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Facts
Information regarding high value transactions by the assessee was received, indicating an inward remittance of Rs. 2,27,31,635/- for AY 2016-17, which was not offered for tax. The AO initiated reassessment proceedings under Section 148A and issued a notice under Section 148.
Held
The Tribunal held that the reassessment proceedings were vitiated due to want of proper, legal, and valid approval under Section 151(ii) of the Act, as the approval obtained was from the Principal Commissioner of Income Tax-1 instead of the Principal Chief Commissioner or Principal Director General as required for cases beyond three years. Consequently, the reassessment was quashed.
Key Issues
Whether the reassessment proceedings are valid when the approval under Section 151(ii) was not obtained from the prescribed authority for a case beyond three years.
Sections Cited
148, 148A, 142(1), 5(2), 9, 69A, 151, 271AAC, 271F, 149
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘D’ BENCH,
Before: SHRI VIKAS AWASTHY & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
The above two appeals by the assessee are preferred against the order of the ld. A.C.I.T Circle – 3(1)(2) International Taxation, Delhi dated 29.02.2024 pertaining to A.Ys 2016-17 and 2017-18.
Page 1 of 9 & 1867/DEL/2024 [A.Ys 2016-17 & 2017-18] Aftab Ahmad Shah 2. Since common issues are involved in both the appeals and pertain to same assessee, they were heard together and are disposed of by this common order for the sake of convenience and brevity.
ITA No. 1866/DEL/2024 A.Y. 2016-17
Grounds raised by the assessee in the year under consideration reads as under:
“1. That the notice under section 148 issued by the ld. AO is bad in law and without a proper sanction. 2 That the ld. AO has passed an order under section 148A(d) which is perverse, to issued notice under section 148, as no reasonable person could arrive at a decision drawn by him on the basis of material available on record and the reply of the assessee that it is a fit case to issue notice.
3. That in the fact and circumstances of the case the ld. AO has erred in treating the return filed by the assessee in response to notice under section 148 as invalid return.
4. That ld.AO has erred in considering the notice issued under section 142(1) through the ITBA system, as duly served on the assessee.
That the directions of the Id. DRP-01, New Delhi to the ld. AO are bad in law and contrary to the provisions of section 5(2) read with section 9 of the Act.
6. That the ld. AO has erred in making an addition of Rs. 2,31,14,033 pursuant to the directions of the Id. DRP-01, New
Page 2 of 9 & 1867/DEL/2024 [A.Ys 2016-17 & 2017-18] Aftab Ahmad Shah Delhi on account of foreign remittance in NRE account of a Non- Resident person as unexplained money under section 69A of the Act.
7. That the ld.AO has not complied with the directions of the ld. DRP-01, New Delhi to pass a speaking order after verifying from records if the requirement of approval of the competent authority in terms of section 151 of the Act has been duly complied with.
8. That the ld. AO has erred in initiating penalty proceedings under section 271AAC and section 271F of the Act.
That the above grounds of appeal
are with prejudice to each another.
10. That the appellant craves leave to add, amend or alter above grounds of appeal.”
In addition to the above grounds, the assessee has raised an additional ground of appeal as under:
“The notice issued u/s 148 is invalid as necessary approval in terms of section 151, as amended by the Finance Act 2021 has not been obtained.” 5. Briefly stated, the facts of the case are that information regarding high value transactions undertaken by Shri Aftab Ahmad Shah, the present assessee, was received by the DDIT/ADIT [Inv] Srinagar through Insight Portal. As per the information, the assessee has made inward
Page 3 of 9 & 1867/DEL/2024 [A.Ys 2016-17 & 2017-18] Aftab Ahmad Shah remittance of Rs. 2,27,31,635/- during the FY 2015-16, relevant to the assessment year 2016-17.
After due analysis of the relevant information and verification from the Department's database, the Assessing Officer observed that the income corresponding to Rs. 2,27,31,635/- has escaped assessment as the assessee has not filed the return of income for A.Y 2016-17. Thus, income from above transaction has not been offered for tax and due tax has not been paid.
Thereafter, in conformity with the Hon'ble Supreme Court Order dated 04.05.2022 following due procedure as provided by section 148A of the Act, order u/s 148A(d) of the Act was passed on 26.07.2022 with the prior approval of the Specified Authority. Subsequently, notice u/s 148 of the Act dated 28.07.2022 was issued and duly served on the assessee through ITBA System. In response to notice u/s 148, the assessee filed his return after due date on 22.05.2023 and did not verify the return. Hence, the Assessing Officer was of the opinion that the return filed by the assessee was invalid.
At this juncture we find it appropriate to deal with the additional ground taken by the assessee that approval in terms of section 151 of Page 4 of 9 & 1867/DEL/2024 [A.Ys 2016-17 & 2017-18] Aftab Ahmad Shah the IT Act has not been obtained by the AO. Order under section 148A(d) was passed on 26/07/2022 and notice under section 148 was issued on 27/07/2022 after obtaining prior approval of the Commissioner of Income Tax-1, (International Taxation). The relevant portions of section 148, 149 and 151 as amended by Finance Act, 2021 which governs the issue of approval at hand, are reproduced hereunder:
1st Proviso to Section 148.
"Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice:" Section 149 reads as under:
(1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represent in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more that year." Section 151 reads as under:
Sanction for issue of notice:- Specified authority for the purposes of section 148 and section 148A shall be,-
Page 5 of 9 & 1867/DEL/2024 [A.Ys 2016-17 & 2017-18] Aftab Ahmad Shah (i) Principal Commissioner of Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner of Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.
9. In the instant case, notice under section 148 dated 27.02.2022 was issued for escapement of income of Rs. 2,27,31,635/- which is above Rs 50 lakh. The notice u/s 148 was issued for a period beyond three years from the relevant assessment year. In terms of provisions of Section 151, as amended by Finance Act, 2021, therefore, the specified authority for grant of approval becomes Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner of Principal Director General, Chief Commissioner or Director General. We find that in the instant case, the approval u/s 151 has been obtained from the Principal Commissioner of Income Tax-1 (International Taxation). We are therefore, of the considered view that the impugned re-assessment is vitiated for want of proper, legal and valid approval u/s 151(ii). Accordingly, the reassessment made in the instant case can not be sustained and we hereby quash the said reassessment. The additional ground of appeal is hereby allowed.
Page 6 of 9 & 1867/DEL/2024 [A.Ys 2016-17 & 2017-18] Aftab Ahmad Shah 10. We are fortified in our view by the decision of the Hon'ble Delhi High Court in the case of Twilight Infrastructure Private Limited Vs Income Tax Officer Ward 25(3), Delhi, which held as under:
"12.3 In these cases, there is no dispute that although three (3) years had elapsed from the end of the relevant AY, the approval was sought from authorities specified in clause (1), as against clause (ii) of Section 151. 12.4 Before us, the counsel for the revenue continue to hold this position. The only liberty that they seek is that if, based on the judgement in Ganesh Dass Khanna, the impugned orders and notices are set aside, liberty be given to the revenue to commence reassessment proceedings afresh.
13. Therefore, having regard to the aforesaid, the impugned notices and orders in each of the above-mentioned writ petitions are quashed on the ground that there is no approval of the specified authority, as indicated in Section 151(ii) of the Act. The direction is issued with the caveat that the revenue will have liberty to take steps, if deemed necessary, albeit as per law."
As the case has been decided on the basis of jurisdictional ground, no adjudication is made on the merits of the case.
Facts and circumstances are identical to those discussed and decided by us hereinabove. The issue of proper sanction has been [supra]. For our detailed
Page 7 of 9 & 1867/DEL/2024 [A.Ys 2016-17 & 2017-18] Aftab Ahmad Shah discussion and findings given therein, the additional ground for the instant year is allowed. As the case has been decided on the basis of jurisdictional ground, no adjudication is made on the merits of the case.
In the result, both the appeals of the assessee in and 1867/DEL/2024 are allowed.
The order is pronounced in the open court on 05.06.2025.