BRIJ SYSTEMS LTD ,MUMBAI vs. ASST. COMMISSIONER OF INCOME TAX CIRCLE 4(1), MUMBAI

आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against the impugned order dated 13.01.2026 passed by the learned National Faceless Appeal Centre (NFAC), Delhi, arising out of reassessment order passed under section 147 of the Income Tax Act, 1961 for the assessment year 2016-17.

2 ITA No.731/Mum/2026 Brij Systems Ltd., 2. In the grounds of appeal, the assessee has challenged the validity of reopening proceedings initiated under section 148 as well as the addition made on merits. One of the principal grounds raised by the assessee is that the mandatory sanction contemplated under section 151 of the Act has not been obtained from the competent authority prescribed under the statute. According to the assessee, since the impugned notice under section 148 had admittedly been issued beyond the period of three years from the end of the relevant assessment year, the approval ought to have been accorded by the Principal Chief Commissioner or Chief Commissioner and not by the Principal Commissioner of Income Tax. The assessee has also challenged the addition of Rs.3 Crores made under section 68 on account of unsecured loan received from M/s. Aneri Fincap Ltd. Since the legal issue relating to the very assumption of jurisdiction under section 147 goes to the root of the matter and strikes at the validity of the reopening itself, the same is being adjudicated first.

3 ITA No.731/Mum/2026 Brij Systems Ltd., assessee had received accommodation loan entries from M/s. Aneri Fincap Ltd. amounting to Rs.3,00,94,192/-. Based on such information, notice under section 148 came to be issued. Admittedly, the proceedings were initiated after expiry of three years from the end of the relevant assessment year. Thereafter, consequent to the judgment of the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal, notice under section 148A(b) dated 31.05.2022 was issued treating the earlier notice as deemed notice under the new reassessment regime.

4 ITA No.731/Mum/2026 Brij Systems Ltd., 19.07.2022 with approval of the Principal Commissioner alone.

5 ITA No.731/Mum/2026 Brij Systems Ltd., faceless Assessment Centre u/s. 142(1) 09.01.2023 16.01.2023 Yes 16.01.2023 Part u/s. 142(1) 12.01.2023 19.01.2023 Yes 19.01.2023 Part & 31.01.2023 SCN 04.05.2023 09.05.2023 Yes 09.05.2023 Part

6 ITA No.731/Mum/2026 Brij Systems Ltd., years, approval can be accorded by the Principal Commissioner or Commissioner; however, where more than three years have elapsed, the legislature, in its wisdom, has consciously provided a much higher threshold of approval requiring sanction from the Principal Chief Commissioner or Chief Commissioner. This legislative safeguard is neither cosmetic nor procedural in nature but constitutes a jurisdictional precondition intended to prevent arbitrary reopening of concluded assessments after substantial lapse of time. In the present case, admittedly, the notice has been issued beyond three years from the end of A.Y. 2016-17 and therefore the sanctioning authority contemplated under section 151(ii) could only have been the Principal Chief Commissioner or Chief Commissioner. Admittedly, approval has been granted only by the Principal Commissioner.

7 ITA No.731/Mum/2026 Brij Systems Ltd., elapsed period from the end of the relevant assessment year and any deviation therefrom goes to the very root of jurisdiction. The relevant observations and findings of the Hon’ble Supreme Court are reproduced hereunder:

“73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments Sri krishna (P.) Ltd. v. ITO [1996] 87 Taxman 315/221 ITR 538 (SC)/[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below:

Regime Time limits Specified authority Section Before expiry of four Joint Commissioner 151(2) of years from the end of the old the relevant regime assessment year Section After expiry of four Principal Chief 151(1) of years from the end of Commissioner or Chief the old the relevant Commissioner or Principal regime assessment year Commissioner or Commissioner Section Three years or less Principal Commissioner or 151(i) of than three years from Principal Director or the new the end of the relevant Commissioner or Director regime assessment year Section More than three years Principal Chief 151(ii) of have elapsed from the Commissioner or Principal

8 ITA No.731/Mum/2026 Brij Systems Ltd., the new end of the relevant Director General or Chief regime assessment year Commissioner or Director General 74. 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: (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. 75. 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: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within

9 ITA No.731/Mum/2026 Brij Systems Ltd., three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. 76. 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. 77. 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 20 March 2020 to 31 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 20 March 2020 and 31 March 2021, then the specified authority under section 151(i) has an extended time till 30 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 20 March 2020 and 31 March 2021, then the specified authority under section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime

10 ITA No.731/Mum/2026 Brij Systems Ltd., expires on 31 March 2021 because the new regime comes into effect on 1 April 2021. 78. For example, the three year time limit for assessment year 2017-2018 falls for completion on 31 March 2021. It falls during the time period of 20 March 2020 and 31 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 30 June 2021. 79. Under Finance Act 2021, the assessing officer was required to obtain prior approval or sanction of the specified authorities at four stages: a. Section 148A(a) - to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment; b. Section 148A(b) - to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022 c. Section 148A(d) - to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and d. Section 148 - to issue a reassessment notice. 80. 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

11 ITA No.731/Mum/2026 Brij Systems Ltd., 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 U P [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.

12 ITA No.731/Mum/2026 Brij Systems Ltd., stood diluted by virtue of the directions issued in Ashish Agarwal, the requirement of obtaining proper sanction under section 148A(d) and section 148 was never dispensed with. Thus, obtaining approval from the specified authority under the new regime was a mandatory jurisdictional requirement and not a mere procedural formality.

“where more than three years had expired from end of assessment year 2018-19, sanctioning authority under section 151(ii) should have been Principal Chief Commissioner and not Principal Commissioner and, thus, order under section 148A(d) and notice under section 148 issued on basis of approval granted by Principal Commissioner were to be quashed and set aside. On similar lines, the assessee has argued that in its case, since more than three years had expired from the end of impugned AY 2017-18 at the time of issue of notice u/s.148 of the Act, sanctioning authority under section 151(ii) should have been Principal Chief Commissioner and not Commissioner of Income Tax, and, thus, order under section 148A(d) and notice under section 148 issued on basis of approval granted by

13 ITA No.731/Mum/2026 Brij Systems Ltd., Commissioner of Income Tax were to be quashed and set aside.”

14 ITA No.731/Mum/2026 Brij Systems Ltd., consequently renders the entire reassessment proceedings void ab initio and liable to be quashed. Accordingly, the notice issued under section 148, order passed under section 148A(d) and all consequential proceedings arising therefrom are hereby quashed. Since we have quashed the reassessment proceedings on the legal issue itself, the grounds raised on merits challenging the addition under section 68 are rendered academic and therefore are not being adjudicated.

Order pronounced on 20th May, 2026.

Sd/- Sd/- (PRABHASH SHANKAR) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 20/05/2026 KARUNA, sr.ps Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER,

(Asstt. Registrar) ITAT, Mumbai