Introduction
The decision of the Delhi ITAT ‘H’ Bench in JCIT v. RNT Metals Pvt. Ltd. and the connected cross-objection by the assessee, rendered as a common order in ITA 970/DEL/2026 and CO 234/DEL/2026 (pronounced on 03-September-2026), is an important authority on the boundary between scrutiny assessment and reassessment in search cases. Passed by the Accountant Member, Shri Manish Agarwal, with Judicial Member Shri Sudhir Kumar, the order grapples with one central question: after a search is initiated under Section 132 of the Income-tax Act, 1961 on or after 01-04-2021, can the Assessing Officer continue with, and complete, an assessment in the normal route of Section 143(3)?
The Tribunal answered in the negative. It held that Explanation 2 to Section 148 creates a deemed escapement of income once a search is carried out in the post-01-04-2021 regime, and that the jurisdictional strictures of Section 147/148 cannot be bypassed merely because the original return had already been taken up for scrutiny. The result was the quashing of the assessment order dated 31-03-2024 passed under Section 143(3) of the Act, with the Revenue’s appeal being dismissed as infructuous and the assessee’s cross-objection being allowed.
Facts of the Case
RNT Metals Pvt. Ltd., the assessee, filed its original return of income for Assessment Year 2022-23 under Section 139(1) of the Act declaring a total income of ₹2,12,14,440. This return was processed under Section 143(1). Subsequently, a search and seizure action under Section 132 was carried out on 12-12-2022 at the business and residential premises of the company’s directors. The jurisdiction over the assessee was thereupon transferred to the AC/DC, Central Circle-7, New Delhi, in terms of an order under Section 127 of the Act.
Thereafter, a statutory notice under Section 143(2) was issued on 29-06-2023. Following the assessee’s participation in the proceedings, the assessment was completed on 31-03-2024 under Section 143(3) with multiple additions totaling ₹1,92,35,043, bringing the assessed income to ₹4,04,49,480. The assessee appealed to the Ld. CIT(A), Delhi-24, who partly allowed the appeal on 06-11-2025.
Aggrieved, the Revenue filed an appeal before the Tribunal, while the assessee filed cross-objections raising a jurisdictional challenge. The assessee contended that once the search was conducted under Section 132 on 12-12-2022—that is, on or after 01-04-2021—Explanation 2 sub-clause (i) to Section 148 mandated initiation of assessment under Section 147 by issuance of notice under Section 148. The assessment order passed under Section 143(3) without such notice was therefore invalid and liable to be quashed.
Reasoning of the Tribunal
The reasoning of the ITAT rests on a careful reading of Explanation 2 to Section 148, which introduces a legal fiction. The provision states that where a search is initiated under Section 132 on or after 01-04-2021 in the case of the assessee, or a survey is conducted under Section 133A, or books of account and documents belonging to the assessee are seized from any other person with the satisfaction of higher authorities, the Assessing Officer “shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment.”
The statutory consequence is significant. Before the Finance Act, 2021 amendments, a search would typically give the Assessing Officer jurisdiction to frame an assessment for the six assessment years preceding the year of search. In the post-01-04-2021 scheme, the legislature has constructed a deeming fiction by which income is presumed to have escaped assessment if the trigger is a search on or after that date. Once that fiction is invoked, the plain scheme of the Act is that the assessment proceedings ought to follow the reassessment route under Sections 147 and 148, not the general scrutiny route under Section 143(3).
Applying this to the facts, the Tribunal observed that despite the Revenue being fully aware of the search—indeed, the case had been transferred to the Central Circle precisely because of the search—the Assessing Officer proceeded to conclude the assessment proceedings initiated by notice under Section 143(2) issued on 29-06-2023. This, the Tribunal held, was a misdirection. The proper course of action, once the search took place, was to drop the pending scrutiny proceedings and initiate fresh proceedings under Section 148 read with Explanation 2. Failure to follow the prescribed statutory procedure constituted a jurisdictional defect, because the route adopted by the Assessing Officer was not merely an irregularity but went to the root of his competence.
The Revenue’s defence was factually and legally unavailing. It argued that the assessee’s case had been selected for compulsory scrutiny under CBDT Guideline F.No.225/81/2022/ITA-II dated 26-09-2022 with the prior approval of the competent authority, and that the notice under Section 143(2) had been issued on 29-06-2023 and duly served. The assessee had responded to notices under Section 142(1) and questionnaires and participated throughout, before the assessment was completed on 31-03-2024. The Revenue submitted that since the period of limitation for issuance of notice under Section 143(2) had not expired as on the date of search, the Assessing Officer had rightly initiated and completed the assessment in the normal manner.
The Tribunal was not persuaded. The question was not whether the return had been validly selected for scrutiny, but whether, after the search occurred, the Assessing Officer retained the jurisdiction to proceed under Section 143(3) at all. The statutory trigger in Explanation 2(i) is the date and fact of the search. Neither the prior selection for compulsory scrutiny, nor the issuance of a timely Section 143(2) notice, nor the assessee’s participation in the proceedings, could cure the absence of a Section 148 notice. Acquisition of jurisdiction in the reassessment channel is a condition precedent; the presence of an alternative procedure in the general channel does not validate an order passed without authority.
The Tribunal reinforced this conclusion by invoking the fundamental principle of law laid down by the Hon’ble Apex Court in Babu Varghese v. Bar Council of Kerala, (1999) 3 SCC 422. In paragraphs 31 and 32 of that judgment, the Supreme Court held that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner or not at all. Tracing the rule to Taylor v. Taylor and the celebrated dictum of Lord Roche in Nazir Ahmed v. King Emperor—“where a power is given to do certain things in a certain way, the thing must be done in that way or not at all”—the Court applied the rule as a basic principle of statutory and administrative law.
That principle squarely applies to reassessment proceedings. Section 148 read with Explanation 2 prescribes a particular manner for assuming jurisdiction to assess after a qualifying search. By framing the assessment under Section 143(3) without issuing notice under Section 148 and obtaining the requisite prior approval, the Assessing Officer failed to act in the manner prescribed by the statute. Such failure amounts to a jurisdictional defect—the resulting assessment order is invalid in law, not merely annullable for a curable procedural breach.
The Tribunal further placed reliance on the coordinate bench decision in Montage Enterprises Pvt. Ltd. (ITA No. 5458/Del/2025, dated 29-12-2025), which followed the Chandigarh Tribunal’s judgment in Homelife Buildcon (P.) Ltd. v. DCIT, (2025) 176 taxmann.com 614, as well as Jamna Das Nikkamal Jain Saraf Pvt. Ltd. v. DCIT (ITA No. 403/Chd./2025, dated 04-11-2025). These decisions consistently hold that the special provisions governing search-based assessments under Section 148, in the post-01-04-2021 regime, override the general assessment framework of Section 143(3). The special procedure is not optional; it is mandatory once search information is statutorily deemed to exist.
The reasoning also underscores a separation between the merits of the additions and the jurisdiction to make them. Even if the additions themselves had been supported by material found in the search, the jurisdictional defect at the inception invalidates the order. An assessment order passed by an authority without jurisdiction is a nullity, and participation by the assessee cannot confer jurisdiction that the statute withholds.
Conclusion
The Delhi ITAT quashed the assessment order dated 31-03-2024 passed under Section 143(3) of the Act for Assessment Year 2022-23. The assessee’s cross-objection was allowed, and the Revenue’s appeal was dismissed as infructuous. The decision clarifies that in the post-01-04-2021 search regime, the special procedure under Section 148 overrides the normal scrutiny provisions. Assessing Officers cannot clock in a search case under Section 143(3) merely because scrutiny notices had earlier been issued. The order restores the statutory discipline under the reassessment scheme and serves as a strong reminder to the tax administration that procedure is the very essence of jurisdiction.
For taxpayers facing search-based additions, the decision provides a valuable safeguard: where the search is on or after 01-04-2021 and the assessment is framed without a Section 148 notice, the foundational validity of the assessment order can be challenged at the threshold before the ITAT, irrespective of the merits of the underlying additions.