SHOBHIT GOEL (HUF),FARIDABAD V. PCIT, FARIDABAD

ITA 2622/DEL/2024

AI Insights

The case involves an appeal by Shobhit Goel (HUF) against the order of the Principal Commissioner of Income Tax, Faridabad, which directed a fresh assessment under section 263 of the Income Tax Act, 1961. The original assessment was reopened under section 148, and the assessee contested the validity of both the reopening and the subsequent revisionary order. The Tribunal examined the legal grounds concerning the validity of the reassessment and the revisionary proceedings, ultimately finding them to be without legal foundation due to procedural and jurisdictional flaws.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474602 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Other Referred Cases: NTPC Ltd. vs. CIT, GKN Driveshafts India Ltd. vs. ITO, Kiran Singh & Ors. vs. Chaman Paswan & Ors., Sushil Kumar Mehta vs. Gobind Ram Bohra, Indian Bank vs. Manual Govindji Khona, P.V. Doshi vs. CIT, Krishna Kumar Saraf vs. CIT, Dhiraj Suri vs. Addl. CIT, Inventors Industrial Corporation Ltd vs. CIT, Westlife Development Ltd. vs. PCIT, Shri Jignesh Lilachand Shah vs. Pr. CIT, Steel Strips Ltd. vs. CIT, Mavany Brothers vs. CIT, Jet Airways (I) Ltd. vs. CIT, Pioneer Distilleries Limited vs. Pr. CIT, Kiran Singh & Ors. vs. Chaman Paswan & Ors., Sushil Kumar Mehta vs. Gobind Ram Bohra, Indian Bank vs. Manual Govindji Khona, P.V. Doshi vs. CIT, Krishna Kumar Saraf vs. CIT, Dhiraj Suri vs. Addl. CIT, Inventors Industrial Corporation Ltd vs. CIT, Westlife Development Ltd. vs. PCIT, Shri Jignesh Lilachand Shah vs. Pr. CIT, Steel Strips Ltd. vs. CIT, Mavany Brothers vs. CIT, Jet Airways (I) Ltd. vs. CIT, Pioneer Distilleries Limited vs. Pr. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASSESSEE; JAYA CHOUDHARY
• Assessee Lawyers: KAPIL GOEL
• Keywords: Set aside; Reassessment proceedings; Capital Gains; Principle of natural justice; Accommodation entries; Block assessment; Audit objection; Reason to believe; Revision of order; Bogus
• Section: 147; 148; 144; 143(3); 201; 143(1); 263; 56; 22; 113; 13; 101

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.2622/Del/2024 (ASSESSMENT YEAR 2013-14) Shobhit Goel (HUF), H.No.585, Sector-15 Haryana-121002. PAN-AAVHS2861J Vs. PCIT, Faridabad. (Appellant) (Respondent) Assessee by Dr. Kapil Goel, Advocate Department by Ms. Jaya Choudhary, CIT-DR Date of Hearing 10/02/2025 Date of Pronouncement 27/02/2025 O R D E R PER MANISH AGARWAL, AM: This is appeal filed by the Assessee against the order of Learned Principal Commissioner of Income Tax, Faridabad (‘the PCIT’ for short) date 28/03/2024 passed in DIN & Order No. ITBA/REV/F/REV5/2023-24/1063532908(1) for Assessment Year 2013-14. 2. The assesse has challenged the order by taking the following grounds of appeal: “1. Order passed by the Ld. PCIT u/s 263 is without jurisdiction and barred by limitation. 2 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 2. Ld. PCIT has erred in passing an order u/s 263 reopening the case by directing the AD to make fresh assessment against the provisions of law and natural justice. 3. Ld. PCIT has erred in initiating and passing an order u/s 263 on the basis of audit objections against the provisions of alw and natural justice. 4. Ld. PCIT has erred in initiating and passing an order u/s 263 without application of mind and just to regularize the legality of order passed u/s 154 by the AO. 5. Ld. PCIT has erred in passing order u/s 263 brushing aside our explanations that the order passed neither erroneous not prejudice to the interest of revenue. 6. The assessee reaves to add, amend or delete any ground of appeal.” Thereafter, during the hearing vide application under Rule 11 ITAT Rules, additional legal grounds were taken which reads as under: “1. That impugned revision order passed u/s 263 of 1961 Act by PCTT Faridabad is non est and nullity because it is founded on underlying assessment order passed u/s 147/1448 which itself is nullity and totally invalid and is passed without authority of law. 1.1 That impugned revision order u/s 263 is nullity and void ab initio because underlying assessment u/s 147/144B is based on invalid foundation reopening action u/s 147/148 as evident from admitted and undisputed facts of the case (namely there is no valid \"reasons to believe u/s 148(2)) 1.2 That impugned revision order u/s 263 is nullity and void ab initio because underlying assessment u/s 147/144B is based on invalid foundation \"reopening\" action u/s 147/148 as there is no valid sanction\" u/s 151 and 1.3 That impugned revision order u/s 263 is nullity and void ab initio because underlying assessment w/s 147/144B is based on invalid foundation \"reopening\" action u/s 147/148 as there is no valid disposal of \"objection\" u/s 148 against reopening as per Hon'ble Apex court ruling in case of GKN Driveshaft case and. 1.4 That impugned revision order u/s 263 is nullity and void ab initio because it is making revision on impugned assessment order passed w/s 147/144B which itself is ultra vires to provisions of 1961 Act: 1.5 That impugned revision order u/s 263 is nullity and void ab initio because underlying assessment u/s 147/144B is based on invalid foundation \"reopening\" action u/s 147/148 because there is admitted lack 3 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT of confrontation of back material referred in impugned reasons recorded which is fatal to reopening u/s 148 of the 1961 Act 1.6 That impugned revision order u/s 263 is nullity and void ab initio because underlying assessment is made totally contrary to provisions of 1961 Act and applicable binding CBDT instructions/guidelines 2. That impugned revision order passed u/s 263 of the Act is invalid as no revision u/s 263 can take place qua assessment order passed in faceless mode u/s 144B of the Act as per very scheme of the 1961 Act.” 2. During the course of hearing, the Ld. AR of the assessee submitted the additional legal grounds are purely legal in nature and requires no further verification, therefore, the same deserves to be admitted. He placed reliance on the judgments of Hon’ble Supreme Court in the case of NTPC Ltd. reported in 229 ITR 383 (SC). Besides this, the AR also placed reliance on various judgements which are available in the petition filed under Rule 11 of the ITAT Rules. After considering the submissions of the assessee and the judgments relied upon and also looking to the fact that the additional grounds now taken are purely legal in nature requires no further verification, therefore, these are admitted for adjudication. Since the legal grounds goes to the root of the matter, they are taken up first. 3. The brief facts of the case are that the assessee is HUF and has filed the return of income on 29.07.2013 declaring total income of Rs.1,66,070/- and income from the sale of share at Rs.32,97,066/- was claimed as exempted u/s 10(38) of the Act. The return was processed u/s 143(1), thereafter, the case is reopened by way of issue of notice u/s 148 on 28/03/2021 and after obtaining various details from the assessee and careful consideration of the same, the 4 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT Assessing Officer has accepted the income declared by assessee vide order dated 28/03/2022 passed u/s 147 r.w.s 144B of the Act. Thereafter, the PCIT found the order so passed is erroneous in so far as prejudicial to the interest of Revenue and show cause notice was issued on 28/02/2024 to explain as to why the order passed u/s 144 r.w.s 144 of the Act should not be set aside and fresh assessment be directed. After considering the submissions of the assessee, the Ld. PCIT is of the opinion that the order passed u/s 147 r.w.s 144B on 28/03/2022 is erroneous in so far as the prejudicial to the interest of Revenue and by setting aside the same order, directed the AO to pass a fresh assessment and re-compute the assesee’s income after making enquiries with respect to the issue of long term of capital gain of Rs.32,79,066/- received in the form of accommodation entries of the companies M/s Indian Infotech and Software Limited and M/s Oasis Cine Communication Ltd. which was claimed as exempt u/s 10(38) of the Act by the assessee. Against such order of PCIT, the assesse is in appeal before us. 4. With regard to the legal ground of appeal No.1 to 1.6 wherein the assessee has challenged the initiation of proceedings u/s 148 of the Act and submit that where the very foundation of reopening of assessment is invalid, the consequent revision order passed u/s 263 is nullity and void ab initio. The Ld. AR submitted that during the course of re-assessment proceedings also, assessee has objected the reopening of the assessment which were stated to have been disposed of vide letter dated 11/03/2022 available in paper book Pages 9 to 5 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 13 and submit that the case of the assessee was reopened on conjecture and surmises. The reasons recorded for reopening of the assessments shows that the same are vague and has not specified the specific details of the transactions carried out by the assessee which were claimed as bogus long term capital gain. The Ld. AR further drew our attention to the reasons where the AO observed that assesse has obtained bogus accommodation entries in the forms of penny stock by M/s Indian Infotech and Software Limited during the financial year 2012-13 for Rs.32,79,066/- which is not correct. The Ld.AR submit that the assessee has earned long term capital from sale of two companies namely M/s Indian Infotech and Software Limited Rs.18,91,815/- and Oasis Cine Communication Ltd. Rs.13, 87,251/. He further submit that all these facts were available before the AO in the return of income filed by assesse, and has not recorded the proper findings in the reasons so recorded. He thus, prayed that when the reasons are not clear and unambiguous and had not clarified as to how the AO has recorded the satisfaction for reopening the assessment, the same is bad in law. Once the reopening is based on wrong appreciation of facts, the consequent order passed u/s 263 has no legs to stand. He thus, prayed that the orders passed u/s 147 & 143(3) along with order 263 deserves to be quashed. 5. On the other hand, the Ld. CIT-DR has vehemently supported the order of the lower authorities and submitted that in the present case, initially the return of assessee was processed u/s 143(1) and the assessment was not completed u/s 143(3) of the Act and there 6 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT was no occasion with the AO to examine the issue of long term capital gain claimed by the assessee as exempt u/s 10(38). She further argued that the assessee has filed ITR-2 wherein details of such long term capital gain are not available with respect to every transaction. 6. Ld. CIT-DR further argued that the Assessing Officer has disposed off the objections raised by the assessee with respect to the validity of the initiation of the re-assessment proceedings by way of speaking order, and, therefore, the directions as provided by the Hon’ble Supreme Court in the case of GKN Driveshafts India Ltd. vs. ITO (2002) 125 taxman. con 936 (SC) were complied with by the AO. It is further submitted by the Ld. CIT-DR that in absence of the precise details and further there is a link between the information that long terms capital gain of Rs.32.79,066/- declared by the assessee and claimed exempt u/s 10(38) of the Act is bogus, therefore, there is live nexus between the information available and the satisfaction recorded and, accordingly, Ld. CIT-DR submit that the case of the assessee was rightly reopened and prayed accordingly. 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. 7 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 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 8 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 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 9 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 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. 10 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 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 11 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 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. 12 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 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. 13 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 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 14 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 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. 8. Now, coming to the issue of validity of reopening u/s 148 of the Act. The reasons recorded before the reopening the assessment are as under: “Subject: Furnishing of reasons for reopening-as requested-reg. Information in this case is available with the AO from credible sources and based on the same the Assessing officer had reason to believe that income chargeable to tax to the tune of Rs.32,79,066/- had escaped assessment for the A.Y.2013-14 which is given as under: 15 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT \"The assessee Shobhit Goel HUF is one of the beneficiary who had obtained bogus accommodation entry in the form of penny stock of M/s Indian Infotech & software Limited (INDINFO) during the financial year 2012-13. Upon analysis of the findings in this matter and after going through the available record, the assessing officer was satisfied that the income amounting to Rs.32,79,066/- had escaped assessment for A.Y. 2013-14 by reasons of the failure on the part of the assessee to disclose truly and fully all material facts necessary for the A.Y. 2013-14. Kindly note that notice u/s 148 of the IT Act was issued after obtaining satisfaction and approval from the appropriate authority.” From the perusal of the reasons recorded it is found that the Assessing Officer has not given the details of transactions of capital gain alleged as the accommodation entry in the shape of penny stock. The Assessing Officer further observed that the assessee has obtained bogus accommodation entries of M/s Indian Infotech Software Limited of Rs.32,79,066/- whereas the assessee has declared long term capital gain from the sale of two companies, namely M/s Indian Infotech and Software Limited Rs.18,91,815/- and Oasis Cine Communication Ltd. Rs.13,87,251/-. It is also a matter fact that in ITR-2 filed by the assessee, the relevant details of the capital gains from each script is to be filled in Such ITR-2 was available before the AO when he recorded the reasons before issue of notice u/s 148 of the Act. It appears that Assessing Officer has recorded the reasons in mechanical manner without any independent application of mind and without making any enquiry nor making any other of verification the information received by him with the information available on record. We further found that from the face of the reasons, it is clear that they are incomplete and vague, 16 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT therefore, in our considered opinion, the notice issued u/s 148 in the case of the assessee is bad in law and consequently order passed u/s 147 r.w. s 144B is invalid. Since the order passed u/s.144 r.w.s.144B of the Act is an invalid order, any further proceedings originated from the said order cannot be held as valid proceedings which includes the revisionary proceedings initiated by the ld. Pr. CIT, Sambalpur u/s.263 of the Act. In this regard, we find support from the observations made by the ITAT Mumbai Bench of the Tribunal in the case of Westlife Development Ltd. (supra), in para 10.1 to 11, which reads as under:- 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 learned 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 learned Departmental Representative that the proceedings under s. 263 are for the benefit of revenue and not for assessee. 18. However, under s. 263 the learned Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice under 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. 17 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 19. While exercising powers under s. 263 learned 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 learned CIT 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 act ion 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 under 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 under s. 143(3) dt 24th Oct., 2013 was null & void in the eyes of law as the same was passed upon a non-existing entity and, therefore, the learned CIT could not have assumed jurisdiction under the law to make revision of a non est order and, therefore, the impugned order passed under s. 263 by the learned CIT is also nullity in the eyes of law and therefore the same is hereby quashed. 8. By respectfully following the decision of Co-ordinate Bench of ITAT, Mumbai in the case of Westlife Development Ltd. (supra), we quash the revisionary order passed u/s 263 of the Act as the re- assessment order passed u/s 144/143(3) is already held as invalid. Thus, the additional grounds of appeal No.1 to 1.6 are allowed. 9. Since, the order of PCIT passed u/s 263 of the Act has been quashed on the issue of reopening u/s 148 of the Act, the other grounds taken become infructuous. Accordingly, the same are not adjudicated upon. 18 ITA No.2622 /Del/2024 Shobhit Goel (Huf) vs. PCIT 10. In the result, the appeal of assessee is allowed. Order pronounced on 27/02/2025. Sd/- Sd/- (ANUBHAV SHARMA) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 27/02/2025 PK/Sr. Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "