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Facts
The Assessing Officer (AO) reopened assessment for AY 2016-17 under Section 147 based on suspicious high-value transactions identified from the department's portal. The AO issued a notice under Section 148A(b) and subsequently an order under Section 148A(d), followed by a notice under Section 148, after obtaining approval from the Principal Commissioner of Income Tax. The additions made by the AO were deleted by the CIT(A). The department appealed, and the assessee filed a cross-objection challenging the jurisdictional validity of the reassessment proceedings.
Held
The Tribunal held that a jurisdictional issue, concerning the validity of reassessment proceedings due to improper sanction under Section 151, cannot be waived by the assessee, even if initially not pressed before the lower appellate authority. It further held that for AY 2016-17, since the reassessment proceedings (order under Section 148A(d) and notice under Section 148) were initiated after the expiry of 3 years from the end of the assessment year, the approval of the Principal Chief Commissioner or Chief Commissioner was required as per Section 151(ii), not the Principal Commissioner. The approval obtained was therefore invalid.
Key Issues
Whether reassessment proceedings initiated under Section 147 are valid when the approval for reopening was obtained from an authority not competent to grant such sanction as per Section 151, considering the time elapsed since the end of the assessment year.
Sections Cited
139, 147, 148, 148A, 151, 68, 56, 133(6), 149
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI. MAKARAND VASANT MAHADEOKAR, AM
O R D E R
PER SAKTIJIT DEY, VICE PRESIDENT:
Captioned appeal by the department and cross objection by the assessee arise out order of dated 29.09.2025 passed by National Faceless Appeal Centre (NFAC), Delhi (‘ld. CIT(A)’ for short), pertaining to the Assessment Year (‘A.Y.’ for short) 2016-17.
CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody 2. Though, revenue’s appeal is on merits challenging the deletion of addition made u/s. 68 of the Act by the Assessing Officer, however, in the cross objection, the assessee has raised a pertinent jurisdictional issue challenging the validity of the proceedings initiated u/s. 147 of the Act on the ground that prior to issuance of notice u/s. 148 of the Act, the Assessing Officer has not obtained sanction/approval of the competent authority in terms of Section 151 of the Act. Since the aforesaid issue raised by the assessee in its cross objection is a purely jurisdictional issue striking at the very root of the assessment proceedings and can be decided based on facts and materials available on record, we deem it appropriate to address the issue at the very outset.
Few relevant facts for deciding this issue are, the assessee is a resident individual. For the assessment year under dispute, assessee had filed his return of income u/s. 139(1) of the Act, declaring income of Rs. 90,58,280/-. On going through the information available on the insight portal of the department, the Assessing Officer came to know that the assessee had entered into some suspicious transactions in the year under consideration. It was noticed that the assessee is in the business of manufacturing of diamonds and its imports and exports. He found that the assessee had entered into high value transactions with couple of other entities which do not appear to be normal. Based on the information received, the Assessing Officer intended to make enquiry and accordingly issued notice u/s. 133(6) of the Act to the assessee to furnish statements of the bank accounts held by him and to explain the credit and debit entries appearing therein. As observed by the Assessing Officer, though, the assessee furnished the bank statements, however, he failed to justify the source of the transactions. Being of the view that income chargeable to tax has escaped assessment, the Assessing Officer CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody reopened the assessment u/s. 147 of the Act by issuing a notice u/s. 148 of the Act on 30.06.2021.
After the decision of the Hon'ble Supreme Court in case of Union of India vs. Ashish Agarwal [2022] 138 taxmann.com 64, the Assessing Officer initiated proceedings under the new regime by issuing a show cause notice u/s. 148A(b) of the Act on 26.05.2022. In response to the said notice, the assessee furnished his objections on 08.06.2022. Not being satisfied with the submissions of the assessee, the Assessing Officer passed an order u/s. 148A(d) of the Act on 30.07.2022 concluding that it is a fit case for reopening and issuance of notice u/s. 148 of the Act. Accordingly, on the very same date i.e., 30.07.2022, the Assessing Officer issued a notice u/s. 148 of the Act after obtaining approval in terms of Section 151(i) of the Act from Principal Commissioner of Income Tax-19, Mumbai. Ultimately, the Assessing Officer completed the assessment u/s. 147 r.w.s. 144B of the Act making couple of additions u/s. 56 and 68 of the Act respectively, resulting in determination of total income of Rs. 14,92,99,783/-.
Being aggrieved by the assessment order so far the assessee preferred an appeal before the First Appellate Authority. After considering the submissions of the assessee, in the context of facts and materials on record, the First Appellate Authority, being convinced that the additions made by the Assessing Officer are unsustainable both on fact and in law, deleted them.
Being aggrieved with the decision of the First Appellate Authority, the department has preferred the present appeal. Whereas, the assessee has filed the cross objection raising the jurisdictional issue. Before us, it is the say of learned Counsel appearing for the CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody assessee that the order u/s. 148A(d) of the Act and also the notice u/s. 148 of the Act were passed/issued after the expiry of 3 years from the end of the assessment year under dispute. Drawing our attention to Section 151(ii) of the Act, it has submitted, after expiry of 3 years from the end of the relevant assessment year, the competent authority who can grant approval/sanction u/s. 148 of the Act is the Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax, whereas, he submitted, in the case of the assessee the Assessing Officer has taken prior approval of Principal Commissioner of Income Tax who is not an authority prescribed u/s. 151(ii) of the Act. Thus, he submitted, there is gross jurisdictional error in initiating the proceedings u/s. 147 of the Act. In this context, he relied upon the following decisions: i. Ramesh Bachulal Mehta v. ITO [2025] 177 taxmann.com 606 (Bombay). ii. (Third Member) Essar Exploration and Production Ltd. Vs. DCIT in date of order 12.09.2025.
7. However, without prejudice to the aforesaid submissions, the learned Counsel for the assessee fairly submitted that in course of proceedings before the First Appellate Authority, the assessee had furnished an affidavit not to press the jurisdictional issue raised in ground no. 2 relating to the validity of the notice u/s. 148 of the Act. However, he submitted that the issue being a purely jurisdictional issue, irrespective of the fact whether the assessee has given up the ground at the first appellate stage, he is not precluded from canvassing the ground at a later stage as it is a purely jurisdictional issue. In support of such contention learned Counsel relied upon the following decisions: i. Vijaykumar Jain Vs. CIT [1975] 99 ITR 349 (Punjab and Haryana)
CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody ii. Suresh K. Jajoo vs. ACIT [2010] 39 SOT 514 (Mumbai) 8. Opposing the contentions of the learned Counsel for the assessee, the learned Departmental Representative submitted, as per the ratio laid down by the Hon'ble Supreme Court in case of Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC)/[2024] 301 Taxman 238 (SC)/[2024] 469 ITR 46 (SC), extension provided under Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (‘TOLA’) will not only cover the time limit u/s. 149 but also time limit for sanction of specified authority u/s. 151 of the Act. He submitted, the observations of the Hon'ble Supreme Court in case of Union of India vs. Rajeev Bansal (supra) cannot be picked up selectively to hold that after expiry of 3 years from the end of the assessment year, Principal Commissioner of Income Tax looses power to grant approval/sanction u/s. 151 of the Act. He submitted, in case of Ramesh Bachulal Mehta vs. ITO (supra), the Hon'ble Jurisdictional High Court has not correctly appreciated the ratio laid down by the Hon'ble Supreme Court in case of Union of India vs. Rajeev Bansal (supra). In this context, he extensively referred to the decision of the Hon'ble Supreme Court in case of Union of India vs. Ashish Agarwal (supra) and in case of Union of India vs. Rajeev Bansal (supra). He submitted, the Hon'ble Bombay High Court in case of Ramesh Bachulal Mehta vs. ITO (supra) and similar other decisions have not considered the observations made by the Hon'ble Supreme Court in case of Union of India vs. Rajeev Bansal (supra) regarding applicability of deemed legal fiction and resultant exclusion period. He submitted, in case, the extension period as per TOLA and Section 149 of the Act is applied, the authority competent to grant approval is the Principal Commissioner of Income Tax in terms with Section 151(i) of & CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody the Act. In this context, he heavily relied upon the decision of the Hon'ble Gujrat High Court in case of Dhanraj Govindram Kella vs. ITO in Special Civil Application No. 6387 of 2022 vide judgment dated 08.07.2025.
9. We have given a thoughtful consideration to rival contentions and perused the materials on record. We have also applied our mind to the judicial precedents cited before us. At the outset, we deem it appropriate to address the issue whether by not pressing the jurisdictional issue before the First Appellate Authority, the assessee had given up his right to raise the issue before the Higher Appellate Authority. In this context, we must observe that in course of proceedings before the First Appellate Authority, the assessee did furnish an affidavit expressing his intention not to press the grounds raised challenging the validity of the notice issued u/s. 148 of the Act. However, the present cross objection has been filed by the assessee before us raising the very same issue. The learned Departmental Representative has expressed strong objections against entertaining the grounds. In our view, jurisdiction or lack of it, strikes at the very root of any proceeding. It is fairly well settled that in case a particular authority has no jurisdiction to initiate certain act, jurisdiction cannot be conferred upon him by a party or parties either by consent or by acquiescence. In other words, once particular authority has no jurisdiction under law to refer certain act, he cannot act even if the party or parties before him have subjected themselves to his jurisdiction. Lack of jurisdiction disentitles the authority to perform the act. If an authority performs any act without having jurisdiction vested in him either by the statute or by law, such act has to be declared as null and void.
CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody 10. In case of Vijaykumar Jain vs. CIT (supra) the Hon'ble Punjab and Haryana High Court, come to deal with a similar jurisdictional issue, wherein grounds challenging the validity of notice issued u/s. 148 of the Act were given up before the Appellate Assistant Commissioner but were again agitated before the Tribunal. However, the tribunal refused to entertain the ground on the reasoning that the assessee had given up the ground before the First Appellate Authority. The following question of law was raised before the Hon'ble High Court: a. Whether the tribunal was justified in refusing to consider the validity of the notice u/s. 148, even though the grounds challenging the same had not been pressed before the Appellate Assistant Commissioner? 11. While answering the aforesaid issue, the Hon'ble High Court held as under: “There is no material on the record to show that any decision was made by the Income-tax Officer to issue a notice under section 148 on the basis that the assessee had failed to disclose fully and truly all material facts necessary for his assessment for that year and that the income chargeable to tax had escaped assessment for that year. The notice was issued on the basis that there was omission or failure on the part of the assessee to make a return under section 139 for any assessment year. It is maintained that in view of the clear provisions of section 139(4) there was a valid return before the Income-tax Officer. That return could not be treated as invalid and no ground was made out for taking action under section 148 read with section 147. Once it is held that the return dated 28th March, 1969, was a valid return, the mere fact that the assessee gave up grounds Nos. 2 to 5 before the Appellate Assistant Commissioner would be of no consequence. In this connection, reliance is placed on the decision of the Supreme Court in Commissioner of Income-tax v. M.K.K.R. Muthukaruppan Chettiar [1970] 78 ITR 69. The following passages from that judgment are relied upon by the learned counsel for the assessee: "It is not necessary to decide whether the observations made by the Appellate Assistant Commissioner in his order declining to assess the income of the Hindu undivided family operated to lift the bar of limitation as regards the assessment of income of the separated members by the application of the principle of the judgments of this court in Income-tax Officer v. Murlidhar Bhagwan Das [1964] 52 ITR 335 and N. Kt. Sivalingam Chettiarv. Commissioner of Income-tax [1967] 66 ITR 586 . In our opinion, the orders passed by the income-tax authorities and confirmed by the Tribunal suffer from a fundamental defect. As we have already stated, Karuppan Chettiar submitted returns of his income in his individual capacity for the years 1950-51, 1951-52 and 1952-53 in response to the notice issued under section 22(2) of the Act. By his order dated June 18, 1953, the Income-tax Officer closed the assessments as 'no assessments' and added that since there & CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody was no separate income, the pending proceedings would be closed as N.A. and for income- tax year 1953-54, the file would be removed and clubbed with the family file F. 1005-A. Thereafter, the assessee filed two sets of returns for the aforesaid three years, once on February 23, 1955, arid again on March 30, 1956. These returns were submitted by the assessee in response to (sic) the notice issued on March 2, 1957. It is manifest that in these circumstances notice under section 34 of the Act cannot be issued to Muthukaruppan Chettiar and his minor sons unless the returns which had already been filed by that family were disposed of. It was held by this court in Commissioner of Income-tax v. Ranchhoddas Karsondas [1959] 36 ITR 569 that the return in answer to the general notice under section 22(1) of the Act, can, under section 22(3), be filed at any time before assessment and for this there is no limit of time. When in respect of any year a return has been voluntarily submitted before assessment, the Income-tax Officer cannot ignore the return and the noticeof reassessment and consequent assessment under section 34 ignoring the return are invalid. In the present case, we are of opinion that the order of the Income-tax Officer dated June 18, 1953, is not an order to terminate the proceedings and the result, therefore, is that the original returns submitted by the assessee under section 22(2) and (3) have not been properly and legally proceeded with. In the case before us the order of the Income-tax Officer dated June 18, 1953, should be interpreted in the light of circumstances in which that order was passed. So interpreted, it appears to us that the Income-tax Officer did not intend to conclude the proceedings before him. It follows, therefore, that there is no disposal of the voluntary returns made by the respondent for the assessment years 1950- 51, 1951-52 and 1952-53. It is manifest that the assessment proceedings under section 3(1) of the Act for the aforesaid three years are invalid." The matter has been put beyond any doubt by the Supreme Court in Commissioner of Income- tax v. Kurban Hussain Ibrahimji Mithiborwala [1971] 82 ITR 821 , wherein it is observed: "It is well settled that the Income-tax Officer's jurisdiction to reopen an assessment under section 34 (it is equivalent to section 147) depends upon the issuance of a valid notice (now section 148). If the notice issued by him is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction" It is axiomatic that what is void is non est. In this situation, the assessee was not precluded from urging the grounds Nos. 2 to 5. By giving them up the assessee could not confer jurisdiction on the Income-tax Officer where he had none. Therefore, the Tribunal was bound to hear the assessee and could not reject the appeal on the ground that grounds Nos. 2 to 5 were not agitated before the Appellate Assistant Commissioner and thus could not be permitted to be agitated before it.”
As could be seen from the aforesaid observations of the Hon'ble Court, where the authority concerned had no jurisdiction, any action undertaken by him beyond his jurisdiction would be void and non-est. Therefore, the act of giving up a jurisdictional issue by the assessee, would not confer jurisdiction on the Assistant Officer, where he had no jurisdiction in the first place. In case of Suresh K. Jajoo vs. ACIT (supra), the CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody coordinate bench while dealing with similar issue of non-pressing of a ground before the First Appellate Authority has held as under: “14. We have considered the rival submissions. We are of the view that normally the jurisdiction of Tribunal is not confined only to point which was considered by learned CIT(A); but it extends to subject-matter of entire tax proceedings. In the present case, the assessee has sought to raise an additional ground challenging the validity of initiation of reassessment proceedings. As rightly contended by learned counsel for the assessee, the issue goes to the root of the case and jurisdiction of the Assessing Officer to pass the order of assessment under section 148 of the Act. The issue does not require investigation of any new facts and can be adjudicated on the basis of evidence already available on record. The assessee in our opinion has adduced sufficient reason for not raising this additional ground as part of the original ground of appeal, viz., legal advice. It is only in course of conference with the senior counsel that the assessee was enlightened about the merit of the additional ground and, therefore, present application has been filed. In these circumstances, we admit the aforesaid two additional grounds for adjudication. Since, the aforesaid grounds will go to the root of the matter and validity of assessment framed under section 148 of the Act, we deem it proper to consider the aforesaid issue first.”
13. In the light of the ratio laid down in the aforesaid decisions, we are inclined to hold that the assessee cannot be prevented from raising the jurisdictional issue, irrespective of the fact that he had given it up before the first appellate authority. This is for the simple reason that there cannot be any estoppel against law. Therefore, we reject the objections of the department on the issue. Adverting back to the issue itself, it is a fact on record that the assessment year involved is 2016-17. Three-year period from the end of the assessment year ends on 31.03.2021. Whereas, under the new regime, the Assessing Officer has passed the order u/s. 148A(d) of the Act on 30.07.2022 and issued the notice u/s. 148 of the Act on the same day i.e., 30.07.2022. Thus, prima facie, it is demonstrable that both the order u/s. 148A(d) and notice u/s.148 of the Act have been passed/issued after the expiry of 3 years from the end of the relevant assessment year. Whereas, perusal of the order passed under Section 148A(d) as also notice issued u/s. 148 of the Act demonstrate that they have been passed/issued after obtaining prior approval of Principal Commissioner of Income Tax-19, Mumbai. CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody 14. At this stage, a reference can be made to Section 151(ii) of the Act. A reading of the said provision makes it clear that after expiry of 3 years from the end of the relevant assessment year, the authority competent to grant approval/sanction is the Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax. The Principal Commissioner of Income Tax is not an authority prescribed u/s. 151(ii). Therefore, in the facts of the present appeal, it is proved beyond doubt that before passing the order u/s. 148A(d) and issuing notice u/s. 148 of the Act, the Assessing Officer has not obtained the approval of the competent authority in terms of Section 151(ii) of the Act. It is fairly well settled that lack of approval by a competent authority in terms of Section 151 of the Act vitiates the entire proceeding and makes it null and void. In this context, we may refer to the following observations of the Hon'ble Jurisdictional High Court in case of Ramesh Bachulal Mehta vs. ITO (supra): “5. The Petitioner has contended that in the present case, the order under section 148A(d) dated 13.07.2022 was passed beyond three years from the end of the relevant Assessment Year 2016-17. Consequently, according to the provisions of section 151(ii), when more than three years have elapsed from the end of the relevant assessment year, the specified authority for obtaining the approval was either the Principal Chief Commissioner (PCCIT) or Principal Director General (PDGIT), or where there is no PCCIT or PDGIT, the Chief Commissioner (CCIT) or the Director General (DGIT). However, in paragraph 7 of the order dated 13.07.2022 passed under section 148A(d), Respondent No.1 has stated that before passing the said order, prior approval of Respondent No.2 i.e. the Principal Commissioner of Income Tax- 27, Mumbai, was obtained and the said order was passed thereafter. This aspect remains uncontroverted by the Respondents.
6. In these facts, the limited point to be examined is whether the order dated 13.07.2022 passed under section 148A(d) for the Assessment Year 2016-17 after obtaining approval of Respondent No.2 [i.e. the PCIT-27, Mumbai], was in accordance with the provisions of section 151.
The Petitioner has drawn our attention to the decision of the Hon'ble Supreme Court in the case of Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC)/[2024] 301 Taxman 238 (SC)/[2024] 469 ITR 46 (SC) and we deem it appropriate to refer to the said judgment where the Hon'ble Supreme Court has, while dealing with the issue of approval from the specified authority in terms of Section 151 of the Act, made the following observations: "iii. Sanction of the specified authority CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody 73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments Sri krishna (P) Ltd. v ITO [1996] 87 Taxman 315/221ITR 538 (SC)/[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below: Regime Time limits Specified authority Section 151 (2) Before expiry of four years Joint Commissioner of the old regime from the end of the relevant assessment year Section (1) of the After expiry of four years from Principal Chief old regime the end of the relevant Commissioner or Chief assessment year Commissioner or Principal Commissioner or Commissioner Section 151 (i) of Three years or less than three Principal Commissioner the new regime years from the end of the or Principal Director or relevant assessment year Commissioner or Director Section 151 (ii) More than three years have Principal Chief of the new elapsed from the end of the Commissioner or regime relevant assessment year Principal Director General or Chief Commissioner or Director General
The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime: (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
After 1 April 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148.
Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20th March 2020 to 31st March 2021. TOLA will accordingly extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20th March 2020 and 31st March 2021, then the specified authority under section 151(i) has an extended time till 30th June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20th March 2020 and 31st March 2021, then the specified authority under section 151(2) has time till 31st March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31st March 2021 because the new regime comes into effect on 1st April 2021.
For example, the three year time limit for assessment year 2017-2018 falls for completion on 31st March 2021. It falls during the time period of 20th March 2020 and 31st March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till 30th June 2021.
Under Finance Act 2021, the assessing officer was required to obtain prior approval or sanction of the specified authorities at four stages: a. Section 148A(a)- to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment; b. Section 148A(b)- to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022; c. Section 148A(d)- to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody d. Section 148-to issue a reassessment notice.
In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before various High Courts "shall be deemed to have been issued under section 148-A of the Income-tax Act as substituted by the Finance Act, 2021 and construed or treated to be showcause notices in terms of Section 148-A(b)." Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under section 151 for Section 148A(b). It is well established that this Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law High Court Bar Association v State of UP [2024] 160 taxmann.com 32/299 Taxman 21 (SC)/[2024] 6SCC267, 81. This Court in Ashish Agarwal (supra) directed the assessing officers to "pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned." Further, it directed the assessing officers to issue a notice under Section 148 of the new regime "after following the procedure as required under section 148-A." Although this Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under section 148A(d) or issuing a notice under section 148. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable."
On bare reading of the above extract of the judgment of Hon'ble Supreme Court in the case of Rajeev Bansal (supra), we find that the Hon'ble Supreme Court had clarified as under: 8.1 Under the substituted provisions of re-assessment as introduced by the Finance Act, 2021, the Assessing Officer is required to obtain prior approval or sanction of the 'Specified Authority' at four stages: (i) at first stage under Section 148A(a); (ii) at second stage under Section 148A(b); (iii) at third stage under Section 148A(d); and (iv) at fourth stage under Section 148. In the case of Ashish Agarwal (supra) the Hon'ble Supreme Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b) of the Act only. Therefore, the Assessing Officer was required to obtain prior approval of the 'Specified Authority' according to Section 151 of the new regime before passing an order under Section 148A(d) or for issuing a notice under Section 148. 8.2 Under new regime, if income escaping assessment is more than Rupees 50 lakhs, a reassessment notice could be issued after the expiry of three years from the end of the relevant assessment year only after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. 8.3 Section 151(ii) of the substituted provisions prescribes a higher level of authority if more than three years have elapsed from the end of the relevant CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody assessment year. Thus, non-compliance with the provisions of section 151 vitiates the jurisdiction of the Assessing Officer to issue a notice under section 148. 8.4 Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice.
In the present case the period of three years from the end of the Assessment Year 2016-17 fell for completion on 31st March 2020. Since the expiry date fell during the time period of 20th March 2020 and 31st March 2021 contemplated under Section 3(1) of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short "TOLA"), the authority specified under Section 151(i) of the new regime could have granted sanction till 30th June 2021. On perusal of the order, dated 13.07.2022, passed under Section 148A(d) of the Act, we find that the aforesaid order was passed after taking approval from Principal Commissioner of Income Tax (Respondent No.2). Since the aforesaid order was passed after the expiry of three years from the end of the Assessment Year 2016-17, as per the substituted provisions of re-assessment, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. Accordingly, we conclude that in the present case the approval has been obtained from the authority specified under Section 151(i) of the new regime instead of the authority specified under Section 151(ii) of the new regime.
The Hon'ble Supreme Court in the above case has drawn an illustration in paragraph 78 of it's order in the context of Assessment Year 2017-18, wherein it is categorically held that the authority specified under section 151(i) can accord sanction only upto 30.06.2021. This illustration makes it absolutely clear that when the period of three years from end of relevant Assessment Year expired between 20.03.2020 and 31.03.2021, the extension by virtue of TOLA was upto 30.06.2021 and not beyond. Thus, it can be said that the period of three years from the end of the relevant Assessment Year (here AY 2016-17) expired on 30.06.2021, whereas the Respondent No.1, despite passing the order on 13.07.2022 in repsect of Assessment Year 2016-17, has obtained approval of Respondent No.2 who is not the authority as prescribed under section 151(ii).
Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of the Respondent No. 1 to issue a notice under Section 148 of the Act.
12. We are clearly of the view that the present matter stands covered by the decision of Hon'ble Supreme Court in the case of UPI v. Rajeev Bansal (supra). We accordingly hold that the order dated 13.07.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated 15.07.2022 are bad in law for being violative of the provisions of Section 151(ii) of the Act. Hence they are required to be quashed and set aside.
We, accordingly, set aside the impugned order dated 13.07.2022 passed under section 148A(d), the Notice issued under Section 148 and all other proceedings/orders emanating therefrom and allow the writ Petition in terms of Prayer Clause (a) of the petition.”
CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody 15. The aforesaid observations of the Hon'ble jurisdictional High Court is binding on us. Respectfully following it, we hold that due to lack of sanction of the competent authority in terms of Section 151(ii) of the Act, not only the notice issued u/s. 148 of the Act is invalid and void ab initio, but all proceedings consequent to such notice will also be invalid. However, for the sake of completeness, we deem it appropriate to deal with the submissions of the learned Departmental Representative. He had submitted before us that in case of Ramesh Bachulal Mehta vs. ITO (supra) the Hon'ble jurisdictional High Court has failed to correctly appreciate the ratio laid down by the Hon'ble Supreme Court in case of Union of India vs. Ashish Agarwal (supra) and Union of India vs. Rajeev Bansal (supra). Therefore, he had urged before us that the observations made by the Hon'ble Jurisdictional High Court in case of Ramesh Bachulal Mehta vs. ITO (supra) should not be followed. The aforesaid contention of learned Departmental Representative cannot be accepted. Firstly, for the reason that this Tribunal, being subordinate to the Hon'ble Jurisdictional High Court, is bound to follow the decision of the Hon'ble Jurisdictional High Court. The Tribunal at a lower pedestal than the Hon'ble Jurisdictional High Court is not competent to comment upon the correctness or otherwise of a judgement of the Hon'ble Jurisdictional High Court. Therefore, the contention of learned Departmental Representative that the decision of the Hon'ble Jurisdictional High Court cited by him should be followed. In supersession of the decision of the jurisdictional High Court, in our view, goes against the principle of stare decisis. Law is fairly well settled that the decision of the Hon'ble Jurisdictional High Court is binding on all subordinate Courts and authorities within its jurisdiction. That being the case, in our humble opinion, the decision of the non-jurisdictional High & CO No. 35/Mum/2026 (A.Y. 2016-17) Rishabh Avnish Mody Court cited by the learned Departmental Representative cannot have a greater precedential value than the decision of the Hon'ble Jurisdictional High Court. Thus, on the aforesaid reasoning, we reject the contentions of learned Departmental Representative.
Before parting, we must observe that in Section 151 of the Act, as it stood prior to its substitution by Finance (2) Act, 2024 with effect from 01.09.2024, a proviso was introduced extending the period of limitation u/s. 151(i) providing for exclusion of the period as provided under 3rd, 4th, 5th and 6th proviso to Section 149(i) of the Act. This proviso having been introduced to the Act by finance Act, 2023 with effect from 01.04.2023 would apply prospectively, hence, will not come to the rescue of the department. Thus, in view of the discussions made in the forgoing paragraphs, we hold that the assessment order passed in assessee’s case, being without jurisdiction having been passed in pursuance to a notice issued u/s. 148 of the Act without obtaining prior approval of the competent authority, deserves to be quashed. Accordingly, we do so. Assessee’s cross objection is allowed on this preliminary issue.
In so far as revenue’s appeal, being is concerned, in view of our decision on the legal issue raised in assessee’s cross objection, the appeal has become infructuous, hence, the issues raised therein have become academic. Therefore, they do not require adjudication for the present. However, they are kept open for adjudication in future, if needed.
In the result, cross objection filed by the assessee is allowed and appeal filed by the revenue is dismissed. Order pronounced on 30.03.2026 Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER VICE PRESIDENT Mumbai; Dated: 30.03.2026 Karishma J. Pawar (SR. PS) Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,