MAHAVEER PRASAD CHAVDA,MUMBAI vs. INCOME TAX OFFICER INT. TAX WARD 2(1)(1), MUMBAI

The present appeal preferred by the assessee arises out of final assessment order passed by the Income Tax Officer, Int. Tax Ward-2(1)(1) Mumbai passed u/s 144C(13) of the Act and the order passed 144C(5) of the Act by the Hon’ble Dispute Resolution Panel-2, Mumbai (‘DRP’) for the Assessment Year [A.Y.] 2018-19. 2. The grounds of appeal are as under:

On the facts and circumstances of the case and in law, the Assessing Officer has erred in passing the order under Section 148A(d) and issuing

On the facts and circumstances of the case and in law, the ITO, INT TAX WARD 2(1)(1), Mumbai has erred in passing the order u/s. 148A(d) and also issuing the notice u/s. 148 without appreciating that he was not having the jurisdiction for the same in view of Section 151A and the notification issued thereunder notifying e-Assessment of Income Escaping Assessment Scheme, 2022 and, thereby, rendering the said order and the notice as well as the entire assessment proceeding as null and void.

On the facts and circumstances of the case and in law, the Ld. Assessing Officer erred in invoking provisions of section 56(2)(x) of the Act.

On the facts and circumstances of the case and in law, the Ld. Assessing Officer erred in adding an amount of 47,55,300 under section 56(2)(x) of the Act.

In this case, Draft order u/s. 144C(1) of the Act was passed proposing addition of Rs. 49,40,930/-. Against the said order, the assessee filed objections before the DRP which passed order u/s. 144C(5) of the Act. In the order u/s. 144C(5), the DRP has confirmed the addition made the Assessing Officer.

1 The assessee had not filed return of income for the assessment year under consideration. Accordingly, order u/s. 148A(d) of the Act was passed on 05.04.2022 followed by notice u/s 148 of the Act issued on 06.04.2022.In response, the assessee filed return of Income on 04.05.2022, declaring total income of Rs.1,85,630/-.As per information, the assessee had purchased an immovable property being a flat in Kharghar, Navi Mumbai for total purchase consideration of P a g e | 3 A.Y. 2018-19 Mahaveer Prasad Chavda Rs.1,22,52,700/- and paid stamp duty of Rs. 10,20,50/-and Registration Charges of Rs 31,080/-. On perusal, it was seen that the stamp duty value of the property taken by the SRO-Panvel-2 at Rs.1,70,08,000/-. Accordingly, provisions of section 56(2)(x) of the Act were applicable in respect difference of Rs. 47,55,300/- (Rs. 1,70,08,000 - Rs. 1,22,52,700) between purchase consideration and value of the property as per stamp valuation authorities. The said difference in value as per stamp valuation Authorities and actual consideration being more than 5% of the consideration price, difference amount of Rs.13,67,837/- was added by the AO as per provisions of section 56(2)(x) of the Act under the head Income from Other Sources.

Aggrieved, the assessee filed appeal before the ld.CIT(A) on legal ground as also on merits. He challenged the validity of order under section 148A(d) r.w.s. 151 of the Act claiming it to be without jurisdiction. It was stated that the AO erred in reopening the assessment without obtaining valid sanction from the specified authority as mandated under Section 151 of the Act for issuance of notice under Sections 148 and 148A. Hence, the notice u/s 148 was bad in law as the conditions prescribed u/s 147 to 151 of the Act were not fulfilled. The said assessment order was, however, order was upheld by the ld.CIT(A).

Before us, the ld.AR has drawn our attention to the ground no.1 challenging the validity of the notice u/s 148 of the Act and the consequent assessment order. It was stated that in this case, reopening was made after more than three years from the end of the assessment year. However, the approval of the notice was accorded by Pr.CIT and not by the Pr.CCIT/CCIT as provided in the Act. The approval was accorded on 05.04.2022.Reliance has been placed on various judicial orders claiming that the impugned notice was invalid. The ld.DR on other hand relied on the impugned orders.

We have carefully considered the relevant facts of the case, perused the record and provisions of the Act in this regard and find merits in the contentions of the ld.AR.The issue raised here has been adjudicated in several judicial decisions by various courts of law including jurisdictional High Court in the case of Alag Property Construction Pvt. Ltd. v. ACIT (2025) reported in 179 taxmann.com 578 (Bom). Relevant parts of the order in paragraphs 11 to 14 thereof as under:

The Hon'ble Supreme Court in the above case has drawn an illustration in para 78 of its order in the context of A.Y. 2017-18 (which is also the relevant Assessment year in the present Writ Petition) wherein it is categorically held that the authority specified under section 151(1) can accord sanction only up to 30.06.2021. This illustration makes it absolutely clear that when the period of three years from end of relevant Assessment Year expired between 20.03.2020 and 31.03.2021, the extension by virtue of TOLA was upto 30.06.2021 and not beyond. Thus, it can be said that the period of three

Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(i) vitiates the jurisdiction of Respondent No.I to issue a notice under Section 148 of the Act.

We are clearly of the view that the present matter stands covered by the decision of Hon'ble Supreme Court in the case of Rajeev Bansal (supra) and we are bound by it. Accordingly, we hold that the order dated 18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated and 23.08.2022 are bad in law, and hence, are required to be quashed and set aside.

We accordingly set aside the impugned order dated 18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated 23.08.2022, and all other proceedings/orders emanating therefrom." 6.1 Reliance is also placed on the decision of the Co-ordinate Bench of the ITAT, Mumbai in the case of Shabbir Taheri in ITA No. 1574/Mum/2025 in which the Hon'ble Vice President of the Mumbai Bench passed a concurrent order therein, and the relevant observations of the Bench are reproduced below:

As could be seen from the provision contained u/s. 151 of the Act reproduced above, as per clause (i), in a case where action u/s. 148 and Section 148A of the Act is initiated before expiry of three years from the end of the relevant assessment year, the specified authority who can grant sanction/approval is the Principal Commissioner or Principal Director General or Commissioner or Director of Income Tax. However, as per clause (ii), if more than three years have elapsed from the end of the relevant assessment year, the specified authority, who can grant sanction is the Principal Chief Commissioner or Principal Director General or where no Principal Chief Commissioner or Principal Director General is available then Chief Commissioner or Director General of Income Tax. It is noteworthy, akin to third and fourth provisos, which were incorporated in Section 149(1) of the Act under the new regime effective from 01.04.2021, no corresponding amendment was made to Section 151 of the Act. By virtue of Finance Act,

Thus, as per Section 151 of the Act as it stood prior to its amendment by Finance Act, 2023, the limitation prescribed under Clause (i) of Section 151 of the Act was prior to expiry of three years from the end of the relevant assessment year and without benefit of further extension in terms with third, fourth or fifth proviso under sub section (1) of Section 149 of the Act. xxxxxxxxxxxxxxxxxxxxxxxxx

Similar view was reiterated by the Coordinate Bench in case of ACIT vs. Asha P. Kedia (Supra). It is relevant to observe, though the aforesaid decisions of the Coordinate Benches were rendered at a prior point of time and were available when the appeal of Albert Joseph Rozario (Supra) vs. ITO (Supra) was taken up before another Coordinate Bench, however, either knowingly or unknowingly, these decisions of the Coordinate Benches were not brought to the notice of the learned Bench. It appears so, because, there is no reference of these decisions in case of Albert Joseph Rozario vs. ITO (Supra). Had these decisions of Coordinate Benches been brought to the notice of learned Bench deciding the case of Albert Joseph Rozario (Supra), a different view might have been taken. In any case of the matter, the point of time from which the proviso to Section 151 of the Act would be applicable was considered by the Hon'ble Jurisdictional High Court in at least four judgments. Three of these judgments have already been referred to in the decision of my learned brother Accountant Member. Even in case of AgnelloOswin Dias vs. ACIT [2014] 161 taxmann.com 16 (Bombay), the Hon'ble Jurisdictional High Court, while reiterating the view that after expiry of three years from the end of the relevant assessment year, the specified authority in terms of Section 151(ii) of the Act is PCCIT, has held that the proviso to Section 151 of the Act having been inserted w.e.f. 01.04.2023 shall not be applicable prior to 01.04.2023. Meaning thereby, the proviso will not have retrospective effect. These decisions of the Hon'ble Jurisdictional High Court, being directly on the issue, constitute binding precedents.

In any case of the matter, Sections 149 and 151 of the Act have been enacted for different purposes and operate in different situations. While Section 149 of the Act, prescribes limitation for issuance of notice u/s. 148 and 148A of the Act, Section 151 of the Act prescribes the timeline for the specified authority to grant sanction for Section 148 and 148A of the Act. At the cost of repetition, it needs to be observed that prior to insertion of proviso u/s. 151 of the Act by Finance Act, 2023 w.e.f. 01.04.2023, the specified authority who can grant sanction for initiating proceedings u/s. 148A and issuing notice u/s. 148 of the Act after

In view of aforesaid, I fully agree with the decision of my learned brother Accountant Member that, both the order passed u/s. 148A(d) of the Act and notice issued u/s. 148 of the Act are invalid due to lack of sanction by the specified authority as specified u/s. 151(ii) of the Act. As a natural corollary, the assessment order passed in consequence thereof is also invalid. Hence, the ground is allowed."

From the above discussion, the legal position with regard to the competent authority for granting sanction under section 151 of the Act, prior to its amendment by the Finance Act, 2023, is now well settled. The Hon'ble Bombay High Court in Alag Property Construction Pvt. Ltd.(supra) has categorically held that where the period of three years from the end of the relevant assessment year has expired, sanction under section 151(i) could not have been accorded by the Principal Commissioner, and such sanction renders the reassessment proceedings void ab initio. The said judgment, being rendered by the Jurisdictional High Court, is binding on us. We further find that the Co- ordinate Bench of the ITAT, Mumbai, in Shabbir Taheri (supra), after an exhaustive analysis of sections 149 and 151 of the Act, has reiterated that prior to 01.04.2023, sanction for issuance of notice under section 148 after expiry of three years could be granted only by the authority specified under section 151(ii) of the Act, namely the Principal Chief Commissioner or Chief Commissioner, and that the proviso inserted by P a g e | 8 A.Y. 2018-19 Mahaveer Prasad Chavda the Finance Act, 2023 has no retrospective application. In the present case, it is undisputed that the sanction for issuance of notice under section 148 and for passing the order under section 148A(d) of the Act was granted by the Pr. CIT, Mumbai, who was not the competent authority prescribed under section 151(ii) of the Act. Consequently, the assumption of jurisdiction by the Assessing Officer is bad in law which vitiates the entire reassessment proceedings. 7.1 In view of the above stated legal position, we hold that the notice issued under section 148 of the Act, the order passed under section 148A(d) of the Act, and all proceedings consequential thereto are invalid and unsustainable in law. Accordingly, the reassessment proceedings are hereby quashed. 7.2 As the reassessment itself is held to be invalid, the issues raised on merits and other grounds do not survive for adjudication.

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