UPESH DHIRAJLAL SHAH,MUMBAI vs. INCOME TAX OFFICER WARD 41(3)(4), MUMBAI

The reopening of assessment is without proper application of mind and therefore, bad in law. 3. There is no reason to believe and the reasons recorded are merely on the basis of the information from the Department. 4. The notice u/s 148 of the Act is without Document Identification Number. 5. The sanction u/s 151 is bad in law and as a result, the reassessment proceeding is bad in law. 6. The notice u/s 148 of the Act is without Jurisdiction and bad in law, as same has been issued by the Jurisdictional Assessing Officer who has no jurisdiction. 7. The Ld. CIT(A) has erred in confirming the reopening proceedings and upholding he order passed u/s. 147 r.w.s. 143(3) r.w.s. 144 of the Act without appreciating that the same was against the principle of Natural Justice and is bad in law. 8. The Ld. CIT(A), NFAC, erred in sending the matter back to the Ld. AO without dealing with the jurisdictional issues raised. 9. The Ld. AO erred in confirming the initiation of penalty proceedings u/s. 271(1)(c) of the Act. 10. The Ld.AO erred in confirming the levy of interest u/s. 234B, 234C of the Act. 11. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal.”

At the outset, the Ld. Counsel for the assessee submitted that the delay of 27 days in filing the present appeal was neither deliberate nor intentional. It was submitted that the impugned order was not served upon the assessee and, consequently, the assessee remained unaware of the order. It was only when the Chartered Accountant logged into the Income-tax portal in or around October, 2025 that the impugned order came to the notice of the assessee. Immediately thereafter, the assessee took prompt steps to obtain the relevant records and preferred the present appeal before the Tribunal. It was, therefore, submitted that the delay had occurred due to bona fide reasons beyond the control of the assessee and deserved to be condoned.

The Ld. AR, at the outset, submitted that Ground Nos. 1 and 2 raised by the assessee are jurisdictional grounds challenging the validity of the reassessment proceedings as being bad in law. It was submitted that the assessee is an individual and had not filed any return of income for the year under consideration, as there was no income chargeable to tax. However, subsequently, a notice u/s 148 of the Act was issued, which, according to the assessee, was never received. As the assessee did not respond, an order u/s 148A(d) of the Act came to be passed on 14/07/2022, followed by issuance of notice u/s 148 of the Act.

It is noticed that the order passed u/s 148A(d) of the Act on 14/07/2022 was issued pursuant to the directions of the Hon'ble Supreme Court in Union of India & Ors. v. Ashish Agarwal (2022) 444 ITR 1. We note that the notice u/s 148 of the Act was issued on 08/07/2022 pursuant to the order passed u/s 148A(d) of the Act. Be that as it may, it is observed that the said notice was issued after obtaining the prior sanction of the Pr. Chief Commissioner of Income-tax in terms of section 151(ii) of the Act.

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:

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 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.

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:

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 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 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] 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.” 4.3. 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. Accordingly, Ground Nos. 1-2 raised by assessee stands allowed.