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Facts
The assessee challenged the validity of reopening proceedings initiated under Section 147/148 of the Income Tax Act for AY 2018-19, based on information from a WhatsApp chat. The reassessment notice was issued after the statutory period and with the approval of the PCIT, which the assessee argued was not the appropriate authority.
Held
The Tribunal held that the notice u/s 148 was issued beyond the prescribed three-year period from the end of the assessment year. As per Section 151, such notices require approval from the Principal Chief Commissioner or Chief Commissioner, not the PCIT. Therefore, the notice was invalid.
Key Issues
Whether the reassessment notice issued beyond three years from the end of the assessment year, with approval from PCIT instead of PCCIT/CCIT, is valid in light of Section 151 of the Income Tax Act.
Sections Cited
147, 148, 148A, 151, 132, 133A
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Income Tax Appellate Tribunal, ‘F’ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 01/07/2024 passed by ld. CIT (A)-54, Mumbai for the quantum of assessment passed u/s.147 for the A.Y.2018-19. 2. In various grounds of appeal the assessee has challenged the validity of reopening u/s.148 on various grounds and on merits has challenged the addition of Rs.64,00,000/- which were based on some Whats App chat.
Jar Pictures LLP 3. One of the issues which have been raised before us is that, the approval on the notice u/s 148 has not been given by the appropriate authority. Since notice u/s 148 has been issued after 3 years from the end of the relevant assessment year, therefore, the sanctioning authority should be Principal CCIT or CCIT and here in this case PCIT has approved the notice which is bad in law. Before us it has been stated that here in this case assessee has filed his return of income for A.Y.2018-19 on 31/10/2018 declaring total income of Rs.10,47,430/-. There was a search and seizure action u/s.132 in the case of “Phantom Films Pvt. Ltd.” and other groups on 03/03/2021 and assessee was also covered u/s.133A. The ld. AO has noted that as per the information available in the High Risk VRU / CRU module of insight portal there was a Whats App chat which showed that Shri Ajay Rai received cash of Rs.64,00,000/- and accordingly, a notice u/s.148A was issued to the assessee on 11/03/2022. After disposing of the assessee’s objection, order u/s. 148A(d) was passed on 06/04/2022 with the prior approval of PCIT (Central Mumbai-3). Finally, the notice u/s.148 was issued on 06/04/2022 again with the prior approval of PCIT (Central Mumbai-3). This has been stated in the notice in the following manner:-
Jar Pictures LLP 4. It has been submitted before us by the ld. Counsel that as per the amended law if any notice has been issued beyond the period of three years from the end of the relevant assessment year then, approval has to be sought from the Chief Commissioner of Income Tax or Pr. Chief Commissioner of Income Tax. Thus, the notice issued with the approval of ld. PCIT (Central) is bad in law. Therefore, the entire notice and the proceedings u/s.147 deserve to be quashed.
On the other hand, ld. DR submitted that even though final order u/s.148 has been issued on 06/04/2022 with the prior approval of ld. DCIT, however, the initial notice u/s. 148A(a) was issued prior to three years i.e. on 11/03/2022. Thus, it was the continuation of the same notice for which prior approval of ld. PCIT is required.
After considering the submissions and also on perusal of the records we find that it is not in dispute that three years to issue notice u/s.148 for the A.Y.2018-19 had expired on 31/03/2022. Section 151 of the Act as applicable w.e.f. 01/04/2021 to 01/09/2024, the specified authority for sanction of notice for the purpose of Section 148 and 148A provides that if the notice has been issued before three years from the end of the relevant assessment year, then ld. PCIT or ld. CIT can grant approval / sanction the notice; and if it is more than three years, then ld. Pr. Chief Commissioner or ld. Chief Commissioner are the specified authorities who can sanction the notice. Here in this case, the notice u/s.148 has been issued on 06/04/2022 which Jar Pictures LLP is clearly more than three years from the end of the relevant assessment year. Thus, the notice could have been issued only after the approval or sanction of notice by the ld. PCCIT or ld. CCIT. The Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal (2024) 469 ITR 46 has categorically held that the conditions provided u/s.151 is mandatory. For the sake of ready reference, the relevant paras of the judgment of the Hon’ble Supreme Court read 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 Section Before expiry of four years Joint Commissioner 151(2) of the from the end of the relevant old regime assessment year Section After expiry of four years from Principal Chief 151(1) of the the end of the relevant Commissioner or Chief old regime assessment year Commissioner or Principal Commissioner or Commissioner Section 151(i) Three years or less than three Principal of the new years from the end of the Commissioner or regime relevant assessment year Principal Director or Commissioner or Jar Pictures LLP Director Section More than three years have Principal Chief 151(ii) of the elapsed from the end of the Commissioner or new regime relevant assessment year Principal Director General or Chief Commissioner or Director General
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.
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 Jar Pictures LLP 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. 77. ……………………………………………………………………….. 78. ………………………………………………………………………..
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; Jar Pictures LLP 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.
Ergo, from the bare perusal of the para 76, it can be seen that the Hon’ble Supreme Court has clearly held that grant of sanction by an appropriate authority is a pre-condition for the ld. AO to assume jurisdiction u/s.148 and to issue a notice. This has been further clarified in para 79 above wherein, the Hon’ble Supreme Court has clearly clarified that under the provision brought by the Finance Act, 2021, ld. AO was required to obtain prior approval or sanction of the specified notice at four stages. Here in this case, the order u/s. 148A (d) and final notice u/s.148 has been issued with the prior approval or sanction of ld. PCIT who had no authority to grant approval. Accordingly, on this ground alone, the entire notice u/s.148 deserves to be quashed. Accordingly, the notice u/s.148 dated 06/04/2022 is quashed as invalid as sanction of the notice has been given by the ld. PCIT instead of Pr. CCIT or ld. CIT. Accordingly, the entire re-assessment order is quashed.
In the result, appeal of the assessee is allowed on legal grounds. Order pronounced on 22nd May, 2025.