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Facts
The assessee's income tax assessment for AY 2017-18 was reopened under section 147 after information suggested an "on money" payment for a property purchase, but the Assessing Officer completed the reassessment without making any adverse inferences. The PCIT initiated revisional proceedings under section 263, deeming the assessment erroneous and prejudicial to revenue for lack of inquiry into the "on money" payment. The assessee challenged the PCIT's jurisdiction by arguing that the original section 148 notice was issued by a non-jurisdictional Assessing Officer.
Held
The Tribunal found that the PCIT failed to address the fundamental jurisdictional objections raised by the assessee regarding the competence of the Assessing Officer to issue the section 148 notice. It held that such jurisdictional defects must be adjudicated as a preliminary issue, and the PCIT's non-adjudication vitiated the revisional order. The matter was remanded to the PCIT to first decide the jurisdictional issues before proceeding to the merits of the case under section 263.
Key Issues
The core issue was whether the PCIT could exercise revisional powers under section 263 without first ruling on the validity of the underlying reassessment order, which was challenged on grounds of the issuing Assessing Officer's lack of territorial jurisdiction.
Sections Cited
263, 147, 144B, 142(1), 148, 143(3), 69, 69B, 115BBE, 153C, 127, 120, 151, Rule 35A
AI-generated summary — verify with the full judgment below
(Assessment Year: 2017-18) Nirmaben Sureshkumar Patel, Vs. Income Tax Officer, 261, Saurabh Society, B/h. Gunjan Ward-1, Cinema, Vapi, Gujarat-396195 Mehsana [PAN No.AHHPP5680K] (Appellant) .. (Respondent) Appellant by : Shri M S Chhajed, AR Respondent by: Shri Rignesh Das, CIT-DR Date of Hearing 13.11.2025 Date of Pronouncement 28.11.2025 O R D E R
PER MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER:
This appeal by the assessee is directed against the revisional order passed under section 263 of the Income tax Act, 1961 [hereinafter referred to as “the Act”] by the Principal Commissioner of Income Tax - 3, Ahmedabad [hereinafter referred to as “PCIT”] dated 06.03.2024 for the Assessment Year 2017-18 arising out of the assessment framed by the National Faceless Assessment Centre, Delhi [hereinafter referred to as “Assessing Officer / AO”] under section 147 read with section 144B of the Act vide order dated 28.03.2022.
Nirmaben Sureshkumar Patel vs. ITO Asst.Year –2017-18 - 2– Condonation of Delay 2. The Registry has reported a delay of 188 days in filing the present appeal. The assessee filed an application supported by a duly sworn affidavit explaining the circumstances resulting in the delay. It has been stated that the notice under section 263 was received on 01.02.2024, a detailed reply was filed along with a specific written request seeking opportunity of hearing through video conferencing on 19.02.2024, however, no such hearing was granted till finalisation of the revisional order. According to the assessee, only upon receipt of notice under section 142(1) dated 25.10.2024 it came to know that the revisional order had already been passed, which led to the immediate filing of appeal. The assessee has affirmed that there was no intention to delay the proceedings and that the delay was purely on account of bona fide and reasonable cause. When queried, the learned Departmental Representative fairly stated that he has no objection to condonation of delay. Having considered the affidavit, the sequence of events and the absence of objection from the Department, we are satisfied that the assessee has shown reasonable cause. The delay of 188 days is therefore condoned, and the appeal is admitted for adjudication.
Facts of the Case 3. Briefly stated, the assessee filed her original return of income for A.Y. 2017 18 on 24.07.2017 declaring total income of Rs. 4,81,320/-. The case was reopened under section 147 of the Act and notice under section 148 was issued on 31.03.2021. Thereafter, notices under section 142(1)
Nirmaben Sureshkumar Patel vs. ITO Asst.Year –2017-18 - 3– and 143(2) were issued electronically. The assessee filed a return in response to notice under section 148 on 09.04.2021 declaring the very same income. The National Faceless Assessment Centre proceeded with reassessment and passed order dated 28.03.2022 under section 143(3) read with section 147 and section 144B of the Act accepting the returned income of Rs. 4,81,320/-. No additions or variations were made, and the reassessment was completed on the basis of submissions filed by the assessee. The assessment records noted that reopening was triggered because the assessee had purchased an immovable property during the year but had not disclosed the same in the return. However, after considering the reply and documents furnished, including the sale deed, the Assessing Officer did not draw any adverse inference and completed reassessment by accepting the income declared.
The information was received by the Investigation Wing regarding alleged cash component or on money payments of Rs. 61,51,005/ by purchasers of residential units in the Kalhaar Blues and Greens project developed by Navaratna Organisers and Developers Pvt. Ltd. (NODPL). The said information was based on search and seizure action carried out on 11.04.2017 in the case of the Navratna Group, during which excel files and other incriminating documents reflecting booking details, plot numbers, recorded consideration, and alleged cash payments were found. On verification of assessment records, the PCIT observed that the assessee had purchased a villa vide sale deed dated 31.05.2016 in the said project for recorded consideration of Rs. 84,83,245/ Nirmaben Sureshkumar Patel vs. ITO Asst.Year –2017-18 - 4– and the excel sheet named x10000226.xls contained entry reflecting alleged payment of on money of Rs. 61,51,005/ by the assessee. The revisional authority further noticed that in subsequent proceedings before the Hon’ble Settlement Commission, NODPL admitted receipt of on money across the project for the period 2008 to 2019 and paid taxes thereon. According to the PCIT, these documents clearly indicated unexplained investment under section 69 or section 69B of the Act in the hands of the assessee which was required to be examined during reassessment.
The Principal Commissioner issued show cause notice under section 263 on 01.02.2024 stating that the assessment order dated 28.03.2022 was erroneous and prejudicial to the interests of the Revenue because the Assessing Officer accepted the returned income without making enquiries regarding the seized excel sheet, the alleged on money payment, the source of investment, documentary trail and the Settlement Commission order. The assessee filed a written reply and sought video conference hearing. The Principal Commissioner however concluded that no meaningful enquiry was carried out by the Assessing Officer, the seized information was ignored, and the order was cryptic. Relying upon Explanation 2(a) to section 263 and various judicial precedents, the Principal Commissioner set aside the reassessment order with a direction to the Assessing Officer to conduct fresh assessment after making detailed verification including applicability of section 115BBE, interest and penalty provisions.
1. The order passed U/S 263 of the Act by the Ld. PCIT is in against law, equity & justice.
2. The Order passed U/s 263 of the Act by the Ld. PCIT is void and illegal as PCIT has no valid jurisdiction.
3. The Ld. PCIT has erred in law and on facts in not considering the submission made by the appellant.
4. The Ld. PCIT has erred in law and on facts by passing order U/S 263 is bad and illegal as in spite of specific request no video conferencing has been provided. 5. The Ld. PCIT has erred in law and on facts on various grounds in passing order U/S 263 of the Act to set aside order passed by the Ld. A.O. 6. The appellant craves liberty to add, amend, alter or modify all or any grounds of appeal
before final appeal.
7. The assessee also filed additional jurisdictional grounds under Rule 35A of the Income Tax Appellate Tribunal Rules, 1963, which read as under:
1. Assessment order passed u/s 147 of the Act is void & illegal as Ld. A.O. (ITO Ward 1, Mehsana) had no valild jurisdiction hence assumption of jurisdiction by PCIT U/S 263 of the Act is void & illegal.
No order is passed u/s 127 of the Act for transfer of jurisdiction from ITO Ward 2, Vapi to ITO Ward 1, Mehsana hence order passed by ld. A.O. and approval by PCIT are void, illegal and without jurisdiction.
Assessment order passed u/s 147 of the Act is void & illegal as approval U/S 151 of the Act is unsigned and without jurisdictiton hence assumption of jurisdiction by PCIT U/S 263 of the Act is void & illegal.
4. The Ld. AO has erred in law and on facts in reopening the assessment U/S 147 of the Act instead of section 153C of the Act, makes assessment order void, hence assumption of jurisdiction by PCIT u/s 263 of the Act is void.
Nirmaben Sureshkumar Patel vs. ITO Asst.Year –2017-18 - 6– 8. During the course of hearing before us, the learned Authorised Representative (AR) for the assessee drew our specific attention to the preliminary jurisdictional objections raised before the Principal Commissioner in response to the show-cause notice under section 263. It was submitted that the assessee had categorically challenged the very assumption of jurisdiction by the Assessing Officer while initiating reassessment proceedings under section 147. The learned AR submitted that these objections went to the very root of the validity of the reassessment order, and unless a valid and legally sustainable assessment existed in the eyes of law, there could be no occasion for the PCIT to assume revisional jurisdiction under section 263.
It was further contended that notwithstanding the fact that these objections were specifically raised in writing, the Principal Commissioner failed to deal with or adjudicate the same and proceeded to exercise revisional jurisdiction solely on the footing of alleged lack of enquiry by the Assessing Officer. The learned AR pointed out the reply to the notice submitted by the assessing dated 19.02.2024, pointing out the jurisdiction. (Paper Book Page No. 12).
In support of his argument, the AR relied upon the judgment of Hon’ble Gujarat High Court in Pankajbhai Jaysukhlal Shah vs ACIT, [2019] 110 taxmann.com 51 (Gujarat), wherein it was held that notice under section 148 issued by a non-jurisdictional Assessing Officer is invalid in law and consequent reassessment proceedings cannot be sustained.
Nirmaben Sureshkumar Patel vs. ITO Asst.Year –2017-18 - 7– 11. The learned Departmental Representative, did not object to the admission of additional grounds raised by the assessee. However, the learned DR placed a screenshot from ITBA jurisdiction module showing that the assessee’s PAN was transferred only between Ward 2, Mehsana and Ward 1, Mehsana on 05.01.2021. The screenshot does not contain any order transferring jurisdiction from Vapi to Mehsana.
We have carefully considered the rival submissions, perused the material placed on record, including the order passed under section 263, the assessment records, the jurisdictional screenshot produced by the Department, and the detailed submissions of the assessee raising jurisdictional objections going to the root of the validity of the reassessment order.
At the outset, it is noticed that the assessee had specifically pointed out before the PCIT substantial jurisdictional objections that the notice under section 148 was issued by ITO, Ward 1, Mehsana, who was not the jurisdictional Assessing Officer. This issues was raised not only in the written reply before the PCIT but also reiterated before us through the additional grounds filed under Rule 35A.
We find that the assessee has filed all her returns of income from A.Y. 2013–14 to A.Y. 2018–19 with ITO Ward 2, Vapi and has continued to reside in Vapi. No material has been brought to our notice to suggest that jurisdiction under section 120 had been altered or transferred to Mehsana at any point of time. The jurisdictional screenshot placed on Nirmaben Sureshkumar Patel vs. ITO Asst.Year –2017-18 - 8– record by the learned Departmental Representative also does not depict any transfer order from Vapi to Mehsana. It only shows an intra- Mehsana transfer from Ward 2 to Ward 1 dated 05.01.2021, which is wholly irrelevant in the absence of a foundational jurisdictional shift from Vapi.
In this background, the judicial precedent relied upon by the assessee, being the judgment of the Hon’ble Gujarat High Court in Pankajbhai Jaysukhlal Shah vs. ACIT [2019] 110 taxmann.com 51 (Guj.), squarely applies. The Hon’ble High Court held in clear terms that a notice under section 148 issued by an Assessing Officer who lacks territorial jurisdiction is void and invalid in law, and all consequential proceedings under section 147 stand vitiated. The ratio is binding and directly relevant where, as in the present case, the statutory jurisdiction of the Assessing Officer issuing the notice is seriously disputed.
Despite these jurisdictional objections being foundational and determinative of the very existence of a valid reassessment order, the PCIT has not recorded any finding on them. Instead, the PCIT has proceeded on merits to examine the enquiries allegedly not made by the Assessing Officer and invoked Explanation 2(a) to section 263. In our considered view, this approach is legally untenable. The revisional jurisdiction under section 263 presupposes the existence of a valid and operative assessment order. If the assessment order itself is non est in the eye of law for want of jurisdiction, the PCIT must first resolve that question before assuming revisional jurisdiction.
Nirmaben Sureshkumar Patel vs. ITO Asst.Year –2017-18 - 9– 17. It is settled law that jurisdictional defects strike at the root of the proceedings and must be adjudicated as a preliminary issue. Unless the validity of the notice under section 148 and the competence of the Assessing Officer who issued it are determined, it would not be proper to examine whether the assessment suffers from an error causing prejudice to the revenue. The Principal Commissioner has not discharged this jurisdictional obligation.
We therefore hold that the impugned revisional order suffers from a serious infirmity inasmuch as the PCIT failed to adjudicate the assessee's jurisdictional objections despite the same being specifically raised and going to the root of the matter. Such non-adjudication vitiates the revisional order.
In the interests of justice and to ensure that the assessee is not deprived of statutory remedies, we restore the matter to the file of the PCIT with a direction to first adjudicate the jurisdictional issues raised by the assessee by passing a speaking order. Only if it is held that the reassessment order is validly framed in law shall the PCIT thereafter proceed to examine the merits of the case under section 263. To maintain procedural fairness, the order on jurisdiction shall be passed within thirty days of receipt of this order, and the order on merits, if required, shall not be passed earlier than thirty days thereafter so as to enable the assessee to pursue appropriate legal recourse.
With these observations, the revisional order is set aside and the matter is restored to the file of the PCIT to decide afresh in accordance with law and after granting adequate opportunity of being heard to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 28/11/2025