PASUVANTHANI PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY,OTTAPIDARAM vs. THE INCOME TAX OFFICER, WARD ONE , TUTICORIN

आदेश / O R D E R

PER MANU KUMAR GIRI, JM:

This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 31.12.2025 for Assessment Year (AY) 2018-19.

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 2 ::

“1. The order of the learned Commissioner of Income Tax (Appeals) NFAC is erroneous, contrary to law, facts on record and opposed to the principles of natural justice. The appellant is the primary agricultural co-operative society formed with the objectives of rendering assistance to farmers in rural villages. For encouraging savings out of their income, deposits are collected from the members. Out these deposits collected, loans are granted to the members as per guidelines of Co-operatives Act and RBI. The interest earned is the main sources of income in addition to trading activities carried out by selling fertilizers, seeds to the members. 2. The assessee could not file any return of income for the AY 2018-19. The jurisdictional assessing officer received information that the assessee made cash deposits of Rs 85,28,685/ in its bank account and therefore proposed to reopen the assessment under section 148 by issuing show cause notice under section 148A (b) dated 23.03.2022 requiring the assessee to file reply on or before 30.03.2022. As the assessee could not respond, the jurisdictional assessing officer reopened the assessment on 13.04.2022 after passing the order under section 148A (d) with the approval of the PCIT whereas the sanction was to be obtained from the PCCIT as three years had elapsed from the end of the relevant assessment year. 3. In response to notice under section 148, the assessee filed its return of income on 09.05.2022 admitting Nil income after claiming deduction under section 80P at Rs 19,58,147/-. In response to the hearing notices, the assessee explained that the cash deposits were made as per the entries recorded in the books of accounts and submitted the extracts of the cash book for the relevant period. However, the assessing officer completed the assessment on 08.03.2024 by adding Rs 85,28,685/-under section 69A towards unexplained money and disallowing Rs 19,58,147/- towards deduction under section 80P claimed on the ground that the return was not filed within the time limit allowed under section 139(1) as laid down in section 80AC with effect from AY 2018-19 and the sarne was contested before the learned CIT (Appeals). 4. The learned CIT (Appeals) by order dated 31.12.2025 dismissed the appeal by concurring with the assessing officer and the same is contested in this appeal before the Honourable ITAT. II) 1. The learned CIT (Appeals) ought to have seen that the assessing officer erred in reopening the assessment under section 148 on the basis of order under'section 148A(d) dated 13.04:2022 passed with the approval of the PCIT, Madurai whereas the sanction was to be obtained from the PCCIT, as

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 3 :: three years had elapsed from the end of the assessment year. The learned CIT (Appeals) ought to have seen that the proviso to section 151 was inserted by Finance Act, 2023 and therefore not applicable as on 13.04.2022. 3. The learned CIT (Appeals) ought to have seen that the assessing officer erred in giving only 6 clear days to respond to notice under section 148A (b) dated 23.03.2022 as against the minimum of 7 clear days prescribed under section 148A (b) and therefore the entire reassessment proceedings are invalid. 4. The learned CIT (Appeals) ought to have seen that the jurisdictional assessing officer erred in issuing notice under section 148 on 13.04.2022 against the scheme framed by the CBDT as per Notification dated 29.03.2022 under section 151A as per which only the Faceless Assessment Unit was empowered to issue notices under section 148A (b) and 148 and not the jurisdictional assessing officer and therefore the entire assessment proceedings are invalid. 5. The learned CIT (Appeals) erred in confirming the addition of Rs 85,28,685/- under section 69A towards unexplained money without noticing that section 69A is applicable only in respect of the money not recorded in the books of accounts whereas it is duly recorded in the books of accounts maintained and therefore section 69A is not applicable. 6. The learned CIT (Appeals) erred in confirming the disallowance under section 80P claimed by the assessee without noticing that the substance of the claim cannot be denied merely because of inadherance, to the procedures. 8. The appellant craves leave to add, amend, alter, modify or withdraw any of the above grounds at the time of hearing”.

2.1 The assessee is a primary agricultural co-operative society and had not filed its return of income for the relevant assessment year. The Assessing Officer (AO), on noticing cash deposits amounting to ₹85,28,685/-, issued a notice u/s.148A(b) of the Act dated 23.03.2022. Thereafter, an order u/s.148A(d) of the Act was passed on 30.03.2022, followed by issuance of notice u/s.148 of the Act dated 13.04.2022. Subsequently, the assessment was completed u/s.147 read with Section 144B of the Act by making an addition of ₹85,28,685/- u/s. 69A of the Act.

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 4 :: Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who confirmed the addition made by the AO. Aggrieved thereby, the assessee has preferred the present appeal before the Tribunal challenging the order passed by the CIT(A).

“40. We find that the Show Cause Notice u/s.148A(b) of the Act came to be issued on 23.03.2022 in proposing to issue notice u/s.148 of the Act and as a consequence proposing to assumption of jurisdiction in terms of Section 147 of the Act. The assessee had filed its response to the said notice on 29.03.2022 and the AO had issued a letter dated 04.04.2022 in seeking further details in support of the submissions of the assessee and ultimately the order u/s.148A(d) of the Act came to be passed on 19.04.2022 by the AO, wherein the AO deemed it fit to issue notice u/s.148 of the Act. Thus, the notice u/s.148 of the Act came to be issued on 19.04.2022 for the A.Y. 2018-19.

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 5 :: 41. The provisions of Section 151 defines the sanctioning authority and the relevant provisions as it stood at that point in time reads as under:

“151. Specified authority for the purposes of section 148 and section 148Abe,— (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.]” From a plain reading of the above provisions, the competent authority to grant / accord sanction in terms of Section 151 of the Act is determined based on the date of issuing of sanction and in the event of issuing the sanction beyond the period of three years from the end of the relevant assessment year, the same would be covered by clause (ii) to Section 151 of the Act. 42. If the notice u/s.148 of the Act / order u/s.148A(d) of the Act is issued / passed within 3 years from the end of the relevant assessment year, the competent authority for the purpose of granting sanction in terms of Section 151 of the Act is either Principal Commissioner or Principal Director or Commissioner or Director, as the case may be.

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 6 :: should be Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General 44. Now, let us examine the facts of the present case by keeping in mind the above legal position. The Show Cause Notice in terms of Section 148A(b) of the Act came to issue on 23.03.2022 after obtaining prior approval from the office of the PCIT, Madurai – 1 and thereafter the order in terms of Section 148A(d) of the Act came to be passed on 19.04.2022 along with the notice u/s.148 of the Act being issued on the same day, i.e. 19.04.2022. We find that both the order passed u/s.148A(d) of the Act as well as the notice u/s.148 of the Act dated 19.04.2022 was issued after getting approval from the office of the PCIT, Madurai – 1. The assessment year under consideration being A.Y.2018-19, the notice u/s.148 of the Act / order passed u/s.148A(d) of the Act being issued / passed on 19.04.2022, it can be said that same were passed / issued after the expiry of 3 years from the end of the A.Y under consideration. 45. Hence, it can be said that the notice u/s.148 of the Act was issued / order in terms of Section 148A(d) of the Act was passed without obtaining proper sanction from the competent authority as prescribed in terms of Section 151(1)(ii) of the Act. 46. It is pertinent to note that the proviso to Section 151 of the Act contemplates exclusion of time provided to the

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 7 :: tax payer to response to Show Cause Notice u/s.148A(b) of the Act to the date of actual passing of the order u/s.148A(d) of the Act / notice u/s.148 of the Act, which proviso reads as follows: “Provided that the period of three years for the purposes of clause (i) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of section 149.” 47. However, we find that the proviso to Section 151 of the Act was only introduced by way of Finance Act, 2023, with effect from 01.04.2023, i.e. the said amendment was introduced only after the sanction was granted on the present case / not available at the time of recording of sanction in terms of Section 151 of the Act in the case of the appellant herein. 48. The Ld. AR took us through the Finance Bill, 2023, wherein clause 71, proposing the said amendment to Section 151 as well the notes of clauses to Finance Bill, 2023, wherein relevant note to the said amendment reads as follows: Clause 71 of the Bill seeks to amend the section 151 of the Income-tax Act relating to sanction for issue of notice. It is proposed to amend clause (ii) of the said section to provide that the specified authority for the purposes of section 148 and section 148A shall be the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year. It is further proposed to

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 8 :: insert a proviso in the said section so as to provide that the period of three years for the purposes of clause (i) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of section 149. These amendments will take effect from 1st April, 2023. 49. Thus, it is an irrefutable fact that the amendment brought in by Finance Act, 2023 in introducing the proviso to Section 151 of the Act by giving effect to the exclusion of time limit by operation of 3rd to 5th proviso to Section 149(1) of the Act would take effect only from 01.04.2023. 50. Hence, it can be said that the said amendment would not come to the rescue of the revenue on the facts of the present case in view of the fact that the notice u/s.148 as well the order u/s.148A(d) of the Act beingissued / passed well prior to the introduction of the said amendment, i.e. on 19.04.2022. 51. Before us, the Ld.DR argued that the said amendment introduced by Finance Act, 2023 ought to be reckoned as clarificatory and would have retrospective applicability, thereby validating the sanction accorded by the PCIT, Madurai – 1 on the facts of the present case. He further relied on the judgement of the Hon’ble Calcutta High Court in the case of Giriraj Commercial (P.) Ltd. v. Union of India reported in 169 taxmann.com 168 in support of his contentions.

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 9 :: 52. This argument of the ld.DR is unable to be countenanced by us for the simple reason that the said amendment was introduced specifically with effect from 01.04.2023 and the plain reading of the notes on clauses as well as the memorandum to Finance Act, 2023 leave no room whatsoever to interpret it otherwise. Moreover, we are not inclined to accept the argument of the Department since the AO could not have foreseen such an amendment while passing the order u/s.148A(d) of the Act / issuing the notice u/s.148 of the Act nor the PCIT, Madurai – 1 could have foreseen such amendment while according sanction in terms of Section 151 of the Act. 53. Hence for the reasons discussed above, we hold that the amendment to Section 151 of the Act, introduced by Finance Act, 2023, with effect from 01.04.2023 cannot be reckoned to have retrospective applicability and on this ground we reject the argument put forth by the ld.DR. 54. It was further argued by the ld.DR, that the approval granted by the competent authority, i.e. PCIT, Madurai – 1 to the AO for issuing the notice u/s.148A(b) of the Act vide approval dated 23.03.2022 as mandated by 1st proviso to Section 148 of the Act would suffice the requirement as per the Section 151 of the Act and as such there was no requirement for the AO to obtain approval / sanction once again by the competent authority for issuing the notice u/s.148 of the Act / passing of the order u/s.148A(d) of the Act.

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 10 :: 55. We find that the 1st proviso to Section 148 of the Act as per Finance Act, 2021 reads as follows: “Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.” Thus, on the facts of the present case, the Show Cause Notice u/s.148A(b) of the Act was issued upon the assessee herein only upon prior approvalof the competent authority, PCIT, Madurai – 1. But whether this sanction would also be available / extended to the issuance of notice u/s.148 of the Act / passing of the order u/s.148A(d) of the Act by the AO by reckoning it was a fit case for issuance of such notice u/s.148 of the Act ? 56. We are unable to further accept this argument of the ld.DR, because if it were to be accepted, it would result in a scenario wherein the competent authority was according sanction / approval in terms of Section 151 of the Act for issuing notice u/s.148 of the Act even prior to reply of the assessee to the Show Cause Notice u/s.148A(b) of the Act and even prior the decision of the AO in reckoning whether it was a fit case or not for issuing notice u/s.148 of the Act. 57. Furthermore, if the said argument were to be accepted, then the very purpose behind introduction of

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 11 :: provisions in Section 148A of the Act by way of Finance Act, 2021 to grant an opportunity to the tax payer to demonstrate his case for dropping the proceedings before issuing notice u/s.148 of the Act would stand defeated. 58. Thus, on the facts of the present case, we find that although the sanction was granted to the AO for issuing the Show Cause Notice u/s.148A(b) of the Act, a separate sanction is to be granted for the purpose of issuance notice u/s.148 of the Act as well as the passing of the order u/s.148A(d) of the Act, in the event of the AO finding it fit to do so. Hence, we reject this argument of the ld.DR also. 59. We further find that the Hon’ble Madras High Court in the case of Core Logistic Company v. Assistant Commissioner of Income-tax, reported in 175 taxmann.com 453, had proceeded to quash the reassessment order passed in terms of Section 147 of the Act on account of grant of sanction by the improper authority. The Hon’ble Madras High Court while quashing the said re-assessment order had held as follows: “9. A perusal of Section 151(i) would show that, the specified authority for the purpose of issuing notice under Section 148 within a period of three years from the end of the relevant assessment year is, the Principal Commissioner or Principal Director or Commissioner or Director. Further, in terms of provision of Section 149, three year time period is fixed for issuance of 148 notice, in the event of the amount is below 50 lakhs. In the present case, the amount involved is Rs.3,65,09,748/-, which is more than 50 lakhs. 148 notice was issued on 25.07.2022, which is beyond the period of three years. So admittedly, the approval has to be obtained from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General as defined under Section 151(ii). But, in the present case,

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 12 :: the approval was obtained from the Principal Commissioner in terms of Section 151(i) and no approval was obtained before issuance of 148 notice in terms of provision of Section 151(ii), which is mandatory. Therefore, the notice under Section 148 was issued in the present case in violation of provision of Section 151(ii) of the Income Tax Act. In view thereof, the initiation of proceedings itself is without any jurisdiction. Hence, the same is liable to be quashed.”

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 13 :: reliance was placed on the decision of the Hon’ble Calcutta High Court in the case of Girija Commercial (P.) Ltd. v. Union of India. 5. We heard the rival submissions and perused the material available on record. From a perusal of the decision of the Coordinate Bench in the case of Meganapuram Primary Agricultural Cooperative Credit Society, it is observed that the ratio laid down therein is that a separate sanction is required to be obtained from the appropriate authority under Section 151 of the Act for the purpose of issuance of notice under Section 148 of the Act. The Coordinate Bench further held that acceptance of the contention of the learned DR would defeat the very purpose behind the introduction of Section 148A of the Act, which provides the assessee an opportunity to demonstrate why the proceedings should be dropped before issuance of notice under Section 148 of the Act. In this regard, we further note that the Hon’ble Bombay High Court, in the case of Vodafone Idea Limited v. DCIT, considered an identical issue and held that even where notice under Section 148A(b) was issued within three years, if the notice under Section 148 is ultimately issued beyond three years, the approval contemplated under Section 151(ii) of the Act must be obtained from the Principal Chief Commissioner of Income Tax (PCCIT). 6. In the present case, although the notice under Section 148A(b) was issued on 23.03.2022, the notice under Section 148 came to be issued only on 13.04.2022. A perusal of the notice issued under Section 148 reveals that the approval for issuance of the said notice had been obtained from the PCIT, Madurai-1. The relevant extract from the notice issued under Section 148 is reproduced hereunder:

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 14 ::

ITA No 880/Chny/2026 & SA No. 78/Chny/2026 (AY 2018-19) Pasuvanthani Primary A C C S (Vs.) ITO :: 15 :: the period of three years, with the approval of the PCIT instead of the PCCIT as mandated under Section 151(ii) of the Act, is invalid in law. Consequently, the assessment completed pursuant to such invalid notice is liable to be quashed.

Sd/- Sd/- (एस. आर. रघुनाथा) (मनु कुमार िग�र) (S.R.RAGHUNATHA) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER �या�यक सद*य/JUDICIAL MEMBER

चे�नई/Chennai, +दनांक/Dated: 11th May, 2026. SNDP आदेश क ��त,ल-प अ.े-षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF