Nugraj Jain vs DCIT, Central Circle 26, Delhi

B) That Ld CIT-A vide impugned order passed u/s 250 of the Act erred in not quashing the impugned assessment order passed u/s 143(3) being made contrary to mandate of special provision of sec 148(expl 2 deemed escapement) as date of assessee search 11.05.2024 falling in FY 2024-2025 and AY 2025-2026 would include present subject AY 2023-2024 within scope of sec 147/148 so impugned asst made u/s 143(3) in totally illegal and unlawful;

C) That Ld CIT-A vide impugned order passed us 250 of the Act erred in not quashing the impugned assessment order passed u/s 143(3) being based on invalid jurisdictional notice u/s 143(2) dated 27.06.2024.

(08.05.2026) Held “Considered the rival submissions and material placed on record. We observed that the assessee had taken additional ground on the issue of jurisdiction. We noticed that the search was conducted on 30.05.2025. The search assessment year would be AY 2024-25. The six assessment years prior to the searched AY would be from AY 2018-19 to AY 2023-24. As per the amended provisions for completing search assessments under the provisions of section 148, 148B and 151 of the Act. We noticed that the assessments for the AYs under consideration are completed u/s 143(3) of the Act. We also noticed that the revenue, in this case respondent has not brought on record any material to substantiate that the AO had proceeded to follow the above due process to complete the search assessments. Respectfully following the aforesaid precedents, thus we hold that the assessments framed u/s 143(3) for AYs 2022-23 & A.Y. 2023-24 are bad-inlaw and without jurisdiction, as the assessment ought to have been framed under special provisions of section 148 and to undertake the same, approval of specified authority u/s 148B was required to be taken. Accordingly, additional grounds taken by the assessees, Pilot Industries Ltd. and Ardee Industries Limited are allowed.”

“A perusal of the grounds of appeal (supra) alludes that the assessee has raised both legal grounds concerning the validity of assessment made u/s143(3) as well as those concerning merits of the addition per se. The Latin legal maxim Sublato fundamento cadit opus that corresponds to hypothesis that a superstructure does not survive on weak foundation is essential part of jurisprudence. This maxim literally translates to, "If the foundation is removed, the superstructure falls". It is a well-established principle in law, especially in cases where the initial action or underlying basis of a legal right is found to be invalid, causing all subsequent actions dependent on it to fail. Another related maxim with a similar meaning is Debile fundamentum fallit opus, which translates to "Where there is a weak foundation, the work fails". As ground of appeal nos. A is legal grounds raising the presumption of lack of jurisdiction with the Ld.AO to pass the assessment order under section 143(3) as well as validity of assessment, we would like to take the same first. It is trite law that a superstructure does not survive on weak foundation. We have noted that facts of the present case are identical to those in the above judicial precedents and no distinguishment of facts could be identified. Accordingly, we are of the considered view that there is sufficient merit in the assessee’s legal ground that once search under section 132 had taken place in assessee’s case on15.02.2024, no assessment u/s 143(3) dated 03.05.2025 could have been concluded qua a Return of Income filed on 30.10.2023. Accordingly, we allow the legal ground of appeal No.A of the assessee and set-aside and quash the assessment order dated 03.05.2025”

Trib)“Considered the rival submissions and material placed on record. We observe that assessment was completed by the Assessing Officer, Ward 28 (1), Delhi vide order dated 30.12.2019. We observe that as per the CBDT InstructionNo.1/2011 dated 31.01.2011 u/s 119 of the Act in the present case, the assessee has declared an income of Rs.91,05,020/- and as per the Instruction, income upto Rs.30,00,000/- is with the ITOs and anything aboveRs.30,00,000/-, assessment has to be completed by ACs/DCs. In the given case, we observed that as per the income declared by the assessee, the jurisdiction falls under ACs/DCs…we observe that actual jurisdiction lies with ACs/DCs and it is beyond the jurisdiction of ITOs. Therefore, notice u/s 143(2) to assess the income of the assessee is beyond the jurisdiction of the ITO. Therefore, the jurisdiction notice u/s 143(2) is bad in law and accordingly even assessment order passed with wrong jurisdiction is bad in law.”

(Assessment Year:2017-18)08.04.2026: “Now CBDT instructions No. 1 of 2011 dated 31.01.2011 provide that in case of metro cities income declared by individuals is aboveRs.20,00,000/- in those circumstances Deputy Commissioner/Assistant Commissioner has power of assessment. Thus, in case of assessee as the income declared was less that Rs. 20,00,000/- the power vested with Income Tax Officer only. Therefore, issuance of notice u/s 143(2) of the Act for assumption of jurisdiction of assessment to be completed u/s 143(3) by ACIT, Circle 41(1) is vitiated.”Following decisions noted “ITA No. 1020/del/2019 VKM Holdings Pvt. Ltd. Vs. ACIT, Circle 4(1) New Delhi; As per same proposition, we rely decision of Coordinate Bench in Vipul Mittal Vs. DCIT, Circle 11(2) New Delhi in ITA No. 2850/Del/2019 and in case of Arjun Rishi Vs. ITO, (2025)176 taxmann.com 720 (Delhi-Trib) and in case of Vanshika Motors (P) Ltd. Vs. ACIT, Circle-2 Meerut in ITA No. 6212/Del/2017 and in case of J. Mitraand Bros Vs. ACIT, Circle 50(1) in ITA No. 3643/Del/2023).”

“And in this case, it is a fact that the notice u/s 143(2) of the Act was not issued by the AC/DC, who ultimately passed the Assessment order, but the same was issued by the Income Tax Officer, who had no authority/competency/ power to make the assessment in the case of the assessee and/or assess the income of the assessee being beyond pecuniary jurisdiction/limit, as prescribed by the CBDT vide Instruction no. 01/2011, therefore we have no hesitation to quash the notice dated 01.08.2017 under section 143(2) of the Act, which is the foundation of the assessment order, along with the assessment order dated 25.05.2023 under section 147 read with section 144 read with section 144B of the Act. Thus, the same are quashed.”

Devichand Jain vs UOI 452 ITR 53“4. We have considered the affidavit in reply of one Mr. Suresh G. Kamble, ITO who had issued the notice under section 148 of the Act. Said Mr. Kamble, ITO, Ward 12(3)(1), Mumbai admits that such a defective notice has been issued but according to him, PAN of Petitioner was lying with ITO Ward (12)(3)(1), Mumbai and it was not feasible to migrate the PAN having returned of income exceeding Rs. 30 lakhs to the charge of DCIT, Circle 12(3)(1), Mumbai, as the time available with the ITO 12(3)(1) was too short to migrate the PAN after obtaining administrative approval from the higher authorities by 31st March, 2019. 5. The notice under section 148 of the Act is jurisdictional notice and any inherent defect therein is not curable. In the facts of the case, notice having been issued by an officer who had no jurisdiction over the Petitioner, such notice in our view, has not been issued validly and is issued without authority in law.”

“6.

It is the case of the assessee that as the Ld. Assessing Officer has, for making impugned additions, exclusively relied upon the seized material, he was required to have, within meanings of special provisions of Explanation -2 to section 148, assessment invoking provisions of section 147/148 and not under section 143(3). It has been vehemently argued that the assessment concluded u/s 143(3) is thus void ab initio. In support of his contentions, the ld. AR has filed a voluminous paper book, inter alia, including judicial precedents. The ld. Counsel has fiercely argued that there are catena of judgments of in its favour mandating that post explanation to section 148 in such facts and circumstances of the case, invocation of section 143(2) is impermissible. It was contended that on this legal issue and infirmity alone, the impugned assessment order u/s 143(3), running into 250 odd pages and dated 03.05.2025 deserves to be quashed.

7.

The ld. DR placed reliance upon the orders of the lower authorities.

8.

We have noted that Hon’ble Co-ordinate Bench of the Chandigarh Tribunal, on similar facts in the case of Malbros International Pvt. Ltd in ITA No.48/Chd/2025 through its dated 13.01.2026 have held as under:-

9.

After due consideration of material facts on record as well as arguments of Ld. AR, we find substantial merit in legal arguments as urged by Ld. AR. The arguments of Ld. AR are duly backed up by various judicial decisions taking the same view. The pertinent legal ground as raised by Ld. AR is that the assessment has been framed u/s 143(3) without fulfilling the mandatory conditions prescribed u/s 148 read with Explanation 2(iv) thereof. Another pertinent legal issue is that mandatory approval as required u/s 148B has not been obtained from the competent authority even though the impugned AY was immediately preceding the search assessment year. Another line of argument is that approval as obtained by Ld. AO from Addl. CIT before passing the assessment order was invalid one since the approval ought to have been obtained u/s 148B of the Act which was not done in the present case. Further, whatever approval was taken, the same was mechanical and without application of mind. All these legal issues, as rightly been pointed out by Ld. AR, has adequately been dealt with by co-ordinate bench of Chandigarh Tribunal in the case of M/s Homelife Buildcon Pvt. Ltd. (ITA No.880/Chd/2024 &ors. dated 17-07-2024). We find that on identical facts, the coordinate bench held as under

22.

The core question before the Bench is whether, in the facts and circumstances of the case, the assessment ought to have been framed under section 143(3) or under section 147 of the Income-tax Act, 1961. From the plain reading of the statutory provisions and in light of Explanation 2 to section 148, it becomes abundantly clear that the legislature has widened the scope of reassessment, particularly through the Finance Act, 2021, which introduced significant changes to the reassessment regime. These amendments explicitly include instances involving third-party search material and make it incumbent upon the Assessing Officer (AO) to follow the procedure under section 148, including obtaining prior approval from the Principal Commissioner of Income Tax (PCIT).

23.

In the present case, the AO proceeded to frame the assessment under section 143(3) despite relying heavily on material found during searches conducted on third parties. The AO, instead of complying with the jurisdictional preconditions laid down under the reassessment provisions, proceeded without recording the mandatory satisfaction and without obtaining prior sanction from the competent authority. This conduct not only, violates the express mandate of law, but also renders the assessment a jurisdictional error. The AO has, in fact, gone a step further by bypassing the legal safeguards embedded in section 147, thereby vitiating the assessment proceedings ab initio.

24.

Furthermore, a plain reading of the Finance Act, 2021 and the Explanatory Memorandum to the Finance Bill clearly indicates that the legislative intent was to bring all searches conducted on or after 1st April 2021 within the ambit of the new reassessment regime under section 147 of the Income-tax Act, 1961. This new regime was introduced through significant amendments to section 147 and section 148, along with the insertion of Explanations 1 and 2, and the concept of "information suggesting escapement of income" was explicitly defined. From the reading of Explanation 2 to Section 147, it is evident that in cases where a search is initiated on or after 1st April 2021, the Assessing Officer shall be deemed to have information, which suggests that income chargeable to tax has escaped assessment for three assessment years immediately preceding the assessment year relevant to the previous year, in which, the search is initiated, provided that books of account, documents, assets, bullion, jewellery, or other valuable articles are seized or requisitioned in the course of the search. This deeming provision is not limited only to the person searched, but also extends to "other persons", provided that due procedure under the law-specifically, the recording of satisfaction that such seized material belongs to the assessee and obtaining prior approval from the PCIT-is followed.

25.

In the present case, where the AO has admittedly relied upon material seized during searches conducted on other persons, i.e., Sh. Ravi Kapoor and Sh. Ajay Kumar Prabhakar, it was mandatory for the AO to invoke the provisions of section 147 and not to bypass the statutory framework by proceeding under section 143(3). Granting such unfettered powers to the AO to rely on third-party material without adhering to the safeguards under section 147 would defeat the very purpose of the amendment and open the floodgates to arbitrary assessments.

26.

The relevant extract Memorandum explaining the finance bill is reproduced as under:-

‘(ii) Assessments or reassessments or in re-computation in cases where search is initiated under section 132 or requisition is made under 132A, after 31st March 2021, shall be under the new procedure.

(vi)

Further, in search, survey or requisition cases initiated or made or conducted, on or after 1st April, 2021, it shall be deemed that the Assessing officer has information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year, in which, the search is initiated or requisition is made or any material is seized or requisitioned or survey is conducted.”

27.

The notice issued under section 143(2) was also produced by the AR. Upon perusal of the said notice, it is evident that the assessment under section 143(3) was initiated solely for the purpose of verifying the return of income filed by the assessee. In such circumstances, the importing and reliance upon material seized from third-party searches, namely, those conducted on Sh. Ajay Kumar Prabhakar and Sh. Ravi Kapoor, goes beyondthe jurisdiction conferred under section 143(3). Particularly, where the applicable law—Explanation 2 to section 148 (as amended by the Finance Act, 2021) mandates prior approval from the Principal Commissioner of Income Tax (PCIT) before initiating reassessment proceedings on the basis of such material, the failure to comply with that requirement renders the assessment legally untenable.

28.

In the present case, the AO did not issue a notice under section 148, nor did he follow the due process of law under the new reassessment framework, including recording of satisfaction and obtaining prior sanction from the PCIT. Therefore, the assessment framed under section 143(3), because of being based on third-party material without adhering to statutory safeguards, is bad in law. The AO was only empowered to verify the return of income and restrict his scope of inquiry accordingly; he was not permitted to expand the assessment by importing and relying upon third-party seized material without following the mandatory procedure laid down under the law.

29.

Furthermore, there exists a mandatory statutory requirement that in all cases involving search-related assessments falling within the assessment year, immediately preceding the year of the search, the prior approval of the Joint Commissioner is required under section 148B of the Income-tax Act, 1961. In the present case, the Assessing Officer (AO) has proceeded without obtaining such approval, which is a clear violation of the procedural safeguards envisaged under the law and, as such, vitiates the assessment proceedings. In the present case, approval has been granted for assessment framed u/s 143(3) only.

The relevant provision of section 148B reads as under:

Prior approval for assessment, reassessment or

recompilation in certain cases. 148B. No order of assessment or reassessment or recompilation under this Act shall be passed by an Assessing Officer below the rank of Joint Commissioner, in respect of an assessment year to which clause (i) or clause (ii) or clause (iti) or clause (iv) of Explanation 2 to section 148 apply except with the prior approval of the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director.

30.

A comparison of the requirement of approval under section 153D and section 148B is drawn, from which it is evident that approval under section 153D was earlier required only in cases where assessments were completed under section 153A/153C and also for search year. However, under the amended provisions, approval under section 148B is now required in all cases where proceedings are initiated pursuant to a search, requisition, or survey, or where asset/material/documents found during such search pertain to or relate to another person. In such cases, the Assessing Officer must take the approval under section 148B from the specified higher authority.

	Aspect	Section 153D		Section 148B (with Explanation 2 to Section 148)
	Applicable Period	Search initiated between 01.06.2003 to 31.03.2021		Search/survey initiated on or after 01.04.2021 but before 01.09.24
	Context	Search assessment under Section 153A/153C		All cases where assessment/reassessment is based in respect of an assessment year to which clause (i) or clause (ii) or clause (iii) or clause (iv) of Explanation 2 to section 148
	Triggering Event	Search or requisition on the assessee under Sections 132 /132A or material is used against assessee from third party search		1. Search/requisition 2. Survey (except under 133A(2A)) on assessee 3. Search/requisition on another person, but assets/documents related to assessee.
Purpose of Approval			Supervisory check in search assessments to ensure fairness and oversight		assessments to ensure fairness and oversight Prevent misuse of powers in reassessment based on search/survey-related information under new regime
Who gives approval	Joint Commissioner (mandatory)	Any of: Joint Commissioner / Addl. Commissioner / Joint Director / Addl. Director
Aspect	Section 153D	Section 148B (with Explanation 2 to Section 148)
Deeming Presumption	Not expressly stated	Explanation 2 creates a legal presumption: AO is deemed to have information suggesting income escaped assessment in specified cases

31.

This requirement has also been explicitly discussed in the Explanatory Memorandum to the Finance Bill, 2022, which emphasizes the need to protect taxpayer rights by ensuring that no reassessment is carried out without proper sanction and due process. It is further seen that the Joint Commissioner has not even been supplied seized material relied upon as seized from third-party in the present assessment. There exists a prescribed procedure under which such seized material (including material found from third-party premises) is to be forwarded to the approving authority at least 30 days in advance of granting approval. This procedural safeguard is crucial to prevent arbitrary and unregulated use of third-party material.

32.

In the present case, there is no evidence to demonstrate that the prescribed procedure was followed, or that the Joint Commissioner was apprised of the seized material by forwarding copies of the documents found from the third party prior to framing the assessment. The complete failure to comply with the mandatory provisions of section 148B renders the reassessment not only. procedurally defective but also without jurisdiction.

33.

Even we find while framing the assessment under section 143(3), the Assessing Officer (AO) has, on the last page of the assessment order, referred to an approval obtained from the supervisory authority. However, a bare perusal of this approval shows that it was obtained in reference to F. No. 299/36/2020/1DAR/INV3(3)/577 dated 15.07.2022, i.e., in accordance with the CBDT Circular dated 15th July 2022, and not under the mandatory provisions of section 148B of the Income-tax Act, 1961.

At the outset, it is important to note that the approval so obtained does not mention or consider any of the seized materials sourced from the third party. searches conducted on Sh. Ajay Kumar Prabhakar and Sh. Ravi Kapoor, despite the AO having heavily. relied on those materials in framing the additions. The approval merely states that the appraisal report was considered, without any reference to the original documents seized or to the statutory procedure outlined under section 148B.

It is pertinent to refer to the Manual of Office Procedure in February 2003, which lays down a mandatory protocol: that in all search cases, especially where material pertains to persons other than the one searched, such material is to be forwarded in original to the approving authority, and a draft order is required to be submitted for approval at least 30 days in advance. In the present case, the approval letter was issued by the DCIT only on 22nd August 2023, which clearly contravenes this procedural requirement. This procedural lapse is further compounded by the judgment of the Hon'ble Supreme Court in Serajuddin and Co. case, [2024] 163 taxmann.com 118 (SC) wherein it was held that in search cases, strict adherence to the approval protocol as laid down in the departmental Manual of Office Procedure in February 2003 and law is essential to uphold the validity of the assessment.

34.

Thus, from the above, it is quite evident from the approval granted by the Addl. CIT(Central), there is no mention or consideration of the seized material sourced from the third party, namely Sh. Ajay Prabhakar and Sh. Ravi Kapoor, though, we find that in the assessment order and in the order of CIT(A), both the authorities have heavily relied upon on such seized material and it only states that the appraisal report have been considered without any reference to any original documents seized for statutory procedure outlined has 16 u/s 148. Thus, in view of above, the assessment as framed by Assessing Officer vide order dated 24.08.2023 is quashed.”

The coordinate bench, on identical facts, held that Ld. AO proceeded to frame the assessment u/s 143(3) despite relying heavily on material found during searches conducted on third-parties. The AO, instead of complying with the jurisdictional preconditions laid down under the reassessment provisions, proceeded without recording the mandatory satisfaction and without obtaining prior sanction from the competent authority. The said conduct not only violates the express mandate of law but also renders the assessment jurisdictionally erroneous. A plain reading of the Finance Act, 2021 coupled with Explanatory Memorandum to the Finance Bill clearly indicate that the legislative intent was to bring all searches conducted on or after 01-04-2021 within the ambit of the new reassessment regime u/s 147 of the Income-tax Act, 1961. This new regime was introduced through significant amendments to Sec.147 and Sec.148, along with the insertion of Explanations-1 and 2 and the concept of "information suggesting escapement of income" was explicitly defined. From the reading of Explanation-2 to Section 147, it would be evident that in cases where a search is initiated on or after 01-04-2021, AO shall be deemed to have information, which suggests that income chargeable to tax has escaped assessment for three assessment years immediately preceding the assessment year relevant to the previous year, in which, the search is initiated, provided that books of account, documents, assets, bullion, jewellery, or other valuable articles are seized or requisitioned in the course of the search. This deeming provision is not limited only to the person searched, but also extends to "other persons", provided that due procedure under the law specifically, the recording of satisfaction that such seized material belongs to the assessee and obtaining prior approval from the PCIT is followed otherwise the assessment would be bad-in-law. It was further observed by the bench that AO relied upon material seized during searches conducted on other persons and therefore, it was mandatory for Ld. AO to invoke the provisions of Sec.147 and not to bypass the statutory framework by proceeding u/s 143(3). Granting such unfettered powers to the AO to rely on third-party material without adhering to the safeguards u/s 147 would defeat the very purpose of the amendment and open the floodgates to arbitrary assessments. It was further observed by the bench that assessment u/s 143(3) was initiated solely for the purpose of verifying the return of income as filed by the assessee. In such circumstances, the importing and reliance upon material seized from third-party searches would go beyond the jurisdiction conferred u/s 143(3) particularly, where the applicable law i.e., Explanation-2 to section 148 (as amended by the Finance Act, 2021) mandates prior approval from the Principal Commissioner of Income Tax (PCIT) before initiating reassessment proceedings on the basis of such material. The failure to comply with such requirement would render the assessment legally untenable. The Ld. AO did not issue a notice u/s 148 nor did he followed the due process of law under the new reassessment framework, including recording of satisfaction and obtaining prior sanction from the PCIT. Therefore, the assessment framed u/s 143(3), because of being based on third-party material without adhering to statutory safeguards, would be bad-in-law. The AO was only empowered to verify the return of income and restrict his scope of inquiry accordingly and he was not permitted to expand the assessment by importing and relying upon third-party seized material without following the mandatory procedure laid down under the law. It was mandatory statutory requirement that in all cases involving search-related assessments falling within three assessment year, immediately preceding the year of the search, the prior approval of the Joint Commissioner u/s 148B would be required. However, Ld. AO proceeded without obtaining such approval which is a clear violation of the procedural safeguards envisaged under the law which would vitiate entire assessment proceedings. In the present case, approval was taken to frame assessment u/s 143(3) only. As against this, the provisions of Sec.148B mandate prior approval of specified authority. These provisions provide that no order of assessment or reassessment or recomputation under this Act shall be passed by an Assessing Officer below the rank of Joint Commissioner, in respect of an assessment year to which clause (i) or clause (ii) or clause (iii) or clause (iv) of Explanation-2 to Sec.148 apply except with the prior approval of the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director. The bench further observed that under the amended provisions, approval u/s 148B would be required in all cases where proceedings were initiated pursuant to a search, requisition, or survey, or where asset / material / documents found during such search pertain to or relate to another person. In such cases, the Assessing Officer must take the approval u/s 148B from the specified higher authority. This requirement was explicitly discussed in the Explanatory Memorandum to the Finance Bill, 2022, which emphasizes the need to protect taxpayer rights by ensuring that no reassessment is carried out without proper sanction and due process. The Joint Commissioner was not even supplied with seized material as relied upon by Ld. AO. There exists a prescribed procedure under which such seized material (including material found from third-party premises) is to be forwarded to the approving authority at least 30 days in advance of granting approval. This procedural safeguard is crucial to prevent arbitrary and unregulated use of third-party material. There was no evidence to demonstrate that the prescribed procedure was followed, or that the Joint Commissioner was apprised of the seized material by forwarding copies of the documents found from the third party prior to framing the assessment. The complete failure to comply with the mandatory provisions of section 148B renders the reassessment not only procedurally defective but also without jurisdiction. The bench further observed that while framing the assessment u/s 143(3), the AO has, on the last page of the assessment order, referred to an approval obtained from the supervisory authority. However, this approval was obtained in reference to F.No.299/36/2020/1DAR/INV3(3)/577 dated 15-07-2022, i.e., in accordance with the CBDT Circular dated 15-07-2022 and not under the mandatory provisions of section 148B of the Income-tax Act, 1961. It was to be noted that the said approval did not mention or consider any of the seized materials sourced from the third party despite the fact that AO heavily relied upon that material while making the additions. The approval merely states that the appraisal report was considered, without any reference to the original documents seized or to the statutory procedure outlined under section 148B. Pertinently, the manual of office procedure issued in February 2003 lays down a mandatory protocol that in all search cases especially where material pertains to persons other than the one searched, such material is to be forwarded in original to the approving authority and a draft order is required to be submitted for approval at least 30 days in advance. In the present case, the approval letter was issued by the DCIT only on 22-08-2023 which clearly contravenes this procedural requirement. This procedural lapse is further compounded by the judgment of the Hon'ble Supreme Court in Serajuddin and Co. case (163 Taxmann.com 118) wherein it was held that in search cases, strict adherence to the approval protocol as laid down in the departmental Manual of Office Procedure in February 2003 and law is essential to uphold the validity of the assessment. It was quite evident from the approval as granted by Ld. Addl. CIT that there was no mention or consideration of the seized material sourced from the third party though both the lower authorities heavily relied upon such seized material. The approval merely states that the appraisal report has been considered but without any reference to any documents seized from third parties. Finally, on the given facts, the bench quashed the assessment order. We find that similar facts exist in the present appeal before us. No change in facts could be demonstrated by revenue.

11.

The Ld. CIT-DR has referred to CBDT Circular F.No.225/66/2023/ITA-II dated 24-05-2023 to state that the jurisdiction was validly acquired by Ld. AO. However, the said circular merely in the nature of guidelines for compulsory selection of returns for complete scrutiny during the financial year 2023-24. After going through the Circular, we find that this circular merely contains parameters for compulsory selection of returns for complete scrutiny. The relevant clause 2(ii) which apply to the facts of present case, provide that assessment in search & seizure cases / requisition cases u/s 132 / 132A conducted on or after 01-04-2021 shall be selected with prior administrative approval of Pr. CIT / Pr. DIT / CIT / DIT concerned who shall ensure that such cases are transferred to central charges u/s 127 of the Act within 15 days of service of notice u/s 143(2) / 142(1) of the act by the jurisdictional AO. The same is thus merely administrative in nature and prescribe a procedure to be followed in search cases which have been conducted after 01-04-2021. The same do not address the various legal issues as raised by Ld. AR before us and which have been enumerated in preceding paragraphs. Therefore, this circular does not render any assistance to the case of the revenue.

12 Finally, considering the entirety of facts and circumstances of the case, we would hold that the assessment ought to have been framed under special provisions of Sec.148. To undertake the same, approval of specified authority as envisaged u/s 148B was required to be taken which is not shown to have been taken. Further, the approval of appropriate authority stood vitiated for application of mind. The procedure as required under the provisions of Sec.148 is not shown to have been fulfilled in the present case. The approval as sought by Ld. AO of the order u/s 143(3) is non-est / bad in law and the granting of the approval of the order u/s 143(3) by the Addl. CIT is null and void and thus, assessment as framed u/s 143(3) vide order dated 26-03-2024 deserves to be quashed on various legal grounds. We order so. Since the assessment order has been quashed on legal grounds, delving into the merits of the case has been rendered mere academic in nature. However, for the sake of completeness we deal with the merits of the additions also which has been raised in these cross-appeals…..”

“….We have heard rival submissions in the light of material placed on record. The ld. Counsel for the assessee submitted that the Appellant filed its return of income for Assessment Year 2022-23 on 03.10.2022. Subsequently, a search under Section 132 of the Income-tax Act, 1961 (the Act) was conducted on 10.01.2023. It was argued that consequently the present year was not closed/ concluded year on the dated of search. It was submitted that as per Explanation 2 to Section 148 of the Act, once a search under section 132 is conducted in a case, assessment proceedings are to be initiated under Section 147 through the issue of notice under Section 148 of the Act. It was submitted that in the present case, however, the AO did not issue the mandatory notice under Section 148 of the Act but had only issued a notice under Section 143(2) without a notice under Section 148 of the Act. It was accordingly argued that the assessment order under section 143(3) dated 31.03.2024 was therefore based upon invalid assumption of jurisdiction by the ld. AO and hence liable to be quashed. The ld. Counsel placed heavy reliance on the decision of this Tribunal, in the case of Montage Enterprises Put. Ltd. v. DCIT (ITA No. 5458/Del/2025 & 5906/Del/2025. Reference was also made to the decisions of Chandigarh Tribunal in the case of Homelife Buildcon (P.) Ltd. Vs. DCIT, (2025) 176 taxmann.com 614 and Jamna Das Nikkamal Jain Saraf Pot. Ltd. Vs DCIT (ITA No. 403/Chd./2025).

5.

We have noted that on the issue of validity of issuance of notice in cases where search has taken place, this Tribunal, in the case of Montage Enterprises Put. Ltd. (supra) has held as under:-

“….

2.

We notice at the outset that there arises the first and foremost issue of validity of the impugned section 143(3) assessment itself framed by the learned DCIT, Central Circle-II, Noida as per the assessee’s pleadings in its appeal ITA No.5458/Del/2025. A combined perusal of both these case files indicates that the assessee/appellant is engaged in the business of manufacturing and sale of flexible packaging material etc. It has filed its return for the impugned assessment year 2022-23 on 29.10.2022, declaring loss of Rs.64,53,88,702/-. And the same was taken for scrutiny. The learned departmental authorities thereafter carried out section 132 search action as well as section 133A survey in its case on 21.02.2023. There is further no dispute that the learned Assessing Officer then proceeded to frame the impugned assessment on 30th March, 2024 in its case inter alia making various disallowances/additions etc., involving varying sums, which stand partly upheld in the CIT(A)’s lower appellate discussion.

3.

It is in this factual backdrop that the assessee seeks to raise it’s precise question challenging validity of the impugned assessment for the sole reason that the same ought to have been framed under section 148 with approval under section 148B of the Act in light of Homelife Buildcon (P.) Ltd. Vs. DCIT, (2025) 176 taxmann.com 614 (Chandigarh – Trib.) as relied in Jamna Das Nikkamal Jain Saraf Pvt. Ltd. Vs DCIT (ITA No. 403/Chd./2025) decided on 04.11.2025, adjudicating the very issue against the department as under:

“11.4

In conclusion, it was submitted that since the year under appeal formed part of the three assessment years immediately preceding the year in which search was conducted, the assessment ought to have been framed under section 148 with approval u/s 148B. The framing of the assessment u/s 143(3) and approval taken only for the purposes of section 143(3) was thus asserted to be fundamentally defective, non-compliant with statutory mandate, and consequently void ab initio. On these grounds, following the ratio in Homelife Buildcon Pvt. Ltd., it was prayed that the impugned assessment be quashed.

12.

The Ld. CIT-DR Shri Manav Bansal opposed the contention, stating that the return for A.Y. 2022-23 was filed prior to the date of search, and validly selected for scrutiny under CASS. The Assessing Officer was competent to complete the assessment u/s 143(3).

12.1

He contended that section 148B applies only to “re-assessment” and not to “regular assessments.” The AO’s approval from Addl. CIT, being in line with the CBDT Instruction No. 7/2022 dated 15.07.2022, fulfils the supervisory requirement. The DR also submitted that Homelife Buildcon is distinguishable, as the Assessing Officer therein relied on third-party search data, whereas the present case is based on assessee’s own seized material.

13.

We have carefully considered the rival submissions and perused the record. It is undisputed that search u/s 132 was conducted on 24.11.2022, relevant to A.Y.2023-24. Thus, A.Y.2022-23 is one of the three preceding years under Explanation 2(iv) to section 148. The Explanation reads that if a search is initiated, “the Assessing Officer shall be deemed to have information suggesting escapement of income for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated.”

13.1

Therefore, the only permissible statutory course was to issue notice u/s 148 and obtain prior approval u/s 148B before passing assessment order.

13.2

As the Assessing Officer completed the assessment under section 143(3) of the Act without issuing the notice under section 148 of the Act. Therefore, the question before us is whether the assessment proceedings initiated under section 143(3) of the Act can be validly continued and completed after a search under section 132 has been conducted in the case of the same assessee, without following the procedure prescribed under section 148 (Explanation2) of the Act.

13.3

In our considered opinion, the answer lies in the scheme of the Act itself. Section 143 provides the general framework for regular assessment, whereas sections 147–148 (post-2021 regime) deal with reassessment based on information suggesting escapement of income, including that unearthed during a search.

13.4

A plain reading of section 143(2) shows that such notice can be issued only when are turn of income is furnished under section 139 or in response to a notice under section 142(1). It empowers the Assessing Officer to scrutinize that return if he considers that income has been understated or tax underpaid. However, when a search under section 132 takes place and materials are found indicating possible escapement of income, the statute envisages a different route for carrying out assessment or reassessment under section 147 read with section 148, which is the special mechanism for bringing to tax the income discovered in consequence of a search.

13.5

Although section 148 (inserted w.e.f. 01.04.2021) does not begin with a non-obstante clause similar to the erstwhile section 153A, its context and Explanation 2 make it clear that where a search is initiated, the jurisdiction thereafter must flow through this special channel, subject to prior satisfaction and approval of the Principal Commissioner or Commissioner. The legislative intent is to ensure that when a search is carried out, the assessment is framed under the specific provisions meant for such cases and not under the general provision of section 143(3). Further we may mention that no notice under section 143(2) could have been issued after 3 months from the from the end of the financial year in which the return is furnished. In the present case the original return of income was filled on 4/11/2022 for the assessment year 202223 and 143 (2) was issued on 21/6/2023 ,therefore also the assessment was framed under 143(3) of the Act is not sustainable. In other words the time required for issuing the notice under 143(2) had already expired, and the revenue can not be allowed to issued issue 143(2) on 21.6.2023 after the search was carried out and notice had been issued on 21.6.2023 and assessment was framed under 143(3) of the Act. The relevant portion of section 143(3) reads as under:-

143(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce any evidence on which the assessee may rely in support of the return:

Provided that no notice under this sub-section shall be issued after the expiry of three months from the end of the financial year in which the return is furnished.

13.6

This position finds substantial support from the ratio of various decisions of Hon'ble High Court and Hon'ble Supreme Court. The Courts unanimously held that once a search has been conducted and proceedings are triggered under section 153A, the Assessing Officer cannot continue parallel proceedings under section 143(3) or section 147 for the same assessment year, because the entire assessment for that year stands merged in the search assessment. The Courts emphasized that the existence of a special procedure for assessment consequent to a search is a complete code in itself; therefore, ordinary assessments abate and cannot coexist with the search-based assessment.

13.7

Drawing this analogy to the current regime, it is evident that when a search takes place and information is unearthed suggesting escapement of income, the Assessing Officer must act under section 148 (which now performs the role formerly assigned to section 153A) rather than continuing with appending section143(3) proceeding. The legislative intent remains the same — to prevent multiplicity of proceedings and ensure that only one comprehensive order is passed, factoring in both the pre-search and post search materials.

13.8

The rationale is further reinforced by the well-settled principle of generalias pecialibus non derogant — the special provision overrides the general. Section 148 (as a special provision triggered by search information) must prevail over section 143 (the general provision for regular scrutiny). Allowing the Assessing Officer to continue and conclude proceedings under section 143(3) after a search would defeat this legislative scheme and render the safeguards, such as prior approval of the Principal Commissioner, redundant.

13.9

Accordingly, we hold that once a search is initiated under section 132 and material is found relating to the assessee, the pending assessment under section 143(3) cannot validly continue, as the time for issuing the 143(2) in response to original return of income had already expired, therefore the Assessing Officer must necessarily proceed in accordance with the special provisions contained in section 148 of the Act.”

6.

We next notice with the able assistance coming from both the parties that the learned CIT(A)’s impugned estimation has considered the assessee’s average GP @ 11.84% in AYs 2012-13 to AY 2021-22 alongwith the flexible packaging material industry’s comparable instances having the GP rate @ 6.96% (pages 122-123) in the lower appellate discussion to arrive at the “mean” profit rate of 9.40% i.e. 11.84% + 6.96%÷ 2, which is challenged by both the parties. That being the case, the assessee takes us to case law CIT Vs. K.Y. Pilliah & Sons (1967) 63 ITR 411 (SC), CIT Vs. Surjeet Singh Mahesh Kumar (1994) 210 ITR 83 (Del.), Bimal Kumar Anant Kumar Vs. CIT (2007) 159 TAXMAN 402 (All.), Salem Steel Co. Vs. CIT (2010) 322 ITR 349 (Mad.), Telelinks & Ors. Vs. CIT (2015) 377 ITR 158 (P&H), quoted in the lower appellate discussion at page 125 onwards that even such an estimation is not to be an unbridled and unguided one but to be based on the very sector’s book results at this relevant point of time. We thus reject the Revenue’s vehement contentions seeking to assess the assessee @ 18% and direct the learned Assessing Officer to estimate it’s GP @ 6.96% going by the segmental trends only. Ordered accordingly.

All other remaining issues between the parties stand rendered academic in forgoing terms.

7.

This assessee’s appeal ITA No.5458/Del/2025 is allowed and the Revenue’s cross appeal ITA No. 5906/Del/2025 is dismissed. A copy of this common order be placed in the respective case files...”

6.

Upon consideration of the matter, we also find merit in the assessee’s legal ground herein that once the impugned search had taken place in its case, no normal assessment under section 143(3) of the Act could have been framed in light of the tribunal’s foregoing twin decisions going against the department. The ld. DR placed heavy reliance upon the order of lower authorities, however, could not satisfactorily controvert the arguments of the appellant assessee on this issue. We thus adopt the above extracted reason mutatis mutandis to quash the impugned assessment framed by the learned Assessing Officer on 31.03.2024 in very terms. The ground of appeal no.3 raised by the assessee qua invalid assumption of jurisdiction is therefore allowed…..”

10.

We have noted that facts of the present case are identical to those in the above judicial precedents and no distinguishment of facts could be identified. Accordingly, we are of the considered view that there is sufficient merit in the assessee’s legal ground that once search under section 132 had taken place in assessee’s case on 15.02.2024, no assessment u/s 143(3) dated 03.05.2025 could have been concluded qua a Return of Income filed on 30.10.2023. Accordingly, we allow the legal ground of appeal No.A of the assessee and set-aside and quash the assessment order dated 03.05.2025. “