MOTIBHAI LALLUBHAI DESAI,MUMBAI vs. INCOME TAX OFFICER WARD 42(1)(3), MUMBAI

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ITA 5588/MUM/2024Status: DisposedITAT Mumbai13 October 2025AY 2017-1812 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the additional grounds of appeal. It held that the validity of the sanction for issuing orders under Section 148A(d) and notices under Section 148 must be tested with reference to the amended Section 151 of the Act. The Tribunal noted that in this case, more than three years had elapsed from the end of the relevant assessment year. According to Section 151(ii), approval should have been obtained from the Principal Chief Commissioner or Principal Director General. However, the approval was obtained from the Principal Commissioner of Income Tax (PCIT), who is an authority specified under Section 151(i) for cases where three years or less have elapsed. Relying on the decisions of the Bombay High Court in J. M. Financial and Investments Consultancy Services Private Limited and Ramesh Bachulal Mehta & Ors., and the Supreme Court in Union of India v. Rajeev Bansal, the Tribunal held that proper sanction from the correct authority is a jurisdictional pre-condition. Since the sanction was obtained from an incompetent authority, the notice issued under Section 148 and the consequential assessment order are null and void and quashed. The Tribunal did not consider the other grounds of appeal as the assessment order itself was quashed.

What were the facts?

The assessee, Motibhai Lallubhai Desai, filed an appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai, against an order dated 29.08.2024 passed by the CIT(A)/NFAC, Delhi. This order upheld the assessment order dated 29.05.2023 passed by the Assessing Officer (AO) under Section 147 read with Section 144B of the Income-tax Act, 1961, for Assessment Year 2017-18. The AO had assessed the total income at Rs. 2,51,18,850/- as against the returned income of Rs. 13,59,600/-. The assessee's appeal challenged the AO's assessment and also raised additional grounds concerning the validity of the reassessment notice. The ITAT admitted the additional grounds as they were purely legal in nature.

What were the issues?

1. Whether the reassessment notice issued under Section 148 of the Act is barred by limitation and consequently liable to be quashed, considering the amended provisions of Section 151 of the Act and the approval obtained from the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner or Principal Director General (PCCIT/PDG) when more than three years had elapsed from the end of the relevant assessment year? (Question of law). Assessee's Contention: The AO issued the notice beyond three years from the end of the assessment year. As per the amended Section 151, approval from the PCCIT/PDG was required, but approval was obtained from the PCIT, which is an authority specified for cases within three years. Therefore, the notice is time-barred and the assessment is invalid. Reliance was placed on the Bombay High Court decision in Siemens Financial Services P.Ltd and Ramesh Bachulal Mehta & Ors. Revenue's Contention: The judgment records no specific argument from the revenue on this issue, other than the fact that the DR did not controvert the arguments of the AR.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 148,Section 148A,Section 149,Section 151

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Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR

For Appellant: Ms. Mona Solanki, CA
For Respondent: Shri Pravin Salunkhe, (Sr. DR)
Hearing: 12.08.2025Pronounced: 13.10.2025

ORDER \nPER PRABHASH SHANKAR [A.Μ.] :-\nThe present appeal arising from the appellate order dated\n29.08.2024 is filed by the assessee against the order passed by the\nLearned Commissioner of Income-tax (Appeals)/National Faceless\nAppeal Centre, Delhi [hereinafter referred to as “CIT(A)"] pertaining to\nthe assessment order passed u/s.147 r.w.s.144Bof the Income-tax Act,\n1961 [hereinafter referred to as “Act”] dated 29.05.2023 for the\n Assessment Year [A.Y.] 2017-18.\nPage 2\nITA No. 5588/Mum/2024\nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\n2. The grounds of the appeal are as under:-\n1. On the facts and in the circumstances of the case and in law, The Income Tax\nOfficer, hereinafter referred to as the Ld. A.O. has erred in law in assessing\nthe total income at Rs.2,51,18,850/- instead of returned Income of Rs.\n13,59,600/-. The returned Income may please be accepted.\n2. On the facts and in the circumstances of the case and in law, the ld. A.O. has\nerred in not allowing deduction of the actual cost of purchase. Your Honor is\nrequested to allow the deduction of the original cost of purchase of the said\nFlat along with Indexation.\n3. Without Prejudice to the Grounds of Appeal

1.

, on the facts and in the\ncircumstances of the case and in law, the ld. A.O. has erred in not\nconsidering the share of the Assessee in the property as the property is co-\nowned between zowners i.e. the share of the Assessee is 1/3rd.\nAdditional grounds of Appeal\n1. “On the Facts & Circumstances of the case, theld.Assessing Officer-ITO\nWARD 42(1)(3) hereinafter referred to as the ld. A.O. has failed to appreciate\nthat the AO issued reopening notice beyond period of three years, approval\nwas required to be taken as per the provisions of amended section 151 of the\nAct from Principal Chief Commissioner or Principal Director General or\nChief Commissioner or Director General however approval is taken from\nPCIT\".\n2. On the Facts &Circumstances of the case, the ld. Assessing Officer-ITO\nWARD 42(1)(3) hereinafter referred to as the ld. A.O. has failed to mention\nthe section under which the Order u/s 148A(d) has been passed ie the ld. AO\nhas not specified whether Order has been passed u/s 149(1)(a) or 149(1)(b).\n3. Brief facts of the case are that the assessee is an Individual in\nwhose case, as a consequence of reopening of assessment u/s 147 of the\nAct, income was assessed at Rs.2,51,18,850/- in place of returned\nincome of 13,59,600/-which was also upheld by the ld.CIT(A).At the\nvery outset, the ld.AR made a request for admission and consideration of\nadditional grounds which relate to notice u/s 148 of the Act and the\nconsequent assessment order passed.We find that the additional\nPage 3\nITA No. 5588/Mum/2024\nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\ngrounds are purely legal in nature and go into the very root of the\nreassessment notice and consequently the validity of the assessment and\nfor which no further facts are required to be investigated. Reliance is\nplaced upon the decision of the hon'ble Apex Court in Jute\nCorporation of India Ltd. v. CIT (187 ITR 688) wherein the Apex\nCourt permitted the appellant to raise an additional ground for the first\ntime before the appellate authority claiming deduction of purchase tax\nliability because the same had become liable to payment subsequent to\nthe assessment order. The Apex Court made reference to the decision of\nthe Apex Court in Additional Commissioner of Income Tax Vs.\nGurjargravures P. Ltd. (111 ITR 1)and held that it does not prohibit\nthe raising of an additional ground before the appellate authority, when\nthe ground so raised could not have been raised before the Assessing\nOfficer or the ground now becomes available in view of changed\ncircumstances such as a decision of a Court allowing a particular\ndeduction.Since the grounds are purely legal in nature, the same are\nallowed for admission and are taken up first for adjudication as the\nassessee wanted to press them only before us.\n4. It is submitted by the ld.AR that in the instant case, the AO\nissued notice for reopening beyond a period of three years from\nPage 4\nITA No. 5588/Mum/2024\nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\nthe end of the relevant assessment year and approval was\nrequired to be taken u/s 151 of the Act as per the amended\nprovisions. He has drawn attention to the page no.134 of the Paper\nbook submitted on the basis of which it is stated that the impugned\nnotice u/s 148 of the Act was barred by the time limitation and\ntherefore, the consequent assessment was liable to be quashed.It is\nclaimed that in this case, notice u/s 148 was originally issued on 15.06.\n2021within the extended time as per TOLA.However,notices u/s\n148A(d) and 148 were issued only on 29.07.2022.The\nsanctioning authority in this case was Pr.CIT-3,Mumbai which should\nhave been Pr.CCIT instead as per the amended provisions of the\nAct. Thus, the notice u/s 148 is barred by time limitation.Reliance has\nbeen placed on the decision of hon'ble Bombay High Court in Siemens\nFinancial Services P.Ltd 457 ITR 647(Bom).\n4.1 The ld.DR did not controvert the arguments of the ld.AR.\n5. We have carefully examined the rival contentions and have\nalso perused the records as also the pre and post amended provisions of\nsection 148 and 151 of the Act.It is pertinent to note that while the\ncontroversy with respect to the applicability of the changed regime of\nreassessment which would govern all notices issued after

01. April 2021\nPage 5\nITA No. 5588/Mum/2024\nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\nis no longer res integra and stands conclusively settled by virtue of the\ndecision of the Supreme Court in Ashish Agrawal case, the issue here is\nconfined to the aspect of sanction and approval as contemplated\nunder section 151 of the Act. After

01. April 2021, section 151 post\namendment, both its clauses specify a particular set of authorities who\nare liable to examine the aspect of sanction dependent solely upon\nwhether reassessment is proposed to be initiated within or up to three\nyears and in the alternative scenario where it is initiated beyond that\nperiod.\n5.1 We find that Clauses (i) and (ii) of section 151 of the amended Act\nclearly specify the authority whose approval can trigger the reassessment\nproceedings. Thus, if three years or less have elapsed from the end of\nthe relevant assessment year, the specified authority who would\ngrant approval for initiation of reassessment proceedings will be\nthe Principal Commissioner or Principal Director or Commissioner\nor Director. However, if more than three years from the end of the\nrelevant assessment year have elapsed, the specified authority for\naccording approval for the reassessment shall be the Principal\nChief Commissioner or Principal Director General or, where there is\nno Principal Chief Commissioner or Principal Director General, Chief\nCommissioner or Director General.\nPage 6\nITA No. 5588/Mum/2024\nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\n5.2 The Revenue normally takes the plea that that once a notice\nfor reassessment comes to be issued after the expiry of four years by\nvirtue of the extended period of time made available by TOLA, all the\nimpugned notices would fall within the ken of sub-section (2) of the pre-\namendment Section 151 and consequently the sanction and approval\naccorded by the JCIT would be in accordance with law.We find that a\nchallenge on identical lines was addressed before the hon'ble Bombay\nHigh Court in J. M. Financial and Investments Consultancy\nServices Private Limited vs. ACIT, Circle.(Writ Petition (L) No.\n5496 of 2022 /26.04.2022).While dealing with these aspects the\nhon'ble High Court had held as follows:-\n\"5 Respondents have relied upon a letter dated 18th March 2021 issued by\none Income Tax Officer, who has given an opinion to the Additional\nCommissioner of Income Tax that in view of the Taxation and other Laws\n(Relaxation of Certain Provisions) Act, 2020 (Relaxation Act), limitation,\ninter alia, under provisions of Section 151(1) and Section 151(2), which were\noriginally expiring on 31st March 2020 stand extended to 31st March 2021.\nAccording to the Income Tax Officer, in view of the above, Assessment Year\n2015- 2016 which falls under the category within four years as on 31st March\n2020, the statutory approval for issuance of notice under Section 148 of the\nAct for the Assessment Year 2015-2016 may be given by the Range Head as\nper the said provisions. Mr. Sharma clarifies that the Income Tax Officer is\nonly conveying the view of the Principal Commissioner of Income Tax\nbecause this letter has been issued on the letterhead of Principal\nCommissioner of Income

9. Writ Petition No. 1050 of 2022 dated

04. April\n2022 Tax.\n6 Even for a moment we agree with the view expressed by the Principal\nCommissioner of Income Tax, still it applies to only cases where the\nlimitation was expiring on 31st March 2020. In the case at hand, the\nPage 7\nITA No. 5588/Mum/2024\nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\n assessment year is 2015-2016 and, therefore, the six years limitation will\nexpire only on 31st March 2022. Certainly, therefore, the Relaxation Act\nprovisions may not be applicable. In any event, the time to issue notice\nmay have been extended but that would not amount to amending\nthe provisions of Section 151 of the Act.\n7 In our view, since four years had expired from the end of the relevant\n assessment year, as provided under Section 151(1) of the Act, it is only the\nPrincipal Chief Commissioner or Chief Commissioner or Principal\nCommissioner or Commissioner who could have accorded the approval and\nnot the Additional Commissioner of Income Tax. On this ground alone, we\nwill have to set aside the notice dated 31st March 2021 issued under Section\n148 of the Act, which is impugned in this petition. In view thereof, the\nconsequent orders and notices will also have to go.\"\n5.

3.

It may be stated here that the decision in J M Financial came\nto be re-affirmed by the High Court in Siemens Financial Services\nPvt. Ltd. vs. Deputy Commissioner of Income-Tax & Ors.in 457\nITR 647 (Bom).Relevant extracts are reproduced as under:\n\"24. As per section 151 of the Act, the \"specified authority\" who has to grant\nhis sanction for the purposes of section 148 and section 148A is the Principal\nChief Commissioner or Principal Director General or where there is no\nPrincipal Chief Commissioner or Principal Director General, the Chief\nCommissioner or Director General if more than three years have\nelapsed from the end of the relevant assessment year. The present\npetition relates to the assessment year 2016-17, and as the impugned\norder and impugned notice are issued beyond the period of three\nyears which elapsed on March 31, 2020 the approval as\ncontemplated in section 151(ii) of the Act would have to be\nobtained which has not been done by the Assessing Officer. The\nimpugned notice mentions that the prior approval has been taken\nof the \"Principal Commissioner of Income-tax-8\" (\"PCIT-8\")\nwhich is bad in law as the approval should have been obtained in\nterms of section 151(ii) and not section 151(i) of the Act and the\nPrincipal Commissioner of Income- tax-8 cannot be the specified\nauthority as per section 151 of the Act. Further, even in the affidavit-in-\nreply, the Department has accepted that the approval 10 2023 SCC OnLine\nPage 8\n \nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\nBom 2822 obtained is of the \"Principal Commissioner of Income-tax-8\" and,\nhence, such an approval would be bad in law.\n25. The Taxation and Other Laws (Relaxation and Amendment of Certain\nProvisions) Act, enacted on September 29, 2020 and came into force on\nMarch 31, 2020 ([2020] 428 ITR (St.) 29 ). It, inter alia, provided for a\nrelaxation of certain provisions of the Income-tax Act, 1961. Where any time\nlimit for completion or compliance of an action such as completion of any\nproceedings or passing of any order or issuance of any notice fell between\nthe period March 20, 2020 to December 31, 2020, the time limit for\ncompletion of such action stood extended to March 31, 2021. Thus, the\nTaxation and Other Laws (Relaxation and Amendment of Certain\nProvisions) Act only seeks to extend the period of limitation and\ndoes not affect the scope of section 151.\n26. The Assessing Officer cannot rely on the provisions of\nthe Taxation and Other Laws (Relaxation and Amendment of\nCertain Provisions) Act and the notifications issued thereunder\nas section 151 has been amended by the Finance Act, 2021 and the\nprovisions of the amended section would have to be complied with\nby the Assessing Officer, with effect from April 1, 2021.Hence, the\nAssessing Officer cannot seek to take the shelter of the Taxation\nand Other Laws (Relaxation and Amendment of Certain\nProvisions) Act as a subordinate legislation cannot override any\nstatute enacted by Parliament. Further, the notification extending\nthe dates from March 31, 2021 till June 30, 2021 cannot apply once\nthe Finance Act, 2021 is in existence. The sanction of the specified\nauthority has to be obtained in accordance with the law existing when the\nsanction is obtained and, therefore, the sanction is required to be obtained by\napplying the amended section 151(ii) of the Act and since the sanction has\nbeen obtained in terms of section 151(i) of the Act, the impugned order and\nimpugned notice are bad in law and should be quashed and set aside.\"\n5.4 As is evident from the aforesaid discussion, Courts appear to\nhave consistently taken the position that TOLA does not impact the\nworking of section 151 and that the operation of the latter would not\nstand amended by TOLA which merely enabled the specified authority\nto issue notices or accord sanction within the extended time frame\nPage 9\nITA No. 5588/Mum/2024\nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\ncreated by that legislation. TOLA authorization merely enabled the\ncompetent authority to take action within the extended time period and\nit does not alter or amend the structure for approval and sanction which\nstands erected by virtue of section 151 of the Act. It merely extended the\nperiod within which action could have been initiated and which would\nhave otherwise and ordinarily been governed and regulated by sections\n148 and 149 of the Act.\n5.5 The hon'ble Bombay High Court, in a recent landmark ruling\nin the case of Ramesh Bachulal Mehta & Ors. (Writ Petition No.\n271 of 2023, dated 11th August 2025), has quashed reassessment\nproceedings for Assessment Years 2016-17 and 2017-18 on the ground\nthat the Assessing Officer failed to obtain sanction from the\ncorrect authority under Section 151 of the Act.In this case notice\nunder section 148 was initially issued on 19th May 2021 under the old\nlaw.The AO eventually passed an order under section 148A(d) on 13th\nJuly 2022 and issued a fresh notice under section 148 on 15th July\n2022, after obtaining approval from the Principal Commissioner of\nIncome Tax (PCIT).The assessee challenged the reassessment\nproceedings on the ground that approval was obtained from the\nwrong authority, rendering the entire exercise without jurisdiction.\nPage | 10\nITA No. 5588/Mum/2024\nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\nThe Court relied on Union of India v. Rajeev Bansal[2024] 469\nITR 46 (SC), which clarified that proper sanction is a jurisdictional\npre-condition for issuing reassessment notices.TOLA (Taxation and\nOther Laws Relaxation Act, 2020) extended the timeline only up\nto 30th June 2021 for AYs where three years expired between 20th\nMarch 2020 and 31st March 2021. For AY 2016-17, the three-year\nperiod ended on 31st March 2020. By virtue of TOLA, sanction could be\nobtained until 30th June 2021 but not thereafter.Since the order under\nsection 148A(d) was passed on 13th July 2022, the AO was required to\nobtain sanction from the PCCIT as per section 151(ii)). Instead,\nsanction was obtained from the PCIT, an authority under\nsection 151(i).The sanction was obtained from an incompetent\nauthority, vitiating the jurisdiction of the AO.Consequently, the order\nunder section 148A(d) dated 13th July 2022 and the notice under\nsection 148 dated 15th July 2022 were held bad in law and quashed.\n6. In the light of the position of law emerging from the cited\ndecisions above, we are of the considered opinion that the validity of\nsanction for issuing the orders under section 148A(d) and the notices\nunder section 148 should be tested with reference to amended section\n151. If so tested, it is evident that sanction was not granted by an\nPage | 11\nITA No. 5588/Mum/2024\nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\nauthority specified under clause (ii) of section 151. Hence, the orders\nunder section 148A(d) and the notices under section 148 are liable to be\nquashed. As a corollary, the assessment order cannot survive and is also\nliable to be quashed.In this case, there is no dispute that although three\nyears had elapsed from the end of the relevant assessment year, the\napproval was sought from the authorities specified in clause (i), as\nagainst clause (ii) of section 151. Accordingly, we allow the additional\ngrounds of appeal holding the notice issued u/s 148 of the Act as well as\nthe consequential assessment order as null and void and not in\naccordance with the amended provisions of the Act and therefore, are\nquashed.\n7. We do not deem it necessary to delve into the other\ngroundno. 1 to 3 on merit as it would amount to a futile exercise since\nthe very existence of the impugned assessment order no longer survives\n8. In the result, the appeal of the assessee is allowed.\nOrder pronounced in the open court on 13/10/2025.\nSd/-\nSANDEEP GOSAIN\n(न्यायिकसदस्य / JUDICIAL MEMBER)\nSd/-\nPRABHASH SHANKAR\n(लेखाकारसदस्य/ACCOUNTANT MEMBER)\nPage | 12\nITA No. 5588/Mum/2024\nΑ.Υ. 2017-18\nMotibhai Lallubhai Desai\nPlace: मुंबई/Mumbai\nदिनांक / Date. 13.10.2025\nLubhna Shaikh / Steno\nआदेश की प्रतिलिपि अग्रेषित/

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