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Facts
The assessee filed its return of income for AY 2017-18. Information was received that the assessee was a beneficiary of accommodation entry. The assessment was reopened under Section 147 and the AO completed the assessment.
Held
The Tribunal held that the reopening of assessment under Section 147 was invalid due to lack of approval from the competent authority as required by Section 151(ii) of the Act.
Key Issues
Whether the reopening of assessment under Section 147 was valid when the approval was granted by an authority not specified under Section 151(ii) of the Income Tax Act.
Sections Cited
147, 151, 144B, 69A, 148, 148A
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, VP & SHRI NARENDRA KUMAR BILLAIYA, AM Shri Shashank Mehta
O R D E R Per Saktijit Dey, VP: This is an appeal by the assessee against order dated 18.10.2024 passed by National Faceless Appeal Centre (NFAC), Delhi pertaining to Assessment Year (AY) 2017-18.
Qua Ground Nos. 5 and 11, the assessee has raised a crucial jurisdictional issue challenging the validity of reopening of assessment under Section (u/s.) 147 of the Income Tax Act, 1961 (hereinafter called the ‘Act’), on the ground of lack of approval by the competent authority in terms with Section 151 of the Act. The issue being a purely legal and jurisdictional issue going to the root of the matter, we intend to take up the issue at the very outset.
Fact relevant for deciding this issue briefly are, the assessee is a resident individual. For the assessment year under dispute, assessee filed its return of income on 01.08.2017 declaring total income of Rs.2,13,06,720/-.
Subsequently, information was received from the office of Deputy Director of Income Tax (Investigation), Unit-1(1), Ahmadabad that in pursuance to a search and seizure operation carried out in case of M/s Kushal Group, Ahmadabad, it was found that the assessee purportedly was one of the beneficiaries of accommodation entry provided by M/s. Kushal Group in Financial Year (FY) 2016-17 relevant to AY 2017-18.
Based on such information, assessment in case of the assessee was reopened u/s. 147 of the Act. Ultimately, the AO completed the assessment u/s. 147 r.w.s. 144B of the Act, vide order dated 22.05.2023, determining the total income at Rs.2,98,22,641/-. After making additions of an amount of Rs.75,04,727/-. Further, the AO treated the capital gain declared by the assessee as unexplained money u/s. 69A of the Act. Against the assessment order so passed, assessee filed an appeal before the First Appellate Authority, inter alia, challenging the validity of reopening of assessment u/s. 147 of the Act. However, the appeal was dismissed. Being aggrieved, assessee is before us. 6. We have considered rival contentions and perused the materials on record. Before us, it is the say of learned counsel for the assessee that in terms with Clause (ii) to Section 151 (clause-ii), the competent authority who can approve reopening of assessment is the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General of Income Tax. Whereas, he submitted, in the present case assessment has been reopened after obtaining approval of Principal Commissioner of Income Tax (PCIT). Thus, he submitted, the approval does not meet the requirements of Section 151(ii) of the Act. He submitted, this being a jurisdictional error, entire reopening of assessment u/s. 147 of the Act is invalid. In support of such contention, learned counsel relied upon the following decisions: - i. Union of India vs. Rajeev Bansal (2024) 167 taxmann.com 70(SC) ii. ACIT vs. Manish Financial, and others order dated 02.12.2024. iii. and CO No.181/Mum/2024 ACIT vs. Ms. Asha P Kedia order dated 28.03.2025.
The learned Departmental Representative (DR) strongly relied upon the observations of learned First Appellate Authority.
In so far as the factual position relating to the issue in dispute is concerned, there is no dispute that in the present case assessment year involved is 2016-17. Whereas, the notice u/s. 148 of the Act was issued by the AO on 09.04.2021. Meaning thereby, the reopening of assessment was after expiry of three years from the end of the relevant assessment year. Thus, in terms with Section 151 existing prior to its substitution by Finance Act, 2024 w.e.f. 01.09.2024, the competent authority, who can grant approval for issuance of notice u/s. 148 of the Act is the Principal Chief Commissioner of Income Tax or Principal Director General or Chief Commissioner or Director General or Chief Commissioner or Director General of Income Tax. In the facts of the present appeal, the materials brought on record by the assessee, such as, notice u/s. 148 of the Act, communication made with the assessee by the AO through mail dated 18.07.2025 and letter dated 30.07.2022 of ITO (HQ) Tech., Mumbai to the Additional Commissioner of Income Tax-2(2), Mumbai, clearly revealed that the approval was, in fact, granted by PCIT-2, Mumbai. The aforesaid factual position remains uncontroverted before us. Therefore, in our considered opinion, the approval granted by the PCIT-2, Mumbai, under no circumstances, meets the requirement of Section 151(ii) of the Act as it existed at the relevant point of time.
Therefore, the question which arises for consideration is, what will be the effect in case of lack of approval by the competent authority in terms with Section 151 of the Act. In our considered opinion, the issue is no more res integra in view of the decision of the Hon’ble Supreme Court in case of UOI vs. Rajvee Bansal (Supra). After following the principle laid down by the Hon’ble Supreme Court in the aforesaid decision, the Coordinate Bench in case of ACIT vs. Manish Financial (Supra) has held as under:
We heard the parties and perused the material on record. In assessee's case for AY 2016-17 pursuant to the directions of the Hon'ble Supreme Court in the case of Ashish Agrawal, the AO passed an order under section 148(d) of the Act and issued a notice under section 148 on 30.07.2022. From the above observations of the Hon'ble Supreme Court it is clear that the though the prior approval under section 148A(b) and 148(d) were waived in terms of the decision of Ashish Agarwal (supra), for issue of notice under section 148A(a) and under section 148 on or after 1 April 2021, the prior approval should be obtained from the appropriate authorities specified under Section 151 of the new regime. The provisions of section 151 of the Act under the new regime read as under: Sanction for issue of notice. 151. Specified authority for the purposes of section 148 and section 148A shall be,-- (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.
In assessee's case from the perusal of para 3 of the notice issued under section 148 for AY 2016-17 we notice that the same is issued with the prior approval of Pr.CIT-19 Mumbai accorded on 29.07.2022 vide reference No.Pr.CIT- 19/148/2022-23 and this fact is not contravened by the ld DR. For AY 2016-17, the period of three years have elapsed as of 31.03.2020 and the notice is issued beyond three years on 30.07.2022. Therefore as per the decision of the Hon'ble Supreme Court, the approval should have been obtained under the amended provisions of section 151(ii) of the Act i.e. the approval should have been obtained from the Principal Chief Commissioner whereas the approval has been obtained from Pr.CIT as stated in the notice under section 148 itself. Therefore we see merit in the contention of the assessee that the notice under section 148 for AY 2016-17 is issued without obtaining the prior approval from the appropriate authority. Accordingly we hold that the notice under section 148 is invalid and the consequent assessment under section 147 is liable to be quashed.”
Therefore, respectfully following the ratio laid down by the Hon’ble Supreme Court and Coordinate Bench in the judicial precedents referred to above, we hold that the reopening of assessment u/s. 147 of the Act for the year under consideration is invalid due to lack of approval by the competent authority in terms with Section 151(ii) of the Act. Accordingly, we quash the assessment order. The order of learned First Appellate Authority is set aside.
In view of our decision above, all other grounds have become academic, hence, left open.
In the result, appeal is partly allowed.
Order pronounced in the open court on 31 /07/2025.