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Facts
The assessee's appeal concerns the validity of reassessment proceedings initiated under Section 148 of the Income Tax Act for AY 2016-17. The primary issue revolves around the proper authority for granting approval for the issuance of the notice and the assessment order under the new regime.
Held
The Tribunal held that the notice issued under Section 148, dated 22/07/2022, was invalid because the approval was obtained from the Principal Commissioner, whereas, given the time elapsed since the end of the assessment year, the approval should have been obtained from the Principal Chief Commissioner as per Section 151(ii) of the Act. Consequently, the assessment order passed under Section 147 was quashed.
Key Issues
Whether the notice issued under Section 148 was valid when the approval for its issuance was granted by an authority not specified under Section 151 of the Act for the given period.
Sections Cited
148, 147, 151, 148A(d), 149(1)(b), 153C, 69A, 144B
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SMT. BEENA PILLAI
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 07/07/2025 passed by NFAC, Delhi for assessment year 2016-17 on following grounds of appeal :
“1. On the facts and circumstances of the case and in law, the CIT (A) ought to have considered the notice issued under Section 148 on 22-7-2022 as invalid and bad in law in view of the fact that it was issued after the expiry of the time period as extended by the provisions of Taxation and Other Laws (Relaxation and A.Y. 2016-17 Sudhir Damji Bharani Amendment of Certain Provisions) Act, 2020 after excluding the period referred to in third proviso to Section 149 as explained by the Supreme Court in the case of UOI v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC). As a result, the said notice as well as the entire assessment proceeding ought to have been declared as null and void.
2. On the facts and circumstances of the case and in law, the learned Assessing Officer has erred in issuing the order under Section 148A(d) and the notice under Section 148 after obtaining the approval of the approval of PCIT-27, Mumbai which was not the correct 'specified authority' as per Section 151 who should have approved it when three years have already elapsed from the end of the relevant assessment year.
3. On the facts and circumstances of the case and in law, the ITO, Ward 27(3)(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 assessment framed u/s 147 of the Act is bad in law in so far as the same should have been framed u/s 153C of the Act since it is based on the information contained in the books of accounts / documents seized or requisitioned during the course of search of the other person.
5. On the facts and circumstances of the case and in law, the CIT(A) has erred in confirming the addition of the alleged cash loan lent amounting to Rs. 7,00,000 under Section 69A without appreciating the fact that the appellant had not lent any such loan in cash.
On the facts and circumstances of the case and in law the CIT(A) has erred in confirming the addition of an amount of Rs 84,000/- under the head Income from other sources being alleged interest received by the appellant.
On the facts and circumstances of the case and in law, the CIT(A) has erred in confirming the additions made by the Assessing Officer without providing an opportunity to cross examination the person on whose statement he had placed his reliance upon.
A.Y. 2016-17 Sudhir Damji Bharani 8. On the facts and circumstances of the case and in law, the CIT(A) has erred in confirming the additions made by the Assessing Officer by relying upon various evidences without confronting them to the appellant and thus violating principle of natural justice.” Brief facts of the case are as under:
The assessee is an individual and filed his return of income for the assessment year under consideration declaring total income of Rs 5,85,090/- on 20/08/2016. 2.1 The assessment in the case of the assessee was reopened vide issue of notice under section 148 of the Act dated 19/05/2021, under the unamended provisions of the Act by seeking approval of JCIT Range, 27(3) under section 151 of the Act. At the time when the notice under section 148 of the Act was issued, the entire scheme of reassessment proceeding had already underwent a change by virtue of amendment brought in by Finance Act, 2021. 2.2 The said notice dated 19/05/2021 was treated to be the deemed notice issued under section 148A(b) of the act, as per the directions of Hon’ble Supreme Court in case of UOI vs Ashish Agarwal reported in (2022) 138 taxmann.com 64. Subsequently, as per the directions of the Hon'ble Supreme Court in the case of the UOI vs. Ashish Agrawal, the assessee was issued notice under section 148A(b) of the Act dated 25/05/2022 along with reasons recorded. In response to the notice under section 148A(b) the assessee filed its response vide reply dated 02/06/2022, 07/06/2022.
2.3 The Ld.AO subsequently, passed order under section 148A(d) on 22/07/2022, rejecting the objections raised by the A.Y. 2016-17 Sudhir Damji Bharani assessee. Accordingly notice under section 148 was issued under the new regime on 22/07/2022. The assessee was subsequently called upon to furnish details on merits of the addition. Ld.AO after considering assessee’s submission passed assessment order making addition in the hands of assessee amounting to Rs.7,00,000/- Aggrieved by the order of the Ld.AO, the assessee preferred appeal before the Ld.CIT(A).
The Ld.CIT(A), upheld the addition made and also rejected the legal plea raised by assessee challenging the validity of notice under section 148 issued under the new regime.
Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.
4. At the outset, the Ld.AR submitted that, Ground No.1-3 are raised challenging validity of notice issued to be bad in law.
4.1 The Ld.AR submitted that, assessee challenges validity of the order passed by the Ld.AO under section 148A(d) of the Act is without jurisdiction and void ab initio as a consequence, notice issued under the amended section 148 dated 22/07/2022 is time barred for following prepositions: a) That, the case of the Assessee does not fall within the scope of directions of the order of UOI vs Ashish Agarwal (supra). b) That, the notice issued under section 148, is barred by time limitation as the Ld.AO while issuing the notice failed to comply with the conditions provided under section 149(1)(b) of the Act. c) it is also sumitted that the sanctioning authority is not the appropriate authority as specified under section 151 of the ACt. 4.2 The Ld.AR submitted that, the assessee is challenging validity of the notice issued under section 148 as in present facts A.Y. 2016-17 Sudhir Damji Bharani the approval was obtained from the Principal Commissioner of Income Tax, instead of Principle Chief Commissioner of Income Tax or Chief Commissioner of Income Tax in terms of section 151 of the Act.
4.3 The Ld.AR submitted that, Hon’ble Supreme Court in case of Rajeeve Bansal reported in (2024) 167 taxmann.com 70 considered the issue of obtaining approval from the appropriate authority under section 151 before issuance of notice under section 148 of the act. It is submitted that as per the new provisions of section 148A the directions of the Hon’ble Supreme Court clearly emphasises about the competent authority who has to approve such notices as under: 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 Joint Commissioner Section 151(2) Before expiry of four years of the old from the end of the regime relevant assessment year Section 151(1) After expiry of four years Principal Chief Commissioner or of the old from the end of the Chief Commissioner or Principal regime relevant assessment year Commissioner or Commissioner Section 151(i) of Three years or less than Principal Commissioner or the new regime three years from the end Principal Director or Commissioner or Director of the relevant assessment year
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.Y. 2016-17 Sudhir Damji Bharani (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.
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 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.
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.
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 A.Y. 2016-17 Sudhir Damji Bharani 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 expires on 31 March 2021 because the new regime comes into effect on 1 April 2021.
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.
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.
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 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.
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 A.Y. 2016-17 Sudhir Damji Bharani 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. 4.4 The Ld.AR submitted that in the present facts of the case, approval was granted by Principal Chief Commissioner Income Tax Mumbai to pass orders under section 148A(d) as well as issuance of notice under section 148 under the new regime. He submitted that the said information is categorically recorded in the order passed under section 148A(d) as well as the notice issued under section 148 of the act, both detailed 22/07/2022.
4.5 The Ld.AR submitted that, as prior approval was not obtained from the prescribed under section 151 of the new regime, issuance of notice u/s.148 of the new regime, and consequential assessment order passed is bad in law.
4.6 On the contrary, the Ld.DR submitted that the initial notice issued by the Ld.AO was with prior approval of the appropriate authority as per the erstwhile section 151 of the act, and therefore the proceedings cannot be invalidated on such arguments that the approval was not obtained from the appropriate authority as envisaged under section151 of the new regime.
I have perused submissions advanced by both sides in the light of the records placed before the Tribunal.
A.Y. 2016-17 Sudhir Damji Bharani 4.7 The Ld.AR raised many preposition challenging the validity of the notices issued. The validity is however analysed based on the arguments advanced by the Ld.AR in respect of Ground No.2
I have carefully perused the observations of the Hon’ble Supreme Court increase of Rajiv Bansal (supra) as well as the decision of Hon’ble Supreme Court in case of Ashish Agarwal(supra).
5.1 The order under section 148A(d) as well as notice issued under section 148 of the new regime was dated 22/07/2022. Hon’ble Supreme Court in both decisions referred to herein above observed that, the appropriate authority for issuance of such notices in the new regime would be as per section 151 of the new regime.
5.2 The impugned documents placed before the Tribunal at page 37-41 being the order under section 148A(d) dated 22/07/2022 and the notice issued under section 148, both dated 22/07/2022 was admittedly, sanctioned by Principle Chief Commissioner vide Reference No. Pr.CIT-27/148A(d)/Approval/2022-23 dated 19/07/2022.
5.3 In the present facts of the case the notice was issued beyond 3 years from end of the assessment year under consideration. Then as per the decisions of Hon’ble Supreme Court, approval is to be obtained as per the amended provisions of section 151 (ii) of the act from the Principal Chief Commissioner. It is noted that the approval is obtained from the Principal Commissioner of Income tax as stated in the notice, as well as the order passed A.Y. 2016-17 Sudhir Damji Bharani under section 148A (d) of the act. I therefore find merit in the argument advanced by the Ld.AR. Accordingly the notice issued under section 148 dated 22/07/2022 is held to be invalid. As a consequence assessment order passed under section 147 read with section 144B of the is liable to be quashed.
Accordingly the legal Ground No.2 raised by the assessee stands allowed. In the result the appeal filed by the assessee is allowed. Order pronounced in the open court on 29/08/2025