SHIVI MUKESH KUMAR ,MUMBAI vs. ACIT, CIRCLE 22(1), MUMBAI

The relevant facts for deciding this issue are, the assessee is a resident individual. For the assessment year under dispute, the assessee had filed his return of income on 17.10.2016, declaring total income at Rs.99,85,950/-, after claiming deduction of an amount of Rs.1,75,00,000/- u/s. 35(1)(ii) of the Act, being donation made to Rural Development Society, towards research work being undertaken by them. Assessment in case of the assessee was completed u/s. 143(3) of the Act, accepting the returned income. Subsequently, a survey u/s. 133A of the Act was conducted on Rural Development Society. In course of survey, it was found that the said organization in reality was not undertaking any research activity and was receiving donation based on fabricated certificate. Based on such information, Assessing Officer (A.O. for short) formed the belief that the deduction claimed by the assessee u/s. 35(1)(ii) of the Act is not admissible. Accordingly, he reopened the assessment u/s. 147 of the Act. Ultimately, assessment was completed u/s. 147 r.w.s. 144 r.w.s 144B of the Act vide order dated 25.05.2023, disallowing the donation of Rs.1,75,00,000/- made to Rural Development Society. While completing the assessment, the A.O. alleged that the assessee did not respond to any of the show cause notices issued to him.

Against the assessment order so passed, the assessee preferred an appeal before the first appellate authority, inter alia, challenging the validity of the reopening of assessment.

Before us, ld. Counsel appearing for the assessee submitted that though the notice u/s. 148 of the Act was issued on 29.07.2022 after expiry of more than three years from the end of the assessment year, however, it was not issued with the prior sanction of Principal Chief Commissioner of Income Tax (‘PCCIT’ for short) in terms with section 151(ii) of the Act. Drawing our attention to the copy of the said notice, ld. Counsel submitted, the notice was issued with the prior approval of the Pr. CIT-20, Mumbai. Thus, he submitted, in absence of proper sanction the issuance of notice u/s. 148 of the Act is vitiated which invalidates the entire assessment proceeding. In support of such contention, ld. Counsel relied upon a judgement of the Hon'ble Jurisdictional High Court in case of Ramesh Bachulal Mehta vs. ITO (in Writ Petition No. 271 of 2023, vide judgement dated 11.08.2025).

Strongly opposing the contentions of ld. Counsel for the assessee, ld. Departmental Representative (ld. DR for short) submitted that the assessee did not appear either before the A.O. or the first appellate authority. Hence, he cannot be permitted to come before the Tribunal and raise the legal issues for the first time which require factual verification.

We have considered rival submissions, in light of the judicial precedent relied upon and perused the materials on record. Insofar as the factual aspect relating to the issue is considered, undisputedly, the A.O. has issued the notice u/s. 148 of the Act on 29.07.2022. This fact is clearly mentioned in pg. no. 2 of the assessment order itself. Thus, it is beyond doubt that the notice u/s. 148 of the Act was issued after expiry of three years from the end (A.Y.2016-17) Shivi Mukesh Kumar vs. ACIT of the relevant assessment year. A perusal of the notice, in particular paragraph 3, clearly reveals that the notice was issued after obtaining prior approval of Pr. CIT-20, Mumbai. At this stage, a reference needs to be made to the provision contained u/s. 151 of the Act. A careful reading of the said provision, as applicable to the impugned assessment year, clearly reveals that the specified authority who can grant sanction for issuance of notice u/s. 148 of the Act within three years from the end of the relevant assessment year is Pr. CIT. Whereas, after expiry of three years from the end of the relevant assessment year, the specified authority who can grant sanction in terms of section 151(ii) of the Act is the Principal Chief Commissioner of Income Tax.

In the facts of the present appeal, admittedly, prior sanction of Principal Commissioner of Income Tax was obtained for issuance of notice u/s. 148 of the Act instead of Principal Chief Commissioner of Income Tax. In such a scenario, it needs to be examined whether it affects the assumption of jurisdiction for reopening of assessment u/s. 147 of the Act. In a recent judgement, in case of Ramesh Bachulal Mehta (supra) the Hon’ble Jurisdictional High Court, while dealing with an identical issue relating to the very same assessment year has held as under: 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 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:

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 20 March 2020 to 31" 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 20 March 2020 and 31 March 2021, then the specified authority under section 151(i) has an extended time till 30 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 31 March 2021, then the specified authority under section 151(2) has time till 31" March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31" March 2021 because the new regime comes into effect on 1ª April 2021.

For example, the three year time limit for assessment year 2017-2018 falls for completion on 31 March 2021. It falls during the time period of 20 March 2020 and 31 March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(1) of the new regime can grant sanction till 30 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 hav 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 (A.Y.2016-17) Shivi Mukesh Kumar vs. ACIT d. Section 148-to issue a reassessment notice.

In Ashish Agarwal (supva), 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 show cause 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 118A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified auth ities 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] 6 SCC 267, 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."

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.

In sum and substance, the essence of the aforesaid judgement of the Hon’ble Jurisdictional High Court is non-compliance with the provision contained u/s. 151(ii) of the Act vitiates the jurisdiction of the A.O. to issue notice u/s. 148 of the Act in a case where more than 3 years has elapsed from the end of the relevant assessment year. At this stage, we must observe, at the time of hearing, ld. DR has vehemently opposed the contentions of the assessee qua this particular issue. It is the say of the ld. DR that the assessee should have raised this issue before first appellate authority and made submissions (A.Y.2016-17) Shivi Mukesh Kumar vs. ACIT before him, as it requires verification of facts. We are not too impressed with these submissions. Firstly, as discussed elsewhere, in the body of the assessment order the A.O. himself has admitted that the notice u/s. 148 of the Act was issued on 29.07.2022. The notice issued u/s. 148 of the Act further reveals that Principal Commissioner of Income Tax has granted sanction on 27.07.2022 for issuance of notice u/s. 148 of the Act. It is further relevant to observe, in the statement of facts, accompanying the memorandum of appeal filed before the first appellate authority, the assessee has very clearly and categorically stated that order u/s. 148A(d) of the Act was passed on 29.07.2022 and the notice u/s. 148 of the Act was also issued on 29.07.2022, that too, without Document Identification Number (DIN).

Even in ground no. 2(j), taken before the first appellate authority, the assessee has specifically challenged the validity of the reassessment proceeding due to lack of proper sanction. Thus, not only the facts relating to issuance of notice u/s. 148 of the Act after expiry of three years from the end of the assessment year was available before the first appellate authority, but the assessee has also raised a specific ground on the issue. Unfortunately, the first appellate authority has completely overlooked the grounds raised by the assessee on legal and jurisdictional issues and proceeded to decide the appeal on merits, that too, through a cryptic and non-speaking order. When the assessee has raised a specific ground challenging the validity of the assessment order on account of inappropriate sanction and facts relating to such issue were available before the first appellate authority, it was his duty to decide the ground. For the failure on the part of the first appellate authority in discharging his statutory duty, the assessee cannot be punished by relegating him again to the first appellate authority. In any case of the matter, since, the (A.Y.2016-17) Shivi Mukesh Kumar vs. ACIT issue is squarely covered by the decision of Hon’ble Jurisdictional High Court, we are inclined to decide the issue based on the factual position available on record. Since the facts on record clearly indicate that before issuance of notice u/s. 148 of the Act, the A.O. had obtained sanction of PCIT instead of PCCIT in terms with section 151(ii) of the Act, not only the issuance of notice u/s. 148 of the Act is vitiated, but all consequential proceedings in pursuance thereof are also vitiated. Accordingly, we quash the impugned assessment order. Hence, this ground is allowed. In view of our decision above, all other grounds having become academic for the purpose of the present appeal do not require adjudication, hence, kept open.

In the result, the appeal is partly allowed as indicated above. Order pronounced in the open court on 17.12.2025 Sd/- Sd/- (Jagadish) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 17.12.2025 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,