GUNVANTRAI DIPCHAND SHAH,MUMBAI vs. DCIT CIRCLE 14(1)(2), MUMBAI

This appeal is filed by the assessee against the order dated 30.10.2025 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), [hereinafter referred to as "Ld. CIT(A)"] for A.Y. 2016-17 arising out of the assessment proceedings framed u/s 147 r.w.s 144B of the Income Tax Act, 1961.

The assessee has raised various grounds challenging the validity of reassessment proceedings as well as disallowance of deduction of Rs.21,00,000/- claimed u/s 35(1)(ii) in respect of donation of Rs.12,00,000/- made to M/s Rural Development Society. Since the legal grounds go to the root of the matter, the same are taken up first.

The brief facts are that the assessee filed original return of income for A.Y. 2016-17 declaring total income of Rs.1,18,72,047/-. The assessment was completed u/s 143(3) on 12.12.2018 accepting the returned income. Thereafter, notice u/s 148 was issued on 30.06.2021 under the old reassessment regime. Pursuant to the judgment of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal, the said notice was treated as notice u/s 148A(b). Thereafter, notice u/s 148A(b) was issued on 24.05.2022 granting time to the assessee up to 08.06.2022. The assessee filed reply on 08.06.2022. The Assessing Officer thereafter issued notice u/s 148 on 31.07.2022 and completed reassessment by making addition of Rs.21,00,000/-.

The Ld. AR submitted that the notice u/s 148 dated 31.07.2022 is without jurisdiction for two independent reasons. Firstly, for A.Y. 2016- 17, more than three years had elapsed from the end of the relevant assessment year and therefore sanction was required from Pr. Chief Commissioner/Chief Commissioner as provided u/s 151(ii). However, the notice was issued with the approval of Pr. CIT, which is not the competent authority. Secondly, applying the judgment of Hon’ble Supreme Court in the case of Rajeev Bansal, the original notice having been issued on 30.06.2021, only one day of limitation was surviving. The assessee filed reply to notice u/s 148A(b) on 08.06.2022 and, even after giving the maximum permissible benefit of surviving period, the notice u/s 148 ought to have been issued within the available time. However, notice was issued only on 31.07.2022 and therefore the same is barred by limitation. 2

The Ld. DR relied upon the orders of the lower authorities and submitted that the reassessment proceedings were initiated pursuant to information received from the Investigation Wing/Exemption Circle and in accordance with the judgment of Hon’ble Supreme Court in the case of Ashish Agarwal.

We have heard both the parties and perused the material available on record. The assessment year involved is A.Y. 2016-17. The period of three years from the end of the relevant assessment year expired on 31.03.2020. The impugned notice u/s 148 has admittedly been issued on 31.07.2022. Therefore, the case clearly falls beyond three years from the end of the relevant assessment year. In such a situation, sanction as contemplated u/s 151(ii) was required from the specified higher authority, namely Pr. Chief Commissioner/Chief Commissioner/Pr. Director General/Director General, as the case may be. The approval of Pr. CIT is not the approval contemplated under the statute for a case where more than three years have elapsed.

The sanction prescribed u/s 151 is not an empty formality. It is a jurisdictional safeguard. Once the statute provides that sanction is to be granted by a particular authority, sanction by an authority lower than the prescribed authority cannot confer jurisdiction upon the Assessing Officer. Therefore, on this count alone, the notice u/s 148 dated 31.07.2022 is bad in law.

Even otherwise, the notice is barred by limitation. The original notice was issued on 30.06.2021, i.e. on the last date extended under TOLA. Thus, only one day was surviving. In terms of the judgment of Hon’ble Supreme Court in the case of Rajeev Bansal, the Assessing Officer was required to act within the surviving period after excluding the time consumed in proceedings u/s 148A(b). In the present case, notice

Thus, the reassessment notice is invalid both on account of want of sanction from the competent authority and also on account of limitation. Consequently, the reassessment order passed pursuant to such invalid notice has no legs to stand and is liable to be quashed.

Since we have quashed the reassessment proceedings on jurisdictional grounds, the other grounds raised on merits, including disallowance of deduction of Rs.21,00,000/-, are rendered academic and are not adjudicated.

In the result, the appeal filed by the assessee is allowed.