NISHANTH,CHENNAI vs. DCIT, NON CORPORATE CIRCLE-22(1), CHENNAI

आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, (hereinafter referred to as ‘Ld. CIT(A)’), Delhi, dated 15.12.2025 for the Assessment Year (hereinafter referred to as ‘AY’) 2019-20, wherein, the Ld. CIT(A) confirmed the levy of penalty of Rs.17,79,274/- u/s.270A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 2 :: 2. Brief facts are that assessee is a salaried employee who didn’t file his return of income for AY 2019-20. The AO based on certain information [which he has reproduced at Page 1 and 2 of the assessment order] reopened the assessment of the assessee for AY 2019-20, and issued notice u/s.148 of the Act on 10.03.2023 and directed the assessee to file return of income. But assessee didn’t file the return of income. Thereafer, AO issued notice u/s.142(1) of the Act to the assessee calling for certain details in respect of income earned for the year under consideration. In compliance to the said notice, assessee replied seeking further time, but the AO notes that assessee didn’t comply to his various notices issued by him. Therefore, based on the information which he collected from the departmental channel, the AO is noted to have assessed the income of assessee at Rs.35,16,394/- by passing the assessment order on 17.11.2023 by making an addition of Rs.35,16,394/- on account of salary received from M/s Quartesian Clinical Research Private Limited and M/s Agati Clinical Informatics LLP. Thereafter, the AO is noted to have issued penalty notice to the assessee u/s.270A of the Act on 17.11.2023; and after hearing the assessee, the AO is noted to have concluded that the assessee is at fault for suppression of facts regarding his income for taxation and hence, he was of the view that assessee is at fault and liable to penalty u/s.270A of the Act for under reporting of income in consequence of misreporting and thus, levied 200% of the amount

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 3 :: taxable on underreported income and levied Rs.17,79,274/- by passing the impugned penalty order on 21.05.2025, which was confirmed by Ld CIT(A).

GROUNDS OF APPEAL 1. The order of the Commissioner of Income Tax (Appeals) ["CIT (A)" against the law, the facts and circumstances of the case and violative of the principles of equity and natural justice. 2 The CIT(A) failed to appreciate that the Assessing Officer "AO] did not specify in the assessment order as to which clause or limb of section 2701(2) and section 270A(9) of the Income Tax Act, 1961 ["Act'] was attracted in the Appellant's case and thus, the satisfaction recorded by him is invalid and consequent order levying penalty is liable to be quashed. 3. The CIT(A) failed to appreciate that the notice for initiating proceeding for levying penalty did not specify which clause or limb of section 270A(2) or section 270A(9) of the Act was attracted in the Appellant's case and thus, the said notice is invalid and consequent order levying penalty is liable to be quashed. 4. The CIT(A) failed to appreciate that the order levying penalty did not specify which clause or limb of section 270A(2) or section 270A(9) of the Act was attracted in the Appellant's case and thus, the order levying penalty is liable to be quashed. 5. The CIT(A) erred in not disposing off the submissions of the Appellant on merits by passing a speaking order. 6. The CIT(A) failed to appreciate that the Appellant's case was covered under section 270A(6) of the Act and hence, the penalty ought to have been deleted.

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 4 :: 7. The CIT(A) failed to appreciate that the Appellant's explanation was hona fide and hence, penalty ought to have been deleted. 8. The CIT(A) failed to appreciate that the AO levied the penalty solely because the Appellant agreed with the findings in the assessment order and did not file any appeal against the assessment order without appreciating that the penalty proceeding is independent of assessment proceeding. 9. The CIT(A) failed to appreciate that there was delay in obtaining the Appellant's Form 16 from his previous employer leading to non-filing of his return of income and thus penalty could not have been levied in the Appellant's case. 10. The CIT(A) failed to appreciate that the total income of the Appellant comprised only income under the head "Salaries" and the same were already reflecting in the Appellant's Form 26AS and thus, there was no misreporting of particulars of income or suppression of facts. 11. The CIT(A) failed to appreciate that the Appellant has generally been filing return of income for other years within the statutory due date and he did not file return of income only for the impugned assessment year and thus, penalty ought to have been deleted. 12. The Appellant craves the leave of the Hon'ble Tribunal to adduce additional grounds in support of its appeal before and during the course of hearing of the appeal. 4. Assessee has raised various grounds of appeal including legal issue Ground No.2 to 4 and additional grounds which is reproduced as under:-

The reopening of the assessment is invalid as the Assessing Officer did not grant clear seven days while issuing the notice u/s 148A(b) of the Act, and hence, the reopening of assessment is invalid and the consequent assessment order dated 17.11.2023 is invalid and the consequent order under section 270A of the Act is null and void ab initio. The legal issue, according to the assessee, is that the impugned penalty is bad in law, since the very action of AO reopening the assessment itself is without jurisdiction, for non-adherence of mandatory procedure to reopen the same. In this regard, the according to the assessee, notice u/s.148A(b) of the Act, which was issued by the AO did not provide ‘seven clear days’ to the assessee, as mandated under the said provision for

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 5 :: responding to the said notice. Instead, in the present case, the AO gave only five (5) clear days to the assessee for furnishing the response to the said notice which is in contravention of section 148(A)(b) of the Act. The assessee accordingly submits that the notice u/s.148A(b) of the Act, dated 10.03.2023 is legally bad in law, and hence the notice of reopening u/s.148 of the Act was issued without proper authority of law, and hence, the consequent assessment order dated 17.11.2023 is null in the eyes of law.

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 6 :: submits that the notice u/s.148A(b) of the Act, dated 10.03.2023, consequent notice u/s.148 of the Act is bad in law, and hence, the subsequent action of framing assessment order on 17.11.2023 is null in the eyes of law. Therefore, according to the Ld. AR, since there is no assessment order of 17.11.2023 in the eyes of law, and the penalty proceedings is pursuant to assessment order, there can’t be any penal action. Hence, according to him, the impugned penalty order dated 21.05.2025 passed u/s.270A of the Act, levying penalty of Rs.17,79,274/- is invalid and bad in law.

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 7 :: 7. Per contra, the Ld. DR vehemently supports the impugned action of the Ld. CIT(A) and submitted that assessee cannot challenge the assessment order, while assailing the penalty action confirmed by the Ld. CIT(A), and pointed out that neither assessee participated in the assessment proceedings nor even filed ITR/RoI pursuant to notice u/s.148, hence he wants us to dismiss the legal issue.

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 8 :: ITO in ITA No.2401/Pune/2024 dated 23.07.2025 wherein several decisions of the Hon’ble Supreme Court has been cited. The Ld AR also referred to other decisions of this Tribunal which are also noted as under:

a) Supersonic Technologies (P) Ltd. vs. PCIT in ITA No. 2269/D/2017 dated 10.12.2018 (ITAT, Delhi Bench) ITA. No.3009 to 3012/DEL/2017 “6.1………….It is well settled Law that assessee can challenge the validity of the reassessment proceedings in the collateral proceedings (relating to examination of validity of Order passed) under section 263 of the I.T. Act. We rely upon the Order of ITAT, Mumbai Bench in the case of Westlife Development Ltd., vs. PCIT 49 ITR (Tribu.) 406 in which it was held “allowing the appeal (i) that jurisdiction aspect of the Order passed in the primary proceedings can be examined in collateral proceedings also. Thus, the assessee could be permitted to challenge the validity of the Order passed under section 263 on the ground that the assessment order was non-est.” Since the reassessment order itself is bad in law, therefore, Learned Counsel for the Assessee, rightly contended that the same cannot be revised under section 263 of the I.T. Act. Only valid re-assessment order can be revised under section 263 of the I.T. Act. On this ground itself the proceedings under section 263 of the I.T. Act are bad in law and liable to be quashed. We, accordingly, set aside the Order of Ld. Pr. CIT passed under section 263 of the I.T. Act and quash the same.” b) M/s CharbhujaMarmo (India) (P) Ltd. vs. PCIT in ITA No. 4749/D/2019 dated 31.12.2019 (ITAT, Delhi) “6. We have considered the rival submissions. It is well settled Law that since reassessment proceedings are invalid and bad in law, therefore, such proceedings could not be revised under section 263 of the I.T. Act. It is also well settled Law that validity of the re- assessment proceedings are to be judged on the basis of the reasons recorded for reopening of the assessment.” 9. He further placed reliance upon the following decision: -

c) M/s Westlife Development Ltd. vs. PCIT in ITA No. 688/Mum/2016 dated24.06.2016 (ITAT, Mumbai) d) Krishna Kumar Saraf vs. CIT in ITA No. 4562/Del/2011 dated 24.09.2015 (ITAT, Delhi) e) M/s Classic Flour & Food Processing (P) Ltd. vs. CIT in ITA No. 764 to 766/Kol/2014 dated 05.04.2017 (ITAT, Kolkata)”

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 9 :: 10. In the light of the aforesaid averments, and other decisions discussed infra, the Ld AR wants us to adjudicate this legal issue.

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 10 :: “ 1. Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263? 2. Whether the impugned assessment order passed u/s 143(3) dated 24-10-2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s.263 to revise the non-est assessment order?”

“ 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

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 11 :: 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."

“ 17. There is no quarrel with the proposition advanced by Id. DR that the proceedings u/s 263 are for the benefit of revenue and not for assessee. 18. However, u/s 263 the Id. Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice U/S 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the same 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 same was legal, which went to the root of the matter. 19. While exercising powers u/s 263 Id. Commissioner cannot revise an assessment order which is non est in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If Id. Commissioner revises such an assessment order, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended. Because the provisions of limitation are

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 12 :: provided in the same 20. In view of above discussion ground no.3 is allowed and revision order passed u/s 263 is quashed.”

“8.6 We have already discussed hereinabove that the decision of Hon’ble Rajasthan High Court in the case of Deep Chand Kothari v. CIT (supra ) is also in favour of the assessee and therefore we are of the view that the validity of assessment proceedings can be looked into during the penalty proceedings even though the assessment itself has not been challenged by the assessee. In that view of the matter, we do not see any merit in this submission of the learned Departmental Representative that validity of assessment order cannot be challenged in appeal against the order of penalty.”

“25. However, in view of the ratio laid down by the jurisdictional High Court in CIT Vs. Lalitkumar Bardia (supra) in turn, relying on the ratio laid down by the Apex Court in Kanwar Singh Saini Vs. High Court of Delhi (supra), wherein it has been held that conferment of jurisdiction was a legislative function and the same neither conferred with the consent of parties nor by superior court and where the Court passes an order / decree having no jurisdiction over the matter, it would amount to nullity as the same goes to the roots of the issue. Applying the said principle, we hold that the assessee can challenge the jurisdiction of Assessing Officer in passing the assessment order while challenging levy of penalty under section 271(1)(c) of the Act. In case the re-assessment proceedings have been completed without proper jurisdiction entrusted upon the Assessing Officer, then the consequent penalty proceedings are also affected as basic issue of conferment of jurisdiction upon the Assessing Officer is under challenge. Accordingly, we hold so.”

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 13 :: 16. In the context of appeal against penalty order passed u/s.271D of the Act, it is noted that Pune Bench of this Tribunal in M/s.Karia Brothers v. ITO in ITA No.2401/Pun/2024 dated 23.07.2025 has held that assessee is entitled to challenge the validity of assessment order as under (relevant portion):- “29. Since the assessee can always challenge the validity of assessment proceedings during the penalty proceedings as per the decision of Hon’ble Bombay High Court in the case of B.R. Bamasi vs. CIT (supra) and the decision of the Hon’ble Gujarat High Court in the case of P.V. Doshi vs. CIT (supra) and the various other decisions relied on by the Ld. Counsel for the assessee in the paper book and since we have already held that the re-assessment proceedings are not in accordance with law on account of not obtaining the approval from the competent authority as per the provisions of section 151 of the Act, therefore, the penalty proceedings initiated u/s 271D of the Act do not survive. In view of the above discussion, the penalty proceedings initiated by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC are not in accordance with law and are liable to be quashed. We, therefore, hold that the penalty levied by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC being not in accordance with law is liable to be deleted. We accordingly direct the Assessing Officer to cancel the penalty levied u/s 271D of the Act. The original grounds and the additional grounds raised by the assessee are accordingly allowed.”

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 14 :: the foundation for levy of impugned penalty. As noted this issue has been analyzed by the Mumbai Bench of the Tribunal in the case of M/s.Westlife Development Ltd. (supra) wherein the Tribunal has equated the reopening assessment u/s.147 to primary proceedings and the subsequent proceedings by Ld. PCIT u/s.263 passed to be collateral proceedings. In this order the Tribunal has taken note of several ratios of the Hon’ble Supreme Court wherein the Hon’ble Supreme Court held that if the primary proceedings are non-est in law or void on the ground of lack of jurisdiction, then the validity of such proceedings can be challenged even in an appeal arising out of collateral proceedings. Since we have already set out the ratio/operating portions of these decisions we do not wish to repeat the same for the sake of brevity. In the light of the aforesaid discussion, we are of the view that the invalidity of the primary proceedings for lack of jurisdiction can be challenged even in appellate proceedings arising out of a collateral proceeding i.e. in a penalty appeal. In view of the aforesaid legal position, we will now examine the legal issue. For doing that first of all we have to examine whether the AO in the present case could have validly reopened the assessment of the assessee by issuance of notice dated 25.02.2023 u/s.148A(b) of the Act which resulted in issuance of notice u/s.148 of the Act on 10.03.2023 and thereafter, framed assessment u/s.147/143(3) on 17.11.2023.

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 15 :: 18. In assessee's case the notice under section 148A(b) was issued on 25.02.2023, the relevant extract of the notice u/s. 148 is as under:

From a perusal of notice issued u/s.148A(b) of the Act, it is clear that, the AO afforded only five (5) clear days to assessee to respond, which is not in consonance with the mandate given in Section 148A(b) of the Act.

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 16 :: According to assessee, Section 148A(b) of the Act mandates seven (7) clear days to assessee to respond to such a notice.

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 17 :: 21. In this regard reference may be made to the case of Pioneer Motors (Private) Ltd. Vs. Municipal Council, Nagercoil reported in AIR 1967 SC 684 wherein at paragraph 8 and 9 the Hon'ble Apex Court has deliberated the issue with regard to counting of dates. 8. The words "not being less than one month" do imply that clear one month's notice was necessary to be given, that is, both the first day and the last day of the month had to be excluded………………….. "When...... 'not less than' so many days are to intervene, both the terminal days are excluded from the computation” ……………………………………… 9…………………………………In every case the words have to be construed in the context taking into consideration the language used and the object to be achieved. As we have said above, the use of the words “not being less than one month” implies the giving of a clear month excluding both the first and the last day of the month ………………………………………………………………………………………………………………… [Emphasis supplied].

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 18 :: the notice u/s.148 dated 10.03.2023 is invalid and hence assessment completed on 17.11.2023 based on the invalid notice u/s 148A(b) of the Act is held to be non-est in the eyes of law, so it is a nullity.

ITA No. 1176/Chny/2026 (AY 2019-20) Nishant :: 19 :: proceedings. Therefore, it is held that the impugned order of NFAC passed u/s.270A dated 21.05.2025 is also null/non-est in the eyes of law. Therefore, we quash the impugned order of penalty u/s.270A of the Act.

Order pronounced on the 20th day of August, 2026, in Chennai.

Sd/- Sd/- (गगन गोयल) (एबी टी. वक�) (GAGAN GOYAL) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai, �दनांक/Dated: 20th August, 2026. YS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

YASHVI Digitally signed by YASHVIR R SINGH Date: SINGH 2026.09.03 15:58:59 -07'00'