The main issue before is, firstly, whether the assessee can challenge the validity of assessment order during the revisionary proceedings and also the validity of reopening u/s.147 when it was not challenged by the assessee; and secondly, whether the reopening based on the reasons recorded by the Assessing Officer itself was bad in law or not.

It is incontrovertible that proceedings u/s. 263 are collateral proceedings of the assessment, because ld. CIT/PCIT exercise revisionary jurisdiction u/s.263 seeking to revise the assessment order on the ground that it is erroneous in so far as it is prejudicial to the interest of revenue. The edifice of the proceedings u/s 263 is the assessment order which is the original proceedings which has come to an end. However, if the original assessment order itself was invalid or illegal in terms of jurisdiction or was not in accordance with the provisions of the statute or was barred by limitation, then such an invalid order cannot be subject matter of further proceedings so as to validate the said assessment order in collateral proceedings like u/s 263. This precise principle has been reiterated by the Hon’ble Apex Court in several cases which is evident from the judgment of Kiran Singh and others vs. Chaman Pawan and others (supra) and Balwant N. Viswamitra and others vs. Yadav Sadashiv Mul (supra). Though assessment order may be said to be erroneous but certainly it cannot be held prejudicial to the interest of the revenue in such circumstances when assessment order itself is unsustainable.

On perusal of the reason it is apparent that, firstly, the learned assessing officer has no where mentioned the details about the entry operators. Secondly, the learned assessing officer has noted that from the verification of the documents seized it appears to him that accommodation entries has been taken from various paper companies which were obtained by the assessee. However in the reasons recorded there is no reference to which are the paper companies and what is the nature of the accommodation entry, and the parties from whom accommodation entries have been provided/obtained by the assessee. No various dates have been mentioned of the accommodation entries and the amount involved from whom accommodation entries have been obtained. In fact there is no whisper about how much credit or entry has been received and what is the income which escaped assessment. No reasons to believe has been formed by the Ld. AO that there is an income which has escaped assessment. The information which has been mentioned in the reasons on the basis of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment.