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Facts
The assessee, State Bank of India, filed an appeal against the order of the Commissioner of Income Tax Appeals for AY 2018-19. The primary issue was the validity of the reassessment notice issued under section 148 of the Income Tax Act, 1961.
Held
The Tribunal held that the notice issued under section 148 was invalid because the approval for issuance was obtained from the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner of Income Tax (PCCIT), as required by Section 151(ii) of the Act for notices issued beyond three years. Consequently, the assessment based on this invalid notice was quashed.
Key Issues
Whether the notice under Section 148 of the Income Tax Act, 1961, issued beyond three years, is invalid if the approval for its issuance was obtained from PCIT instead of PCCIT?
Sections Cited
250, 148A(b), 40(a)(i), 37(1), 147, 148, 143(3), 151, 151(ii)
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, VP &
O R D E R
Per Padmavathy S, AM:
This appeal by the assessee is against the order of the Commissioner of Income Tax Appeals/National Faceless Appeal Centre (NFAC), Delhi passed u/s. 250 of the Income Tax Act, 1961 (the 'Act') dated 10.01.2025 for AY 2018-19. Though the assessee raised several grounds contending the issues on merits, during the course of hearing the ld. AR submitted that if the ground regarding the legal issue of approval not being obtained from the appropriate authority is held in “2.7. The learned CIT(A) erred in not appreciating that the AO has not taken approval of appropriate authority and also not provided the copy of approval before initiating reassessment proceedings which is not in accordance with the law, illegal, and hence invalid.”
The assessee filed the return of income for AY 2018-19 on 28.11.2018 declaring total loss of Rs. 26225,93,41,754/-. The assessee filed a revised return of income declaring a loss of Rs. 28209,28,60,931/-. The return was selected for scrutiny and the statutory notices were duly served on the assessee and the AO completed the assessment u/s. 143(3) after making certain additions/disallowances. Aggrieved the assessee filed an appeal before the ld. CIT(A) who gave partial relief to the assessee. Subsequently, the assessee received a notice u/s. 148A(b) of the Act, dated 24.03.2022 initiating the assessment proceedings wherein the AO required the assessee to show cause as to why notice u/s. 148 should not be issued on account of the following issues. i. Disallowance under section 40(a)(i) in respect of payments to Visa Worldwide Pte Ltd, Singapore ('Visa') and Mastercard Asia Pacific Pte Ltd, Singapore ('Mastercard Singapore') ii. Disallowance under section 37(1) on account of input tax credit and purchases being bogus in respect of transactions undertaken with RCI Industries limited. iii. Unexplained transactions as flagged out on the Insight Portal under the PAN of the erstwhile Associate Banks i.e., State Bank of Hyderabad [e-SBH], State Bank of Mysore [e-SBM), State Bank of Patiala [e-SBP], State Bank of Bikaner and Jaipur [e-SBBJ] and State Bank of Travancore [e-SBT] (such as unexplained cash deposit/credits/withdrawals, unexplained expenditure on purchase of shares/ foreign currency remittances, sale receipts on equity shares/immoveable property, escapement of commission/brokerage/ dividend/insurance income, etc.)
State Bank of India 3. In response to the aforesaid notice the assessee filed its letter dated 31.03.2022 wherein it was submitted that no income chargeable to tax has escaped assessment and therefore there is no requirement for issue of notice u/s. 148 of the Act. The assessee in the said letter requested for the information which formed to the basis for assuming jurisdiction u/s. 147 along with the copy of approvals. The AO vide letter dated 06.04.2022 provided copy of the relevant approvals along with the information based on which the notice u/s. 148A(b) was issue. The assessee vide letter dated 21.04.2022 filed the detailed submission on each of the issues as indicated in the notice u/s. 148A(b). The AO after considering the submissions made by the assessee passed an order u/s. 148A(d) on 27.04.2022 stating that the case is fit for reopening. Simultaneously, the AO also issued notice u/s.148 dated 27.04.2022, requesting the assessee to file the return of income in response to the said notice. The AO completed the assessment u/s. 143(3) r.w.s. 147 assessing the income of the assessee at Rs.30704,43,76,075/-. Aggrieved the assessee filed further appeal before the ld. CIT(A) who gave partial relief to the assessee. The assessee is in appeal before the Tribunal against the order of the CIT(A).
We heard the parties and perused the material on record. The ld. AR submitted that the notice under section 148 dated 27.04.2022 is beyond the period of 3 years and therefore as per the provisions of Section 151 of the Act the AO should have obtained the approval from Principle Chief Commissioner of Income Tax (PCCIT). The ld AR further submitted that in the present case the AO has obtained approval from Principle Commissioner of Income Tax (PCIT) while issuing notice under section 148 and therefore the notice is invalid. The ld. DR rebutted the said argument stating that the AO initiated the proceedings by issue of notice u/s. 148A(b) on 24.03.2022 which is within 3 years and therefore the AO State Bank of India has rightly obtained the approval from PCIT. In this regard, we notice that the Hon'ble Bombay High Court in the case of M/s. Vodafone Idea Limited Vs DCIT (WP No. 2768 of 2022 dated 06.02.2024) has considered and identical issue and held that- 1. Petitioner is impugning a notice dated 19th March 2022 issued under Section 148A(b) of the Income Tax Act, 1961 ("the Act"), the order passed under Section 148A(d) of the Act and the notice both dated 7th April 2022 issued under Section 148 of the Act. One of the grounds raised
is that the sanction to pass the order under Section 148A(d) of the Act and issuance of notice under Section 148 of the Act is invalid inasmuch as the sanction has been admittedly issued by the Principal Commissioner of Income Tax ("PCIT") and not by the Principal Chief Commissioner of Income Tax (PCCIT").
2. Petitioner's request for a copy of the sanction has also been denied. Even in the affidavit in reply, the Department is refusing to give the sanction which makes us wonder what is the national secret involved in that, that Assessee is being refused what he is rightfully entitled to receive from the Department. In the affidavit in reply, the stand taken by the Revenue is it will be made available during the re- assessment proceeding.
3. The impugned order and the impugned notice both dated 7 April 2022 state that the Authority that has accorded the sanction is the PCIT, Mumbai
5. The matter pertains to Assessment Year ("AY) 2018-19 and since the impugned order as well as the notice are issued on 7th April 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCCIT as provided under Section 151 (ii) of the Act. The provisio to Section 151 has been inserted only with effect from 1" April 2023 and, therefore, shall not be applicable to the matter at hand.
4. In this circumstances, as held by this Court in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., the sanction is invalid and consequently, the impugned order and impugned notice both dated 7th April 2022 under section 148A(d) and 148 of the Act are hereby quashed and set aside.
5. The ratio laid down by the Hon'ble Jurisdictional High Court in the above case is that even in cases where the notice u/s. 148A(b) was issued before
In assessee's case though the notice under section 148A(b) was issued on 24.03.2022, the order u/s. 148A(d) and the notice u/s. 148 has been issued on 27.04.2022. On perusal of the notice u/s. 148 we notice that the approval has been obtained from PCIT Mumbai-2. The relevant extract of the notice u/s. 148 is as under – "I have the following information in your case or in the case of the person in respect of which you are assessable under the Income tax Act, 1961(here in after referred to as "the Act") for Assessment Year 2018-19 information flagged by the risk management strategy formulated in this regard suggesting that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. Order under sub-section (d) of section 148A of the Act has been passed in such case vide DIN ITBA/AST/F/148A/2022- 23/1042879843(1) dated 27/04/2022 and annexed herewith for reference, 2. 1, therefore, propose to assess or reassess such income or recompute the loss or the depreciation allowance or any other, allowance or deduction for the Assessment Year 2018-19 and I, hereby, require you to furnish, within 30 days from service of this notice, a return in the prescribed form of the Assessment Year 2018-19. 3. This notice is being issued after obtaining the prior approval of the PCIT, Mumbai-2 accorded on date 27/04/2022 vide Reference No. 100000028879504". (emphasis supplied) 6. From the perusal of these facts, we are of the considered view that the ratio laid down by the Hon'ble High Court is applicable to the present case. Accordingly respectfully following the above decision of the Hon'ble Bombay High Court we hold that the notice issued by the AO u/s.148 beyond 3 years on 27.04.2022 with the approval of PCIT instead of PCCIT as per the provisions of section 151(ii) is
Since we have considered the legal ground and allowed the appeal the rest of the grounds raised by the assessee have become academic and left open accordingly.
In the result, appeal of the assessee is allowed.