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Facts
The assessee filed its return of income for AY 2018-19 declaring NIL income, which was accepted under scrutiny. Later, the AO issued a notice under Section 148A(b) and an order under Section 148A(d) alleging the assessee benefited from bogus entries, leading to a reassessment under Section 147. The CIT(A) confirmed the addition.
Held
The Tribunal held that the notice under Section 148 was issued beyond three years from the end of the assessment year, and the approval for such issuance was obtained from the PCIT instead of the PCCIT, as required by Section 151(ii) of the Act. Relying on High Court judgments, the Tribunal found this approval invalid.
Key Issues
Whether the notice issued under Section 148 is invalid due to not obtaining proper approval from the competent authority as per Section 151 of the Income Tax Act, 1961.
Sections Cited
250, 148A, 148, 151, 68, 147, 143(3)
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI PAWAN SINGH, JM &
(Assessment Year: 2018-19) Parth Construction, Income Tax Officer-41(3)(3), 5, Satsang Complex, Upper Govind Room No. 853, Kautilya Bhavan, Nagar, Malad East, Vs. BKC, Bandra (East), Mumbai-400097. Mumbai-400051. PAN: AAIFP7135M Appellant) : Respondent) Appellant /Assessee by : Shri Jigar Mehta, CA Revenue / Respondent by : Shri Surendra Mohan, Sr. DR : 10.07.2025 Date of Hearing : 18.07.2025 Date of Pronouncement O R D E R Per Padmavathy S, AM:
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 under section 250 of the Income Tax Act, 1961 (the Act) dated 23.01.2025 for Assessment Year (AY) 2018-19. The assessee raised several grounds on merits and during the course of hearing filed the additional ground raising the following legal contention.
Parth Construction “The order u/s 148(A)(d) of the Act dated 07.04.2022, notice u/s 148 of the Act dated 07.04.2022 are invalid as approval has not been sought from Pr. CCIT in accordance with Section 151(ii) of the Act.”
The ld. AR submitted that the legal issue contented through additional if adjudicated in favour of the assessee then the grounds on merits would become academic. Accordingly, we first proceed to consider the appeal on the legal grounds.
The assessee is a partnership firm engaged in the business of developing residential building filed the return of income for AY 2018-19 on 24.09.2018 declaring a total income of NIL. The case was selected for scrutiny and the AO completed the assessment under section 143(3) of the Act accepting the income returned by the assessee. The AO subsequently on the basis of information received from JCIT, CC-7(2), Mumbai during search and seizure action under section 132 of the Act carried out in the case of One World Group of the cases on 06.11.2019 issued a notice under section 148A(b) and subsequently passed an order under section 148A(d) of the Act. It is alleged that the assessee is a beneficiary of the bogus accommodation entries to the tune of Rs. 43,48,924/- from M/s Aneri Finacap Ltd. which is a paper company. The assessee in response to the notice under section 148 filed various details such as the loan confirmations, bank statement, audited financial statements of the lender, copy of ITR etc. The AO after considering the various details and the submissions of the assessee held that the unsecured loan is not genuine and accordingly added the same as addition under section 68 of the Act. On further appeal, the CIT(A) confirmed the addition.
4. The additional ground raised is pure legal issue, which does not require investigation of new facts. Hence, placing reliance on the judgment of the Hon’ble Parth Construction Apex Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC), we admit the additional grounds.
With regard to the legal contention the ld. AR submitted that the approval obtained for issue of notice under section 148A of the Act is not in accordance with the provisions of section 151(ii) of the Act. The ld. AR further submitted that the in assessee's case the notice under section 148 is issued on 07.04.2022 i.e. beyond 3 years from the end of the AY. The ld. AR in this regard drew our attention to the notice issued under section 148 of the Act (page 75 of PB). The ld AR further submitted that the approval in that case should have been obtained from Principle Chief Commissioner of Income Tax (PCCIT) as per section 151(ii) whereas the approval has been obtained from the PCIT. The ld. AR submitted that the Hon'ble Jurisdictional High Court has considered the identical issue in the case of Vodafone Idea Ltd. vs. DCIT (W.P. No. 2768 of 2022 dated 06.02.2024) and Balkrishna Barsha Sutar vs. ITO (W.P. No. 6192 of 2024 dated 29.04.2024) and has quashed the notice under section 148 on the ground that the approval has not been obtained as per the provisions of section 151 of the Act. Accordingly, the ld. AR prayed that in assessee's case the reassessment based on an invalid notice is not sustainable.
The ld. DR on the other hand vehemently submitted that the assessee has not contended the issue before any of the lower authorities and that the assessee is questioning the approval for the first time before the Tribunal is not accepted.
We heard the parties and perused the material on record. The contention of the assessee is that the notice under section 148 which is issued beyond three years is without proper approval as per the provisions of section 151. Therefore before proceeding further we will look at the relevant provisions of section 151 – Parth Construction Sanction for issue of notice.
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.]
We notice from the notice under section 148 as extracted below that the approval for issue of notice has been obtained from PCIT, Mumbai-17 on 07.04.2022 i.e. 3 years have elapsed from the AY i.e. AY 2018-19 Parth Construction 9. We in this regard notice that the Hon'ble Bombay High Court in the case of Vodafone Idea Ltd. has considered a similar issue where the notice is issued without the approval of appropriate authority and held that “3. The impugned order and the impugned notice both dated 7th April 2022 state that the Authority that has accorded the sanction is the PCIT, Mumbai 5. The matter pertains to Assessment Year ("AY") 2018-19 and since the impugned order as well as the notice are issued on 7th April 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCCIT as provided under Section 151 (ii) of the Act. The proviso to Section 151 has been inserted only with effect from 1 April 2023 and, therefore, shall not be applicable to the matter at hand.
In this circumstances, as held by this Court in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., the sanction is invalid and consequently, the impugned order and impugned notice both dated 7th April 2022 under section 148A(d) and 148 of the Act are hereby quashed and set aside.”
We further notice that a similar view has been held in the case of Balkrishna Barsha Sutar. The facts in assessee's case being identical, we are of the considered view that the ratio laid down by the Hon'ble High Court is applicable in assessee's case also. Accordingly, we hold that the notice issued by the AO under section 148 of the Act without obtaining the approval as per the provisions of section 151 of the Act is invalid and liable to be quashed.
Since we have allowed the legal contentions of the assessee, the grounds raised
with regard to the merits have become academic.
12. In result, the appeal of the assessee is partly allowed.