is evident from the judgment of Kiran Singh and others vs. Chaman Pawan and others (supra) and Balwant N. Viswamitra and others vs. Yadav Sadashiv Mul (supra) which we have quoted extenso in the forgoing paragraphs. In view of the binding judicial precedents and the principle and ratio laid down by the Hon’ble Apex Court as well as by the Hon’ble Jurisdictional High Court, we hold that the present proceedings being collateral proceedings and if the assessment order is inherently invalid or bad in law, then validity of such an order can be challenged at any stage in the collateral proceedings including the proceedings u/s.263, because invalid order cannot be set aside or can be revised to make it valid. Though assessment order may be said to be erroneous but certainly it cannot be held prejudicial to the interest of the revenue in such circumstances when assessment order itself is unsustainable, in view of the provisions of law as reiterated by the Hon’ble Jurisdictional High Court as discussed herein above.
9. Above decision squarely apply to the facts of the Assessee’s case. Thus, respectfully following the coordinate Bench decision we hold that since the notice issued u/s.153C for A.Y.2016-17 is barred by limitation and without jurisdiction the consequential assessment made u/s.153C pursuant to such notice is null and void and in which circumstance the Ld. PCIT lacked jurisdiction u/s.263 of the Act to revise such assessment order which is null and void. Accordingly, we quash the order passed by the Ld.PCIT dated 11.03.2025 passed u/s. 263 of the Act for the A.Y. 2016-17 and allow ground No.1 and 7 of grounds of appeal of the assessee. All other grounds are left open.
10. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 31.12.2025.
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