MARUTI CLEAN COAL AND POWER LTD.,RAIPUR vs. PR. COMMISIONER INCOME TAX-1, RAIPUR

आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee company is directed against the order passed by the Principal Commissioner of Income- Tax, Raipur-1 (for short ‘Pr. CIT) under Section 263 of the Income-Tax Act, 1961 (for short ‘the Act’) dated 27.03.2021, which in turn arises from the order passed by the A.O u/s. 143(3) r.w.s 147 of the Act, dated 30.12.2018 for assessment year 2011-12. The assessee has assailed the impugned order on the following grounds of appeal before us: 1. That on the facts and circumstances of the case and in law, the impugned order dated 27.03.2021 passed by the Principal Commissioner of Income Tax ("PCIT") under section 263 of the Income-tax Act. 1961 (`the Act') is beyond jurisdiction, illegal and bad in law and is liable to be quashed. 2. That on the facts and circumstances of the case and in law, the impugned order passed by the PCIT is illegal and bad in law, being barred by limitation prescribed under section 263(2) of the Act. 3. That on the facts and circumstances of the case and in law. the impugned order passed by the PCIT seeking to revise the reassessment order dated 30.12.2018 passed under section 147/143(3) of the Act, is without jurisdiction, illegal and bad in law. 4. That on the facts and circumstances of the case and in law, the impugned order passed under section 263 of the Act, without appreciating that the twin conditions of that section viz., re- assessment order being erroneous as well as prejudicial to the interests of the Revenue, were not satisfied, and hence is illegal and bad in law. 5. That on the facts and circumstances of the case, the impugned order passed by the PCIT without affording reasonable opportunity of being heard to the Appellant in violation of principles of natural justice, is illegal and bad in law.

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10.06.2021, i.e., beyond the prescribed period of limitation of 60 days that had expired on 26.05.2021. It was submitted by the Ld. AR that the failure to file the present appeal within stipulated time period was due to the on- going Covid-19 pandemic and the circumstances arising on account of the same. It was submitted by the ld. A.R that as the State of Chhattisgarh and more particularly Raipur was subjected to lockdown starting from April 09, 2021, therefore, the registry of the Income-Tax Appellate Tribunal, Raipur was not operational until May 30, 2021. It was submitted by the Ld. AR that as the lockdown restrictions were eased and it came to the knowledge of the assessee that the registry of Income-Tax Appellate Tribunal, Raipur had started functioning, therefore, the appeal was filed on 10.06.2021. The Ld. AR submitted that the Hon’ble Supreme Court on March 08, 2021 vide its suo-motto order had initially excluded the period from March 15, 2020 till March 14, 2021 for calculating the period of limitation. It was submitted by him that the Hon’ble Supreme Court had thereafter vide its order dated April,27, 2021 restored its earlier order dated March 08, 2021, and it was provided that the period of limitation w.e.f. March 15, 2020 would stand extended till further order. The Ld. AR submitted that in view of the second Covid-19 wave in India, the Hon’ble Apex Court had pursuant to its aforesaid orders directed that the period of limitation as prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings, whether condonable or not, shall stand extended till further

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order. The Ld. AR submitted that considering the extended period of limitation no delay was involved in filing of the present appeal by the assessee company. Alternatively, it was submitted by the Ld. AR that in case delay, if any, was involved in filing of the present appeal, then the same be condoned as the assessee for sufficient reasons was prevented from filing its appeal which though was prepared well within time on 09.04.2021, i.e, within the stipulated time period.

2.1 Per contra, the Ld. Departmental Representative (for short ‘DR’) did not object to the seeking of condonation of the impugned delay involved in filing of the present appeal by the assessee appellant.

2.2 We have given a thoughtful consideration and considering the circumstances leading to the impugned delay involved in filing of the present appeal r.w the aforesaid order of the Hon’ble Apex Court admit the same.

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National Thermal Power Company Limited Vs. CIT (1998) 229 ITR 383 (SC) we have no hesitation in admitting the same.

3.1 Succinctly stated, the assessee company which is engaged in the business of washing & trading of coal had e-filed its return of income for the assessment year 2011-12 on 30.09.2011, declaring an income of Rs. Nil under the normal provisions and book profit of (-) Rs. 3,55,07,234/- u/s.115JB of the Act. Original assessment was framed by the A.O vide his order passed u/s.143(3), dated 06.03.2014, determining the income of the assessee company at Rs. Nil (i.e after setting-off depreciation) a/w. carry- forward of unabsorbed depreciation of Rs.1,55,66,921/-, while for its book profit u/s.115JB witnessed no modification.

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CIT that the assessee company had during the year under consideration

received share capital and share premium, as under:

Date of issue Name of the Nature of Share capital Face Security Amount (Rs.) Allottees Transactions issued in the form value premium of Equity/ (Rs.) per CCS/Preferences share(Rs.) shares (No.) 20/11/2011 SFI Parcel Allotment of Equity-2095628 10/- 790/- 1,67,70,68,220/- Services equity shares Pvt. Ltd. 20/11/2011 Gupta Allotment of Equity-99404 10/- 790/- 7,95,50,039/- Coalfield & equity shares Washeries Ltd. Total 1,75,66,18,259/-

The Pr. CIT observed that the assessee company by issuing equity shares of

a face value of Rs.10/- per share at a premium of Rs.790/- each had during

the year raised a fund of Rs.176 crore. The Pr. CIT was of the view that there

were no economic/financial reasons which would justify raising of huge

share premium by the assessee which was a loss-making company. It was

observed by him that though one of the subscriber company, viz. M/s SFI

Parcel services Pvt. Ltd. had claimed to have made an investment of

Rs.167,70,68,220/- in the assessee company, however, the same was not

commensurate with its returned income for the last three years, as under:

Name of the PAN Income shown in respective A.Ys. company 2009-10 2010-11 2011-12 M/s. SFI Parcel AAMCS9569D Return 0 0 services Pvt. Ltd. not filed

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The Pr. CIT further observed that though the assessee company had during the year under consideration issued equity shares having a face value of Rs.10/- per share at a high premium of Rs.790/- each and had raised a fund of Rs.176 crores, but the A.O had failed to carry out necessary enquiry regarding the nature and source of the said capital that was introduced in the assessee company. It was observed by the Pr. CIT that the aforesaid failure of the A.O to carry out necessary enquiry had rendered the order passed by him u/s.143(3) r.w.s 147, dated 30.12.2018 as erroneous in so far it was prejudicial to the interest of the revenue. Accordingly, the Pr. CIT vide his “Show Cause” notice (SCN), dated 07.01.2021 called upon the assessee to explain as to why the aforesaid order of the A.O may not be revised u/s. 263 of the Act.

5.1 In reply, the assessee tried to impress upon the Pr. CIT that as the aforesaid issue i.e. receiving of share capital and share premium by the assessee company was at length examined by the A.O both while framing the original assessment u/s.143(3), dated 06.03.2014 as well as in the course of the reopened assessment proceedings that had culminated into an order u/s.143(3) r.w.s 147, dated 30.12.2018, and was accepted by him only after carrying out thorough verifications to his satisfaction, therefore, the order of reassessment passed by him was not amenable for revision u/s.263 of the Act. The assessee in support of his aforesaid claim had inter-alia

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drawn support from the fact that the A.O in the course of the original assessment proceedings had vide his query letter dated 21.08.2013 - Question No.18 & 21 specifically called for the details of the shareholders, and also their identity and creditworthiness. It was submitted by the assessee that in reply to the aforesaid query it had vide its letter dated 16.01.2014 submitted with the AO the confirmations, copies of the bank statements and returns of income of the shareholders to whom shares were allotted during the year under consideration. It was the claim of the assessee that as the A.O after vetting the details that were filed with him in support of the identity and creditworthiness of the share applicants, as well as the genuineness of the transactions, had accepted the same, thus, the possible and a plausible view so arrived at by him could not be dislodged u/s 263 of the Act. The assessee referring to the “reasons to believe” on the basis of which its case was reopened vide notice issued u/s.148 of the Act, dated 28.03.2018, submitted before the Pr. CIT that its concluded assessment was in itself reopened for the purpose of verifying the authenticity of the transactions of raising of share capital and share premium during the year under consideration. The assessee in order to buttress its aforesaid contention took support of Question No. 7 of a query letter dated 26.09.2018, wherein it was specifically called upon by the AO to furnish details a/w. justification with respect to the share capital that was issued to

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M/s SFI Parcel Services Pvt. Ltd. and M/s Gupta Coalfield & Washeries Ltd.,

as under:

Date of issue Name of the Nature of Share capital Face Security Amount (Rs.) Allottees Transactions issued in the form value premium of Equity/ (Rs.) per CCS/Preferences share(Rs.) shares (No.) 20/11/2011 SFI Parcel Allotment of Equity-2095628 10/- 790/- 1,67,70,68,220/- Services equity shares Pvt. Ltd. 20/11/2011 Gupta Allotment of Equity-99404 10/- 790/- 7,95,50,039/- Coalfield & equity shares Washeries Ltd.

Also, the assessee in order to buttress its claim that the A.O had in the

course of the reassessment proceedings verified at length the details of the

shareholders a/w. source of the share capital and share premium had

drawn support from the notice(s) dated 15.10.2018 & 25.10.2018 that were

issued by the A.O. It was the claim of the assessee before the Pr. CIT that in

the course of the reassessment proceedings it was specifically called upon

by the A.O to furnish details pertaining to the issue in question, viz. (i).

source of share capital and share premium; and (ii). details of shareholders,

their PANs, addresses, copies of returns of income, balance sheets and bank

statements of the shareholders. It was submitted by the assessee that in

compliance to the directions of the A.O it had in order to substantiate the

authenticity of the transactions of receipt of share capital and share

premium, vide online ITBA portal on 04.12.2018 furnished the copies of the

returns of income, confirmation of accounts, bank statements and audited

balance sheets of M/s SFI Parcel Services Pvt. Ltd. and M/s Gupta Coalfield

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& Washeries Ltd. It was the claim of the assessee that as the issue of raising of share capital and share premium had been examined by the A.O not once, but twice, i.e., both in the course of original assessment as well as the reassessment proceedings, wherein on both the occasions he had after detailed enquiries and deliberations finding it in order accepted the same, therefore, the view that was arrived at by him after thoroughly vetting the assessee’s claim could not be substituted as against that of the revisional authority in the garb of proceedings under Sec. 263 of the Act. It was the claim of the assessee before the Pr. CIT that now when proper enquires had been conducted by the A.O both at the time of framing of the original assessment u/s.143(3), dated 06.03.2014, and also in the course of the reassessment proceedings that had culminated vide an order passed u/ss.143(3)/147, dated 30.12.2018, therefore, it was incorrect on his part to allege that the same was passed without making proper enquiries. It was the claim of the assessee that as it had justified both the transactions of receipt of share capital and share premium by furnishing the requisite details/documents as were called for by the A.O in the course of the reassessment proceedings, viz. copies of returns of income, confirmation of accounts, bank statements and audited balance sheets of the share subscribers, viz. M/s. SFI Parcel Services Pvt. Ltd. and M/s. Gupta Coalfield & Washeries Limited and had also explained at length the source of their respective investments, therefore, it could by no means be held that the

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order passed by the AO u/s.143(3) r.w.s 147, dated 30.12.2018 was without making proper enquiries and due application of mind.

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of a face value of Rs.10/- per share at a high pitched premium of Rs.790/- each; and (ii). that after referring to the funds which had flown into the assessee company in the form of share capital and share premium from M/s. SFI Parcel Services Pvt. Ltd. he had observed that the source of the same could be traced in a Mauritius based company, viz. M/s. Warburg Pinckers, a company that was not carrying on any business except for making investments in ACB(India) Ltd.; but despite holding such serious reservations had summarily accepted its returned income, which, thus, conclusively proved that the reassessment order passed by him u/s.143(3) r.w.s.147, dated 30.12.2018 was without any application of mind. Also, it was observed by the Pr. CIT that though the verification of the complete details as regards the sources of the investment in the assessee company a/w. the source of the company from whom funds were routed formed the very reason for reopening of the assessee’s case u/s.147 of the Act, but the A.O dispensing with proper investigation and enquiries on the said issue had without any application of mind framed the assessment vide his order passed u/s.143(3) r.w.s 147, dated 30.12.2018. It was further observed by the Pr. CIT that though the assessee company during the year under consideration had made a cash deposit of Rs. 60 lac in its bank account no. 164010200012546 with Axis bank, Branch: Bilaspur, which, inter alia, was a reason for reopening of its case, however, the AO despite himself not being convinced about the source of the said cash deposit which was not

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commensurate with the assessee’s returned income had summarily accepted the same without carrying out any further verification. The Pr. CIT on the basis of his aforesaid observations was of the view that the failure of the AO to carry out necessary enquiry and verifications had rendered the reassessment order passed by him as erroneous in so far it was prejudicial to the interest of the revenue under section 263 of the Act. Accordingly, the Pr. CIT after drawing support from certain judicial pronouncements and triggering the “Explanation 2” to Section 263 of the Act held the order passed by the A.O u/s.143(3) r.w.s.147, dated 30.12.2018 as erroneous in so far it was prejudicial to the interest of the revenue, and set-aside the assessment order to his file, with a direction to adjudicate the same afresh after making adequate enquiry both as regards the source of investments made in the assessee company and the cash deposit in its bank account in light of the provisions of Section 68 of the Act.

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the very outset of the hearing of the appeal took us through the facts of the

case. It was submitted by the Ld. AR that the assessee company during the

year under consideration had raised a fund of Rs.176 crore by issuing equity

shares having a face value of Rs.10/- per share at a premium of Rs.790/-

each. Elaborating on the facts, it was submitted by the ld. A.R that the

assessee company had during the year under consideration received share

application money/share capital/debentures as under:

Date of issue Name of the Nature of Share capital Face Security Amount (Rs.) Allottees Transactions issued in the form value premium of Equity/ (Rs.) per CCS/Preferences share(Rs.) shares (No.) SFI Parcel Allotment of 20/11/2011 Equity-2095628 10/- 790/- 1,67,70,68,220/- Services equity shares Pvt. Ltd. 20/11/2011 Gupta Allotment of Equity-99404 10/- 790/- 7,95,50,039/- Coalfield equity shares &Washeries Ltd.

It was submitted by the Ld. AR that the complete details of the shareholders,

PAN details, addresses, copies of their returns of income, balance sheets,

bank statements etc. were duly called for by the A.O both during the course

of the original assessment proceedings wherein the assessment was framed

vide order u/s. 143(3), dated 06.03.2014, as well as in the course of the

reassessment proceedings which had culminated into an order u/s.143(3)

r.w.s. 147, dated 30.12.2018. The Ld. A.R in order to buttress his aforesaid

contention had taken us through the replies that were filed with the A.O in

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the course of the aforesaid respective assessment/reassessment proceedings. The Ld. A.R also drew our attention towards the extracts of the replies that were brought to the notice of the Pr. CIT during the course of proceedings before him. It was submitted by him that now when the A.O had framed the impugned assessment after due application of mind and carrying out necessary verifications on the issue in question, i.e., receipt of share capital and share premium by the assessee company and had arrived at a possible and plausible view, therefore, the Pr. CIT could not have sought for substitution of his view as against that arrived at by the A.O in the garb of proceedings u/s.263 of the Act. The ld. A.R in order to fortify his contention that detailed submissions as regards receipt of share capital and share premium from the aforementioned share applicants, viz. M/s SFI Parcel Services Pvt. Ltd. and M/s Gupta Coalfield & Washeries Ltd. were furnished in the course of the reassessment proceedings took us through the submissions dated 26.09.2018 and 15.10.2018 that were filed with the A.O in response to notice(s) u/s.142(1) a/w. query letters that were issued by him, Page 108 to 157 of APB. Our attention was also drawn by the Ld. AR towards the copy of the bank account of M/s SFI Parcel Services Pvt. Ltd. wherein the amount of Rs.167,70,68,220/- paid to the assessee company [out of funds which in turn were received by the said investor company from ACB (India) Power Ltd.] was duly reflected. The Ld. A.R took us through the replies/details that were filed by the assessee company in

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pursuance to queries raised by the A.O vide notice(s) u/s 142(1), dated 26.09.2018 and 15.10.2018 in the course of the reassessment proceedings. Taking us through the said replies, it was submitted by the ld. A.R that the assessee had in the course of the reassessment proceedings furnished complete particulars about the receipt of the aforesaid amounts a/w. details of the demand drafts that were issued by M/s SFI Parcel Services Pvt. Ltd. to the assessee company towards share capital and share premium during the year under consideration, Page 155 and 156 of the APB. Also the Ld. AR had taken us through the confirmation of the investor company i.e. M/s SFI Parcel Services Pvt. Ltd. that was filed in the course of the reassessment proceedings, wherein the investor company after divulging its complete income-tax credentials had duly confirmed of having paid the aforesaid amount of Rs.167.70 crore (approx.) to the assessee company on 20.11.2010 for allotment of 2095628 equity shares. It was submitted by the Ld. AR that all the aforesaid documents were duly filed by the assessee company in the course of the reassessment proceedings and the same were accepted by the A.O after making necessary verifications to his satisfaction. Our attention was also drawn by the Ld. AR towards certain specific queries on the issue in question that were raised by the ACIT, Central Circle-1(1), vide his notice u/s.142(1), dated 26.09.2018, wherein he had vide his query No.7 specifically called upon the assessee to justify the transactions of receipt of share application money and share capital from the aforementioned parties,

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viz. M/s SFI Parcel Services Pvt. Ltd. and M/s Gupta Coalfield & Washeries Ltd.

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Ltd., Page 125 to 144 of APB. The Ld. A.R submitted that all the aforesaid documents were filed by the assessee in the course of the assessment proceedings with the A.O.

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authenticity of its transactions of receipt of share capital and share premium from both the aforementioned parties, which after necessary deliberations had been accepted by the A.O, therefore, there was no justification for the Pr. CIT to hold the order passed by the A.O u/s.143(3) r.w.s147, dated 30.12.2018 as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act.

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count itself set-aside the order passed by the CIT u/s.263 of the Act, which order on further appeal by the revenue was upheld by the Hon’ble High Court. The Ld. AR in support of his aforesaid contention had also relied on the judgments of the Hon’ble High Court of Delhi in the case of Pr. CIT-6, New Delhi Vs. Modicare Limited, ITA No.759/2016, dated 14.09.2017 and Income-Tax Officer Vs. D.G Housing Projects Ltd. (2012) 343 ITR 329 (Del). The Ld. A.R submitted that as the Pr. CIT in the present case had failed to examine the issue in question, i.e., receipt of amount by the assessee company towards share capital and share premium and had summarily restored the matter to the file of the A.O, therefore, the order so passed by him could not be sustained and was liable to be struck down on the said count itself.

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his order passed u/s.143(3), dated 06.03.2014. The Ld. A.R submitted that now when the case of the assessee had been subjected to a regular assessment u/s.143(3) of the Act, dated 06.03.2014, therefore, as per the mandate of the “1st proviso” to section 147 of the Act its concluded assessment could not have been reopened after expiry of a period of four years from the end of the relevant assessment year except for in a case where the income of the assessee chargeable to tax had escaped assessment for either of the two conditions carved out in the said proviso, viz.(i). there was a failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or (ii). there was a failure on the part of the assessee to have disclosed fully and truly all material facts which were necessary for its assessment for the year under consideration i.e. A.Y.2011-12. It was submitted by the Ld. AR that it was not the case of the department that the income of the assessee chargeable to tax had escaped assessment for the reason that there was any failure on its part to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148. The Ld. A.R adverting to the second limb of the “1st proviso” to Sec. 147 submitted that the case of the assessee was reopened by the A.O not for the reason that there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the year under consideration, but in fact was reopened in order to rope in the income which

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had escaped assessment within the meaning of “Explanation (2)(c)” of Section 147 of the Act. The Ld. A.R in order to buttress his aforesaid contention that there was no failure of the assessee to fully and truly disclose all the material facts necessary for its assessment for the year under consideration i.e A.Y 2011-12 had drawn our attention to the copy of the “reasons to believe” on the basis of which the concluded assessment of the assessee company was reopened u/s.147 of the Act, Page 81 to 83 of APB. The Ld. A.R submitted that as the case of the assessee did not satisfy either of the two conditions carved out in the “1st proviso” of Sec. 147 of the Act, therefore, the A.O had traversed beyond the scope of his jurisdiction and had wrongly reopened its concluded assessment on the basis of an invalid notice issued u/s.148, dated 14.03.2018 i.e. much beyond the prescribed period of four years from the end of the relevant assessment year i.e. A.Y. 2011-12 that had expired way back as on 31.03.2016.

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and thus had attained finality, therefore, on what basis the validity of the same for the very first time was being challenged in the course of the present appellate proceedings arising from the order passed by the Pr. CIT under Section 263 of the Act, it was submitted by the ld. A.R that the assessee company remained well within its right to raise an objection to the validity of the reassessment order even in the course of the present appellate proceedings. The Ld. A.R submitted that as the AO vide his order passed u/s 143(3) r.w.s 147, dated 13.12.2018 had accepted the assessee’s returned income and had not made any addition/disallowance, therefore, there was no occasion much the less any justification for the assessee to have carried the said order any further in appeal. It was averred by the ld. AR that the assessee remained well within his statutory right to assail the validity of the reassessment order passed by the AO u/ss. 143(3) r.w.s 147, dated 13.12.2018, though for the very first time in the course of the appeal filed against the order passed by Pr. CIT under Sec. 263 of the Act. It was submitted by the ld. AR that as the proceedings before the Pr. CIT under Sec. 263 of the Act, dated 27.03.2021 were in the nature of collateral proceedings, therefore, the assessee could in the course of such proceedings challenge the validity of the impugned reassessment order that was passed by the A.O u/s. 143(3) r.w.s.147 of the Act, dated 30.12.2018. The ld. AR in order to support his contention that the illegality/invalidity of an order passed in the primary proceedings can be challenged in the collateral

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proceedings relied on the order of the ITAT, Mumbai in the case of Westlife Development Ltd. Vs. Pr. CIT-5, Mumbai (2017) 88 taxmann.com 439 (Mumbai). It was submitted by the Ld. AR that the tribunal in its aforesaid order had, inter alia, observed that the assessee can challenge the validity of an order passed u/s. 263 of the Act on the ground that the impugned assessment order was non-est. The Ld. A.R submitted that in the aforesaid case though the department had assailed the order of the tribunal before the Hon’ble High Court but had accepted its view on the issue in hand by not carrying the same any further in appeal. It was submitted by the ld. AR that as the aforesaid order of the tribunal in Westlife Development Ltd. (supra) had thereafter been upheld by the Hon’ble High Court of Bombay vide its order passed in ITA No.1168/2017, dated 28.09.2021, thus, the finding of the tribunal on the issue in hand had attained finality. In sum and substance, it was the claim of the Ld. AR that the aforesaid view taken by the Tribunal in the case of Westlife Development Ltd. (supra) having been accepted by the department had attained finality. The Ld. AR in support of his contention that when the assessment order is itself null and void, then, the Commissioner of Income-Tax could not exercise his revisional jurisdiction u/s. 263 of the Act had also relied on the order of the ITAT, Allahabad in the case of Hari Mohan Das Tandon (HUF) Vs. Pr. CIT (2018) 91 taxmann.com.199 (Allahabad-Trib). The Ld. AR had also on the aforesaid proposition drawn support from the order of the ITAT, Delhi in the case of

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Krishan Kumar Saraf Vs. Commissioner of Income Tax, Hissar, ITA No.4562/Del/2011 dated 24.09.2015. The Ld. A.R submitted that now when the order passed by the A.O u/s. 143(3) r.w.s 147, dated 30.12.2018 was in itself non-est for want of valid assumption of jurisdiction on his part, therefore, the same could not have been revised by the Pr. CIT u/s.263 of the Act.

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Ld. AR had relied on the judgment of the Hon’ble High Court of Punjab & Haryana in the case of Duli Chand Singhania vs Assistant Commissioner of Income (2004) 269 ITR 192 (P&H). Referring to the judgment in the case of Duli Chand Singhania (supra) it was submitted by the Ld. AR that the Hon’ble High Court had held that in a case where an assessment had earlier been made under Section 143(3) of the Act and, action thereafter is sought to be taken for reopening of the case u/s. 147 of the Act after the expiry of four years from the end of the relevant assessment year, then, it would be mandatorily required that both the conditions are satisfied, viz. (i) the AO must have reason to believe that income chargeable to tax has escaped assessment; and (ii). he must also have a reason to believe that such escapement had occurred by reason of failure of the assessee for either of the two conditions, viz. (a). to make a return of income under Section 139 or in response to notice issued under Sub-section (1) of Section 142 or Section 148; or (b). to disclose fully and truly all material facts necessary for his assessment for that purpose. It was submitted by the Ld. AR that as there was absence of satisfaction of either of the aforesaid two conditions in the case of the present assessee, for the reason that there was neither any failure on the part of the assessee to make a return of income under Section 139 or in response to notice issued under Sub-section (1) of Section 142 or Section 148; nor was there any failure on its part to disclose fully and truly all material facts necessary for its assessment for the year under

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consideration, therefore, the A.O had wrongly assumed jurisdiction and after expiry of four years from the end of the assessment year reopened its concluded assessment u/s.147 of the Act. The Ld. A.R in support of his aforesaid contention had also relied on the order of the ITAT, Mumbai in the case of Aishwarya Rai Bachchan Vs. Pr. CIT-8, ITA No.754/Mum/2021, dated 25.02.2022.

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by the A.O u/s.143(3) r.w.s. 147, dated 30.12.2018 could validly be assailed in the course of the revision proceedings as the same were in the nature of collateral proceedings.

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proceedings which arises from the order passed by the Pr. CIT u/s 263 of the Act, dated 27.03.2021.

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(b) In the year 2007-08 [0n 09/04/2007] 173990 equity shares were purchase from secondary market by Pinerdge Investment Ld. total valued Rs.64,23,86,600/- @ Rs.3694/- ( face value + premium) per share. (c) Further, in the year 2007-08 [0n 14/03/2008], 298705 equity shares were allotted to Pineridge investment Ltd. against part conversion of warrants @Rs.675/- per warrant and Rs.4023/- per share which includes premium also) total valued Rs.120,16,90,215/-. (d) In the year 2007-08 [on 31/03/2008] 21400280 equity shares were allotted to Pineridge Investment Ltd. by way of bonus share in the ratio 1: 20. (e) In the year 2008-09 (on 30/03/2009) 3369388 equity shares were allotted to Pineridge Investment Ltd. total valued Rs.53,23,63,304/- @158/- per share. (f) In the year 2010-11 [on 15/09/2010] 25839682 equity shares were allotted to Pineridge Investment Ltd. by way of bonus share in the ratio 1: 1. (g) In the year 2010-11 (on 25/02/2011) 483150 equity shares were allotted to Pineridge Investment Ltd. total valued Rs.2,63,73,250/- @55/- per share. (h) In the year 2008-09 (on 30.03.2009) 9169180 number of shares were purchased (Buy Back) from Pineridge Investment Ltd. and an amount of Rs.53,41,04,735/- was given. The rate of purchase per share stood at Rs.58.25. Further on the same date premium amount of Rs.53,23,63,304/- received from Pineridge against 3369388 no. of shares of ACBPL duly purchased by Pineridge @10/- (face value) + Rs.148/- ( premium) per share. On the one hand ACB (India) ltd issued share to Pineridge Investment Ltd. as a hefty premium per share ranging from Rs.3358/- to Rs.4013/- and again such shares are bought back as low as at a meager purchase price of Rs.58.25 per share. Evidently, the assessee appears to have generated huge capital by inflating the value of its shares at the time of sale and got it a amounting value on buy back from the same company. Except investment made in ACB (India) Ltd. there does not appear any other investment or business activity in the said company of Mauritious. Thus, the flow of fund can be structured in the following manner- Warburg Pinckers( Mauritious based company)

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↓ ACB (India) Ltd. ↓ ACB ((India) Power Ltd. ↓ SFI Parcel Services Pvt. Ltd. ↓ Maruti Clean Coal & Power Ltd. 5 Details of share application money/share capital/debentures issued by MCCPL for F.Y.2010-11 are given in the following chart:

Date of issue Name of the Nature of Share capital Face Security Amount (Rs.) Allottees Transactions issued in the form value premium of Equity/ (Rs.) per CCS/Preferences share(Rs.) shares (No.) SFI Parcel Allotment of 20/11/2011 Equity-2095628 10/- 790/- 1,67,70,68,220/- Services equity shares Pvt. Ltd. 20/11/2011 Gupta Allotment of Equity-99404 10/- 790/- 7,95,50,039/- Coalfield & equity shares Washeries Ltd.

The assessee company has issued equity shares having face value of Rs.10/- per share at a high premium of Rs.790/- during the F.Y.2010-11 raising thereby a fund of Rs.176 crore. The difference of Fair Market Value per share and share premium received against each share is to be ascertained. 6. There is an information available on record regarding transaction of cash deposit exceeding Rs.10 lakhs (total deposit of Rs.60,00,000/- ) which was deposited against Pan AACCM8217A during the F.Y.2010-11 relevant to A.Y.2011-12. This is in the name of Maruti Explochem Pvt. Ltd. and the same has been later changed into Maruti Clean Coal & power Ltd. This is mentioned against FIU A/C No.164010200012546 maintained that Axis Bank, Bilaspur. Interest of Rs.2737/- on refund amount for the A.Y.2009-10 was receipt against the PAN on 03-03-2011. Although, the assessee has filed his return of income for the said assessment year on 30.09.2011 declaring total income at Rs Nil, the said cash transactions valued Rs.10,00,000/- and above is not commensurate with its income returned for the relevant A.Y.2011-12 and also in the Old PAN of the assessee. Therefore, I am satisfied and have formed an honest belief that the above transaction/income of cash deposit of Rs.60,00,000/- and other related transactions as appearing in Para 1 to 5 above have escaped assessment.

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The case of the assessee falls under the explanation (2)(c) of Section 147 of the I.T Act, 1961. Therefore, I have reason to believe that income of Rs.10,00,000/- and above chargeable to tax has escaped assessment for F.Y.2010-11 relevant to A.Y.2011-12 within the meaning of section 147 read with Explanation 2 (c) issued notice u/s.148 of the I.T Act. In order to rope into the escaped income and to assess such income, recourse to the provisions of section 148 is to be taken for the A.Y.2011-12. Date : 14/03/2018 Sd/- ( Tapam Kumar Chatterjee) Asstt. Commissioner of Income Tax-1(1) Raipur.” On a careful perusal of the “reasons to believe” it transpires that the case of the assessee was reopened primarily for two reasons, viz. (i). as the assessee company had during the year under consideration issued equity shares having face value of Rs.10/- per share at a high premium of Rs.790/- per share, and thus, had raised a fund of Rs.176 crore, therefore, the difference between the “Fair Market Value” (FMV) per share and the share premium received against each share was to be ascertained; and (ii). that as the cash deposit of Rs.60 lac in the assessee’s bank account (in its old PAN) was not commensurate with its income returned for the year under consideration, therefore, the income to the said extent had escaped assessment.

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vide order passed under Sec. 143(3), dated 06.03.2014, Page 69 to 73 of APB. Concluded assessment of the assessee was thereafter reopened vide notice issued under Sec. 148 of the Act, dated 28.03.2018. It is the claim of the ld. A.R that as the A.O had exceeded his jurisdiction and reopened the concluded assessment and passed the reassessment order under Sec. 143(3) r.w.s 147, dated 30.12.2018, therefore, such invalid order of reassessment could not have been revised by the Pr. CIT under Sec. 263 of the Act. As observed by us hereinabove the Ld. A.R has assailed the validity of the reassessment order passed under Sec. 143(3) r.w.s 147, dated 30.12.2018, for the reason that the same had been passed in violation of the mandate of the “1st proviso” of Sec. 147 of the Act. Admittedly, as stated by the Ld. A.R and, rightly so, in a case where an assessment had earlier been made under Section 143(3) of the Act and action thereafter is sought to be taken for reopening of the case u/s.147 of the Act after expiry of four years from the end of the relevant assessment year, then, it would be necessary that the twin conditions contemplated in the statutory provision are satisfied, viz. (i). the AO must have reason to believe that income chargeable to tax has escaped assessment; AND (ii). he must also have a reason to believe that such escapement had occurred by reason of failure on the part of the assessee for either of the two conditions, viz. (a). to make a return of income under Section 139 or in response to notice issued under sub-section

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(1) of Section 142 or Section 148; or (b). to disclose fully and truly all material facts necessary for his assessment for that purpose.

(A). Share capital/premium raised : Rs. 176 crore (on issuance of equity shares having face value of Rs.10/- per share at a high premium of Rs.790/- per share). :

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On a perusal of the records it transpires that not only the assessee company had disclosed fully and truly all the material facts regarding the share capital and share premium of Rs.176 crore that was raised by it by issuing equity shares of a face value of Rs.10/- per share at a premium of Rs.790/- each during the year under consideration, but as observed by us at length hereinabove, it had also in the course of both the original assessment proceedings as well as in reassessment proceedings divulged the complete details as regards the authenticity of the said transactions to the satisfaction of the A.O. We may herein observe that the Hon’ble Supreme Court in the case of New Delhi Television Ltd. vs. Deputy Commissioner of Income Tax, (2020) 116 Taxmann.com 151 (SC) had, inter alia, held, that though the assessee is obligated to disclose the “primary facts” but it is neither required to disclose the “secondary facts” nor required to give any assistance to the A.O by disclosure of the other facts and it is for the A.O to decide what inferences are to be drawn from the facts before him. It was observed by the Hon’ble Apex Court that the extended period of limitation for initiating proceedings under the “1stproviso” of Section 147 of the Act would only get triggered where the assessee had failed to disclose fully and truly all material facts necessary for its assessment. Now, in the case before us, we are unable to comprehend as to what facts the assessee had failed to disclose which would have otherwise justified bringing its case within the realm of the extended time period contemplated in the “1st proviso” of section 147 of the

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Act. As noticed by us at length hereinabove at Para No(s) 5.1, 9 & 10, now when the assessee company had disclosed fully and truly all the material facts as regards the aforesaid issue, i.e., receipt of share capital and share premium from the aforementioned subscriber companies as was necessary for its assessment for the year under consideration i.e AY 2011-12, therefore, it could by no means be held to be in default for the purpose of bringing it within the sweep of “1st proviso” of Section 147 of the Act.

(B). Cash deposit : Rs. 60 lac We shall now deal with the observation of the A.O that the assessee company had made a cash deposit of Rs.60 lacs in its bank a/c No.164010200012546 with Axis Bank, Branch: Bilaspur, which, inter alia, was one of the reason to reopen its concluded assessment. On a perusal of the record it transpires that the assessee while objecting to the reasons forming the basis for reopening of its case, vide its letter that was filed with the A.O on 06.11.2018, Page 84 to 91 of APB, had clearly stated that during the year under consideration only a cash deposit of Rs.3.40 lacs made in its bank account. Also the assessee vide its letter dated 24.12.2013 that was filed with the A.O in the course of the original assessment proceedings had furnished the details as regards the same. We find that the A.O after considering the aforesaid reply had neither in the course of original assessment proceeding nor in the course of the reassessment proceeding

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drawn any adverse inferences and had accepted the claim of the assessee. Our aforesaid observation is specifically fortified by the fact that the A.O while framing the reassessment vide his order passed u/s.143(3) r.w.s 147, dated 30.12.2018 had at Para 2 of his order though specifically referred to the impugned cash deposit of Rs.60 lacs in the aforesaid bank account of the assessee (against its old PAN in the name of M/s. Maruti Explochem Pvt. Ltd. which thereafter had been changed into the assesee company), but had not made any addition on the said issue. Also, the claim of the assessee that the said issue was clarified vide its letter dated 24.12.2013 that was filed in the course of original assessment proceeding had neither been rebutted by the lower authorities nor in the course of the proceedings before us by the Ld. DR. In fact, as observed by us hereinabove, it has been the claim of the assessee that it had made a cash deposit of Rs.3.40 lacs only in its aforesaid bank account during the year under consideration, and the said fact stands established from a perusal of the said bank account i.e A/c No.164010200012546 with Axis Bank, Branch: Bilaspur to which our attention was drawn by the Ld. AR, which reveals as under (relevant extract): Date Particulars Amount 15.06.2010 By Cash Rs. 50,000/- 04.10.2010 By Cash Rs. 1,40,000/- 23.11.2010 By Cash Rs. 1,50,000/- Total Rs. 3,40,000/- We, thus, are of the considered view that no failure can be attributed to the assessee to disclose fully and truly all material facts as regards the cash

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deposits in its aforesaid bank account i.e A/c No.164010200012546 with Axis Bank, Branch: Bilaspur, which was necessary for its assessment for the year under consideration i.e. AY. 2011-12. On the contrary, in our considered view the AO had proceeded with on the basis of misconceived and incorrect facts as regards the cash deposit of a sum of Rs. 60 lac by the assessee in its aforesaid bank account during the year under consideration.

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jurisdiction. For the sake of clarity the observations of the Hon’ble High Court are culled out as under: “Examining the proviso [set out above], we find that no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year if the following conditions are satisfied: (a) an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year; and (b) unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee: (i) to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or (ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year. Condition (a) is admittedly satisfied inasmuch as the original assessment was completed under section 143(3) of the said Act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148. This is clearly not the case here because the petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material facts necessary for its assessment, then no action under section 147 could have been taken after the four year period indicated above. So, the key question is whether or not the petitioner had made a full and true disclosure of all material facts. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The

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escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade (P.) Ltd.’s we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our viewpoint, we hold that the notice dated 29-3-2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 2-3-2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above.” Also, a similar view had been taken by the Hon’ble High Court of Delhi in the case of Wel Intertrade Private Ltd. vs. ITO, Ward 18(3) (2009) 308 ITR 22 (Delhi). It was observed by the Hon’ble High Court that as in the “reasons to believe” there was not even a whisper of any allegation that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, therefore, in absence of such finding which was the sine qua non for assuming jurisdiction u/s.147 of the Act the action taken by the A.O for reopening the concluded assessment of the assessee u/s.147 would be wholly without jurisdiction. Apart from that a similar view had been taken by the Hon’ble High Court of Punjab & Haryana in the case of Duli Chand

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Singhania (supra). It was observed by the Hon’ble High Court that as in the reasons recorded for issuance of notice u/s.148 of the Act only satisfaction of the A.O about escapement of income of the assessee could be gathered, and there was no whisper of any allegation that such escapement had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, therefore, the absence of the said finding which was the "sine qua non" for assuming jurisdiction u/s.147 of the Act in a case falling under the “1st proviso”, thus, rendered the action taken by the AO as wholly without jurisdiction.

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u/s.143(3), dated 06.03.2014 clearly militates against the "1stproviso" to section 147 of the Act.

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accepted the assessee’s returned income, therefore, as stated by the ld. AR and, rightly so, there was no occasion much the less any justification for the assessee to have carried the order of reassessment any further in appeal. On the basis of the validity of the reassessment framed by the A.O under Sec. 143(3) r.w.s 147, dated 30.12.2018 the ld. A.R has assailed before us the validity of the order passed by the Pr. CIT under Sec. 263 of the Act, dated 27.03.2021. In sum and substance, it is the claim of the ld. AR that now when the impugned order of reassessment under Sec. 143(3) r.w.s 147, dated 14.03.2018 in itself had been passed on the basis of invalid assumption of jurisdiction by the AO, and thus, is invalid and bereft of any force of law, therefore, the same could not have been revised by the Pr. CIT under Sec.263 of the Act. Admittedly, we have accepted the aforesaid claim of the assessee that the AO as per the mandate of the “1st proviso” to Sec. 147 the Act had invalidly assumed jurisdiction and reopened the concluded assessment of the assessee beyond the prescribed time period available for doing so i.e upto 31.03.2016. Now, this takes us to the second aspect, i.e, as to whether or not the validity of the order passed by the AO under Sec. 143(3) r.w.s 147, dated 30.12.2018 could for the very first time in the course of the present appellate proceedings before us be taken as a basis by the assessee for assailing the sustainability of the order passed by the Pr. CIT under Sec. 263 of the Act, dated 27.03.2021?.

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47 Maruti Clean Coal and Power Ltd. Vs. Pr. CIT-1, Raipur ITA No. 55/RPR/2021

If the impugned assessment order passed u/s 143(3) was 3. 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?” (emphasis supplied by us)

(A). Answering the first issue, i.e, whether the assessee remains within his right to challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263 of the Act, the tribunal had on the basis of its exhaustive deliberations and drawing support from a host of judicial pronouncements answered the said issue in the affirmative. For the sake of clarity the relevant observations of the tribunal in context of the aforesaid issue are culled out 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 restupon. 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,

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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 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. v. Chaman Paswan &Ors., [1955] 1 SCR 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 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

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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." 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 question 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 Manilal 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) in its order dt 17th April, 2015 wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution. 8.5. The aforesaid principles, enunciated by the Apex Court in the case of Kiran Singh & Ors. v. 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 v. Appa Rao (AIR 1974 SC 2089). In the first of these decisions it was pointed out that revenue statutes

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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 Income Tax 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 res judicata 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 113 ITR 22(Gujrat). This case arose under the Income Tax Act with reference to the provisions of Section 147 dealing with re-assessment. The facts were that the assessment was sought to be reopened under Section 147 and notice under section 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 Assessing Officer with some directions to reexamine the issue on merits. When the matter came back to the assessing officer the assessee specifically raised the point of jurisdiction to reopen the assessment, contending that the notice of reopening was prompted by a mere change of opinion. The AO rejected plea of the assessee but the AAC accepted this ground and also held the reassessment to be bad in law on jurisdictional ground. Against the order of the AAC the Revenue went in appeal before the Tribunal and specifically raised the plea that the question of jurisdiction to reopen the assessment having been expressly given up by the assessee in the appeal against the reassessment order in the first round, the assessee was debarred from raising that point again before the AAC and the AAC was equally wrong in permitting the assessee to raise that point which had become final in the first round and in adjudicating upon the same. The plea of the Revenue impressed the Tribunal which took the view that after its earlier order in the first round of proceedings the matter attained finality with regard to the point of jurisdiction which was given up before the AAC and not agitated further and that in the remand proceedings what was open before the Assessing Officer was only the question whether the addition was justified on merits and the point regarding the jurisdictional aspect was not open before the Assessing Officer. 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

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also after specifically discussing the judgment of the Supreme Court in OnkarmalNathmal 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 Assessing Officer 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 JCIT 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 u/s 154. The bench minutely analysed law in this regard and applying the principle of ‘coram non judice’ and following aforesaid judgments of the supreme court, it was held that if an assessee seeks to challenge the reassessment proceedings as being without jurisdiction, when action for rectification is sought to be taken on the assumption of the validity of the reassessment order, then the assessee has to step in and protect its interests and the liberty to question even the validity of the reassessment proceedings ought to be given to it…….” (emphasis supplied). 8.8 Similar view was taken in another decision of the Tribunal in the case of Dhiraj Suri vs ACIT 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

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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 Jainarayan Babulal vs CIT, 170 ITR 399, the bench held as that if the block assessment itself is without jurisdiction then there is no question of levy of any penalty u/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 194 ITR 548 (Bombay) 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 Assessing Officer 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 u/s 263 on the ground that the impugned assessment order was non est and we hold accordingly.” (B). Answering the second issue, i.e, if the order passed u/s 143(3) was illegal or nullity, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order, the tribunal answered in the negative. For the sake of clarity the relevant observations of the tribunal in context of the aforesaid issue are culled out as under: 10. 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: Having decided the aforesaid two issues, the next issue that is to be decided by us is about the validity of order passed u/s 263 by the Ld. CIT seeking to revise the assessment order which was nullity in the eyes of law. 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 Ld. 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:

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“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 provided in the same. 20. In view of above discussion, ground no.3 is allowed and revision order passed u/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 u/s 143(3) dt 24-10-2013 was null & void in the eyes of law as the same was passed upon a non-existing entity and, therefore, the Ld. CIT could not have assumed jurisdiction under the law to make revision of a non est order and, therefore, the impugned order passed u/s 263 by the Ld.CIT is also nullity in the eyes of law and therefore the same is hereby quashed.” It may at this stage be relevant and pertinent to point out that while for the aforesaid order of the tribunal had thereafter been approved by the Hon’ble High Court of Bombay vide its order passed in ITA No.1168/2017 dated

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28.09.2021, but as the aforesaid view of the tribunal on the issues in question before us was not carried by the revenue any further in appeal before the Hon’ble High Court, therefore, the same having been accepted by the department had already attained finality. Our aforesaid view that when the assessment order is in itself null and void, then, the Commissioner of Income-Tax cannot exercise his revisionary jurisdiction u/s.263 of the Act is also supported by the order of the ITAT, Allahabad in the case of Hari Mohan Das Tandon (HUF) Vs. Pr. CIT (2018) 91 taxmann.com.199 (Allahabad). It was observed by the tribunal by relying on the order of the ITAT, Mumbai in the case of Westlife Development Ltd. (supra) that as the assessment order was in itself null and void as it was based on a non-est return, therefore, the Commissioner could not have exercised his jurisdiction under section 263 of the Act. Observations of the tribunal for the sake of clarity are culled out as under: “10.4 The Learned Counsel for the Assessee also argued that since the assessment is framed on the basis of the revised return filed on 1stJuly, 2013 and according to Ld. CIT it was a non est return, if assessment is framed on non est return, the assessment itself would be mill and void and could not be subject matter of jurisdiction under section 263 of the I.T. Act. In support of his contention, he relied upon the decision of the ITAT, Mumbai Bench in the case of Westlife Development Ltd. (supra) in which original assessment order was held to be null and void in the eye of Law as same was passed upon non-existing entity. Therefore, it was held that Ld. CIT could not have assumed jurisdiction under the Law to make revision of a non est order. Therefore, impugned order passed under section 263 by the CIT was also held invalid in the eye of Law and therefore, the same was quashed. The A.O in this case has framed the assessment on the basis of revised return filed on 1st July, 2013 and taken the income from the same for computing the total income of assessee. It is also case of the Revenue that even the A.O. did not mention original return of income in the

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assessment order, therefore, even if it is considered that revised return dated 1st July, 2013 which is basis for completing the assessment in question was non est, then the entire assessment would vitiated and would also be non est under the eye of Law. Therefore, decision of the Mumbai Bench would apply to the facts of the case. When assessment order itself is null and void based on non est revised return, the Ld. CIT could not have exercise jurisdiction under section 263 of the I T Act.” We further find that the ITAT, Delhi in the case of Krishan Kumar Saraf Vs. Commissioner of Income Tax, Hissar, ITA No.4562/Del /2011, dated 24.09.2015 had also taken a similar view. It was observed by the tribunal that the CIT cannot revise an order which is non-est in the eyes of law. In the said case the assessee in the course of the appellate proceedings which had originated from the order passed by the CIT under Sec. 263 of the Act had assailed the validity of the order passed u/s 263, for the reason that the notice u/s 143(2) was issued beyond the stipulated time period. The department objected to the aforesaid challenge thrown by the assessee to the validity of the assessment order on the ground that as the assessee had not challenged the assessment order, therefore, the same had attained finality. However, the said contention of the revenue was turned down by the tribunal by relying on the order of the Hon’ble High Court of Delhi in the case of CIT Central-1 Vs. Escorts Farms Pvt. Ltd., 180 ITR 280(Del) on the ground that the CIT could not have revised a non-est order. The relevant observations of the tribunal are for the sake of clarity culled out as under:

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that assessee has not challenged the assessment order. However, since the assessee was not aggrieved with the assessment order, therefore, he did not challenge. However, nothing turns on this when we consider the issue in the backdrop of proceedings initiated u/s 263 by ld. Commissioner. The moot point for consideration is as to whether this objection can be entertained at this stage of proceeding or not. In this regard we find that the decision of Hon'ble Delhi High Court in the case of Escorts Farms Pvt. Ltd. (supra), which we have extensively reproduced earlier, clearly supports the assessee's plea. 17. There is no quarrel with the proposition advanced by ld. DR that the proceedings u/s 263 are for the benefit of revenue and not for assessee. 18. However, u/s 263 the ld. 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 ld. 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 ld. 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 provided in the statute. 20. In view of above discussion, ground no. 3 is allowed and the revisional order passed u/s 263 is quashed.”

We, thus, on the basis of our aforesaid deliberations read along with the aforesaid settled position of law concur with the ld. AR that now when the impugned order of reassessment under Sec.143(3) r.w.s 147, dated 30.12.2018 in itself had been passed on the basis of invalid assumption of

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jurisdiction by the AO, and thus, is invalid and bereft of any force of law; or in fact non-est in the eyes of law, therefore, the same could not have been revised by the Pr. CIT under Sec. 263 of the Act.

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Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 31st October, 2022 ***SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��यथ� / The Respondent. 3. The Pr. CIT-1, Raipur (C.G) 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. 5. गाड� फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.