HAFIZ DAWOOD CHANGANI,MUMBAI vs. ITO, WARD 1(1)(3), MUMBAI, MUMBAI

Subsequently, the Assessing Officer reopened the assessment on the basis of information relating to certain gift transactions entered into by the assessee during F.Y. 2016-17. The Assessing Officer passed an order under section 148A(d) on 20.07.2022 and thereafter issued notice under section 148 of the Act. In response to the said notice, the assessee filed his return of income on 13.08.2022. During the reassessment proceedings, the Assessing Officer examined gift of ₹28,00,000/- received by the assessee from his wife. The Assessing Officer did not accept the genuineness of the gift and made an addition of ₹28,00,000/- under section 68 read with section 115BBE of the Act . The Assessing Officer accordingly computed the total income at ₹1,08,47,080/- and passed the reassessment order under section 147 read with section 144B on 20.04.2023.

Aggrieved by the reassessment order, the assessee preferred an appeal before the learned CIT(A), NFAC. Apart from challenging the addition on merits, the assessee also challenged the validity of the reassessment proceedings on the ground that the Assessing Officer had not obtained approval from the competent specified authority as required under section 151 of the Act. The learned CIT(A), vide order dated 05.03.2026, rejected the jurisdictional objections as well as the challenge to the addition and dismissed the appeal of the assessee. The assessee is therefore in appeal before us.

We first take up the jurisdictional ground relating to the validity of the approval obtained under section 151 of the Act. Since this issue goes to the root of the reassessment proceedings, we shall first decide the same at the outset. If the assessee succeeds on this ground, the controversy regarding the addition of ₹28,00,000/- would not survive for adjudication on merits.

We have heard the rival submissions and perused the material placed before us. The assessment year under consideration is A.Y. 2017-18. The Assessing Officer passed the order under section 148A(d) on 20.07.2022 after obtaining approval from the Principal Commissioner of Income-tax. The question before us is whether, having regard to the time that had elapsed from the end of A.Y. 2017-18, the Principal Commissioner of Income-tax was the competent authority to grant such approval.

Section 151 of the Act, as applicable under the substituted reassessment regime, has given the specified authority with reference to the period which has elapsed from the end of the relevant assessment year. Where three years or less have elapsed, section 151(i) states that the Principal Commissioner, Principal Director, Commissioner or Director shall be the specified authority. However, where more than three years have elapsed, section 151(ii) of the Act requires approval from the Principal Chief Commissioner or Principal Director General or, where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General.

For A.Y. 2017-18, the normal period of three years expired on 31.03.2021. The issue before us is no longer res integra. The Hon'ble jurisdictional Bombay High Court has considered identical issue in Alag Property Construction (P.) Ltd. v. ACIT, [2025] 179 taxmann.com 578 (Bom.) / [2026] 487 ITR 440 (Bom.), judgment dated 08.09.2025. What is important is that the Hon'ble High Court was also concerned with A.Y. 2017-18 and examined the issue whether approval granted by the Principal Commissioner after expiry of the period contemplated under section 151(i) of the Act was sufficient to confer jurisdiction upon the Assessing Officer.

For ready reference, the relevant findings of the Hon'ble jurisdictional High Court are reproduced below:

The Hon'ble High Court thereafter considered the consequence of an approval granted by the Principal Commissioner after the above period and held as under:

The Hon'ble Bombay High Court further referred to the specific illustration given by the Hon'ble Supreme Court in Rajeev Bansal in relation to A.Y. 2017-18 and observed as under:

The Hon'ble jurisdictional High Court then held that the defect directly affects the jurisdiction of the Assessing Officer:

When we examine the facts of the present case in the light of the above decision, we find that the position is quite identical. Here also, the relevant assessment year is A.Y. 2017-18. The extended period during which an authority specified under section 151(i) could grant approval came to an end on 30.06.2021. The Assessing Officer, however, passed the order under section 148A(d) only on 20.07.2022. Therefore, by that date, the case had moved beyond the period contemplated under section 151(i), and approval was required from the authority specified under section 151(ii)of the Act.

In our view, this is not a case of a mere technical or procedural irregularity. The Hon'ble Supreme Court in Union of India v. Rajeev Bansal (supra) has explained that approval from the appropriate specified authority is a precondition for assumption of jurisdiction by the Assessing Officer under section issued notice u/s 148 of the Act. of the Act. The hierarchy prescribed in section 151 of the Act is itself linked to the period that has elapsed from the end of the relevant assessment year. Therefore, once the statute requires approval from an authority specified under section 151(ii) of the Act, approval granted by an authority falling under section 151(i) cannot be regarded as sufficient compliance with the statutory requirement.

We also find that the factual similarity with Alag Property Construction (P.) Ltd. is not merely general. The assessment year is the same; the relevant cut-off date of 30.06.2021 is the same; the reassessment proceedings were undertaken thereafter; and the approval was obtained from the Principal Commissioner instead of the authority prescribed under section 151(ii). The ratio of the judgment of the Hon'ble jurisdictional High Court, therefore, squarely applies to the facts before us.

In these circumstances, respectfully following the judgment of the Hon'ble Bombay High Court in Alag Property Construction (P.) Ltd. v. ACIT (supra) and the law laid down by the Hon'ble Supreme Court in Union of India v. Rajeev Bansal (supra), we hold that the approval obtained from the Principal Commissioner of Income-tax did not satisfy the mandatory requirement of section 151(ii) of the Act. The Assessing Officer, therefore, could not validly assume jurisdiction to proceed with the reassessment.

The jurisdictional ground raised by the assessee challenging the validity of the approval under section 151 is therefore allowed.

Since we have quashed the reassessment proceedings on the jurisdictional issue itself, the remaining grounds raised by the assessee do not require separate adjudication.

In the result, the appeal of the assessee is allowed.