This happens after an final, desperate attack by the black knights which causes devastation to both the Britanian empire and moonland. Most of Lelouch's group dies, his knightmare gone.
Of course, Kallen sacrificed herself in front of his eyes, and both C.C. and V.V. die in a 1v1 fight in an alternate realm, C.C. suicide bombing to save everyone. Everyone loses their geass.