DCIT 421 MUMBAI, MUMBAI vs. DHWAJA COMMODITY SERVICES PVT. LTD., MUMBAI

Briefly stated, the assessee had filed its return of income for Assessment Year 2016-17 on 31.08.2016. Notice under section 148 was originally issued on 30.06.2021 under the unamended provisions of the Act. Consequent upon the judgment of the Hon’ble Supreme Court in Union of India vs. Ashish Agarwal, the said notice came to be treated as a notice issued under section 148A(b). Thereafter, an order under section 148A(d) was passed and a fresh notice under section 148 was issued on 30.07.2022. Pursuant thereto, reassessment was completed under section 147 read with

Before the Ld. CIT(A), apart from challenging the additions on merits, the assessee specifically assailed the very assumption of jurisdiction on the ground that the notice issued under section 148 dated 30.07.2022 was beyond three years from the end of the relevant assessment year and, therefore, in terms of section 151, as substituted by the Finance Act, 2021, prior approval of the Principal Chief Commissioner or the Chief Commissioner alone could have validated the issuance of such notice. It was pointed out that the notice itself as well as the reassessment order recorded that approval had been obtained only from the Principal Commissioner of Income Tax-4, Mumbai.

The Ld. CIT(A), after calling for comments from the Assessing Officer, which admittedly were never furnished despite opportunity, examined the statutory provisions, the notice issued under section 148 and the assessment records. On finding that the approval had admittedly been obtained only from the Principal Commissioner of Income Tax, whereas approval of the Principal Chief Commissioner or the Chief Commissioner was statutorily required, the Ld. CIT(A), following the judgment of the Hon’ble Supreme Court in

The learned Departmental Representative strongly relied upon the assessment order and the grounds taken by the Revenue and submitted that the Ld. CIT(A) erred in quashing the reassessment proceedings. According to him, the sanction obtained from the Principal Commissioner was sufficient compliance with section 151 of the Act.

Per contra, the learned Counsel appearing on behalf of the assessee supported the order of the Ld. CIT(A) and submitted that the issue is no longer res integra in view of the judgment of the Hon’ble Supreme Court in Rajeev Bansal v. Union of India & Ors. and the subsequent judgments of the Hon’ble Bombay High Court. It was submitted that the notice having been issued after expiry of three years from the end of Assessment Year 2016-17, sanction from the Principal Chief Commissioner or Chief Commissioner alone could satisfy the statutory mandate of section 151. Since admittedly approval was obtained only from the Principal Commissioner of Income Tax, the reassessment proceedings were void ab initio.

The relevant facts are undisputed. The return of income was filed on 31.08.2016. The original notice under section 148 dated 30.06.2021 stood converted into a notice under section 148A(b) pursuant to the judgment of the Hon’ble Supreme Court in Ashish Agarwal. Thereafter, the impugned notice under section 148 was issued on 30.07.2022. The notice itself as well as the reassessment order specifically record that prior approval had been obtained from the Principal Commissioner of Income Tax-4, Mumbai. It is nowhere the case of the Revenue that approval of the Principal Chief Commissioner or the Chief Commissioner had been obtained. Even before the Ld. CIT(A), despite specific opportunity having been granted, no remand report or clarification was furnished by the Assessing Officer controverting the assessee’s objection. Even before us, no material has been placed to establish that approval from the

Section 151, as substituted with effect from 01.04.2021, consciously prescribes different sanctioning authorities depending upon the period within which notice under section 148 is issued. In a case where the notice is issued within three years from the end of the relevant assessment year, approval of the Principal Commissioner or Principal Director or Commissioner or Director is sufficient. However, where the notice is issued after expiry of three years, Parliament has consciously elevated the level of statutory scrutiny by mandating prior approval of the Principal Chief Commissioner, Principal Director General, Chief Commissioner or Director General. The distinction is deliberate and substantive. The requirement of sanction under section 151 is neither an empty ritual nor a procedural formality. It is a jurisdictional safeguard consciously engrafted by Parliament before the extraordinary power of reopening a concluded assessment can be exercised.

The Hon’ble Supreme Court in Rajeev Bansal v. Union of India & Ors. has now conclusively settled the legal position by holding that after 01.04.2021 the prior approval contemplated under section 151 has to be obtained strictly from the authority specified under the substituted provision. Their

Applying the aforesaid statutory provisions and the law laid down by the Hon’ble Supreme Court to the admitted facts of the present case, we find that the notice under section 148 dated 30.07.2022 was admittedly issued beyond three years from the end of Assessment Year 2016-17. Consequently, approval from the Principal Chief Commissioner or Chief Commissioner was an indispensable jurisdictional requirement. Admittedly, however, approval was obtained only from the Principal Commissioner of Income Tax. Such approval cannot, by any process of interpretation, be equated with approval granted by the authority expressly designated by Parliament. Once the statute itself identifies the authority competent to accord sanction, approval granted by any other authority cannot constitute substantial compliance. The doctrine of substantial compliance has no application where the very assumption of jurisdiction depends upon fulfilment of a mandatory statutory condition.

The aforesaid conclusion also stands fortified by the judgments of the Hon’ble jurisdictional Bombay High Court in Alag Property Construction Pvt. Ltd. v. ACIT [2026] 487 ITR 440 (Bom.), Anil Gupta Private Family Trust v. ITO, Ward- 25(2)(1) & Ors., Writ Petition No.928 of 2026, decided on 23.03.2026 (Neutral Citation: 2026:BHC-OS:7433-DB), and Skypak Travels (India) Pvt. Ltd. v. ITO & Ors. [2026] 185 taxmann.com 963 (Bom.), wherein the Hon’ble High Court has reiterated that after substitution of section 151 with effect from 01.04.2021, sanction has necessarily to be obtained from the authority specifically prescribed under the substituted provision and such requirement goes to the very root of the jurisdiction assumed by the Assessing Officer.

We are, therefore, in complete agreement with the reasoning and conclusion recorded by the Ld. CIT(A). The absence of sanction from the competent authority is not a procedural irregularity capable of being cured during appellate proceedings. It strikes at the very assumption of jurisdiction. Once the jurisdictional foundation itself is found wanting, every consequential proceeding founded thereon, namely the order passed under section 148A(d), the notice issued under section 148 and the reassessment framed under section 147, necessarily collapse and become unsustainable in law. We, accordingly, find no infirmity in the order of the

Since we have upheld the order of the Ld. CIT(A) quashing the reassessment proceedings on the preliminary jurisdictional issue itself, the Cross Objection filed by the assessee challenging the addition made under section 68 on merits does not call for adjudication at this stage. The issues raised therein are rendered purely academic in the present proceedings and are, therefore, left open to be urged, if so required, in appropriate proceedings. Accordingly, the Cross Objection is disposed of as academic without expressing any opinion on the merits of the addition.

In the result, the appeal filed by the Revenue is dismissed and the Cross Objection filed by the assessee is disposed of as academic, leaving all the issues raised therein open.