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Facts
The Revenue filed an appeal and the assessee filed a cross-objection against the CIT(A)'s order for assessment year 2017-18. The primary issue in the cross-objection concerned the validity of the reopening proceedings.
Held
The Tribunal held that the sanction for reopening the assessment was obtained from an incorrect authority, making the entire reassessment proceeding invalid. Consequently, the notice issued under Section 148 was quashed.
Key Issues
Whether the reassessment proceedings initiated were valid, specifically concerning the authority that granted the sanction for issuing the notice under Section 148.
Sections Cited
147, 148, 143(3), 43CA, 151, 149, 3(1)
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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI OM PRAKASH KANT & MS KAVITHA RAJAGOPAL
ORDER
PER OM PRAKASH KANT, AM
This appeal by the Revenue and cross-objection by the assessee are directed against order dated 29.11.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – 49, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2017-18.
The grounds raised by the Revenue in its appeal are reproduced as under:
1. "On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition related to 19 units namely unit no. LTC- 909, LTC-805, LR-A-0803, LR-A-0504, LR-A-0505, LSG-705, LSG- 1205, LSG-1206, LSG-0806, LR-A-1002, LR-A-1003, LSG-1706, LSG- 1801, LH-1902, LH-1501, LLSM-1402, LLSM-1503 1504, LSM-1502 & LTC-1008 without considering the fact that in accordance with the provisions of The Registration Act, 1908, any arrangement regarding the transfer of immovable property is not deemed a valid contract unless it is executed through proper registration." 2. "On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition related to 19 units namely unit no. LTC- 909, LTC-805, LR-A-0803, LR-A-0504, LR-A-0505, LSG-705, LSG- 1205, LSG-1206, LSG-0806, LR-A-1002, LR-A-1003, LSG-1706, LSG- 1801, LH-1902, LH-1501, LLSM-1402, LLSM-1503&1504, LSM-1502 & LTC-1008 without considering the fact that mere booking with a small advance payment for a flat does not confer complete rights over the property to the buyer and The provisions of Section 43CA would only apply from the booking date if the entire purchase amount is paid at the time of booking and the transaction is conducted electronically, without any cash component. Since this was not the case in the above scenario, the date of registration will be used to determine the applicability of Section 43CA for determining the date of transfer of the property.”
3. "On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition related to units LLSM-1803, LLSM-1804 & LSG-1406 without considering the fact that nowhere in the Income- tax Act, it is clearly mentioned that the first proviso to the section 43CA of the Act is retrospective and unless explicitly stated, a piece of legislation is presumed not to be intended to have a retrospective operation." 4. "On facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing tolerance band of 10% related to units LLSM-1404 and LLSM-1003 without considering that the tolerance band of 10% is applicable w.e.f. 01.04.2021 and tolerance band of 5% is applicable from 01.04.2019 to 31.03.2021. 5. "On facts and circumstances of the case and in law, the Lả. CIT(A) erred in allowing tolerance band of 10%, related to units LLSM-1404 and LLSM-1003 without considering that the applicability of CBDT Circular No. 8 of 2018 dated 26.12.2018 takes effect from 01.04.2019 and will, accordingly apply in relation to the assessment year 2019-20 and subsequent assessment years and the contention of the assessee to be eligible for tolerance band of 10% for 2017-18 is not acceptable." 6. "The appellant craves leave to add to alter, amend, modify and/or delete any or all of the above said grounds of appeal. The appellant reserves its right to file further submission in the appeal.” 2.1 The grounds raised by the assessee in its cross-objection are reproduced as under:
“1. Grounds of Appeal: (a) The Ld.CIT(A) erred in not appreciating that reassessment order passed u/s. 147 is without jurisdiction, invalid and bad in law. (b) The Ld.CIT(A) erred in not appreciating that the notice issued under section 148 of the Act was without DIN, thereby rendering the assessment proceedings invalid and bad in law. (C) The Ld. CIT(A) erred in not appreciating that reopening of the case is done without obtaining proper sanction from the prescribed authority provided u/s 151 of the Act and hence the reassessment order passed is against procedures laid down in the Act and thereby be quashed as invalid. (d) The Ld. CIT(A) erred in not appreciating that reopening of the case is vitiated by law being based on mere change in opinion and abuse of power to review when the said issue was already examined in the original assessment proceedings u/s 143(3) of the Act (e) The Ld. CIT(A) erred in not appreciating that reassessment proceedings initiated suffers from infirmity as the year involved is beyond 3 years from the end of relevant assessment year and there is nothing to show that income represented in the form of asset exceeding Rs. 50 lacs have escaped assessment in this case.
2. The Ld. CIT(A) erred in not appreciating that the unit sold namely LLSM-1003 was pertaining to A.Y. 2013-14 i.e. prior to introduction of section 43CA and hence, the provisions of section 43CA of the Act are not applicable on the transaction of booking done prior to 01.04.2013.
3. The respondent craves leave to add, alter or modify any ground of cross objection.”
Before us Ld. Counsel for assessee submitted that ground raised in the cross objection challenging the validity of reopening goes to the root of the matter and therefore, same should be adjudicated first. Both the parties agreed on this issue, accordingly we have taken up the ground No. 1(c) of the cross objection for adjudication.
Before us Ld. Counsel for the assessee submitted that in the case notice u/s. 148 of the Act has been issued under the amendment provision u/s 148 of the Act (amended w.e.f. from 1/04/2021). He submitted that under the amended provision which were in operation during the assessment year consideration, for reopening the assessment beyond the three years from the end of the assessment year, sanction for issue of notice should be taken from the Principal Chief Commissioner or Chief Commissioner of the Income Tax and for period of three years or less than three years, sanction of the Principal Commissioner or Principal Director was to be required. He referred to the notice u/s 148(A) and 148(A)(d) and notice u/s 148 of the Act issued by the assessing officer in the case. The relevant part of the notice u/s 148 reproduces as under:
“Notice under section 148 of the Income-tax Act 1961 Sir/Madam/M/s. I have the following information in your case or in the case of the person in respect of which you are assessable under the Income tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2017-18. Information which requires action in consequence of the judgement of the Hon'ble Supreme Court in the case of Union of India Vs. Ashish Agarwal, Civil Appeal 3005/2022, dated 4th May, 2022, suggesting that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. Order under sub-section (d) of section 148A of the Act has been passed in such case vide DIN ITBA/COM/F/17/2022-23/1044251346(1) dated 28.07.2022 and annexed herewith for reference. I, therefore, propose to assess or reassess such income or recompute the loss or the depreciation allowance or any other, allowance or deduction for the Assessment Year 2017-18 and I, hereby, require you to furnish, within 30 days from service of this notice, a return in the prescribed form of the Assessment Year 2017-18. This notice is being issued after obtaining the prior approval of the PCIT (Central), Mumbai-4 accorded on date 29.07.2022 vide Reference No. Pr.CIT(C)-4/Approval u/s 148/2022-23.”
( emphasis supplied externally) 5. Ld. Counsel submitted that under the provision of the Law sanction of the Principal Chief Commissioner was to be taken, whereas sanction of the Principal Commissioner has been obtained for reopening and therefore, entire reopening is invalid in law. The Ld. DR on the other hand submitted that the status approving authorities whether it was PCIT or PCCIT, it would not make difference on reassessment.
We have heard rival submissions of the parties and perused the relevant materials on record. In the case issue in dispute is whether the sanction for issue of notice for reopening u/s 148 of the Act has been obtained from the appropriate authority. The relevant provision of section 151 during relevant period are reproduced as under:
Section 151 in The Income Tax Act, 1961 151. 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.]
7. We find the Ahmadabad bench of Tribunal in the case of Dalpat Baraiya vs. ITO in for A.Y. 2016-17 has quashed reassessment proceeding in similar circumstances. The relevant finding of the Tribunal is reproduced as under::
We have given our thoughtful consideration and perused the materials available on record including the Paper Book filed by the Assessee. Section 149 of the Act prescribes time limit for issuance of notice u/s. 148 of the Act. Clause (a) to sub-section (1) of Section 149 prescribes three years limitation and clause (b) of sub-section (1) of Section 149 deals with the cases beyond three years but not more than 10 years have elapsed from the end of the relevant assessment year. Further sub-section (2) of section 149 provides that issuance of notice is subject to the approval given as per the provisions of Section 151 of the Act by the Specified Authority. 7.1. Clause (i) of Section 151 describes the Specified Authority as Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than 3 years have elapsed from the end of the relevant assessment year. Whereas clause (ii) of Section A.Y. 2016-17 Page No 6 Dalpat Baraiya vs. ITO 151 describes the following Officers as the specified authority namely Principal Chief Commissioner or Principal Director, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year. It is undisputed fact, the reopening of assessment in the present case is done beyond three years period. Hence the Specified Authority under clause (ii) of Section 151 namely PCCIT or Principal Director or Chief Commissioner or Director General are the Sanctioning Authority required to approve the reopening of assessment. Whereas in this case, approval was obtained from the PCIT-3, Ahmedabad on 23-08-2022, the same is reproduced as follows: 7.1. Since the Sanctioning Authority for reopening of assessment was obtained from a wrong Specified Authority, the entire reopening itself is bad in law and liable to be quashed. Further this issue is no more res- integra by the land mark decision of the Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal reported in [2024] 167 taxmann.com 70 deciding the same against the department 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. 128 A table representing the prescription under the old and new regime is set out below: Regime Time limits Specifie d authority Section 151(2) of Before expiry of four J oint Commissioner the old regime years from the end of the relevant assessment year Section 151(1) of After expiry of four years Principal Chief the old regime from the end of the Co mmissioner or relevant assessment Chief Commissioner years or Principal Commissioner or Commissioner Section 151(i) of the Three years or less than Principal new regime three years from the end of Commissioner or the relevant Principal Director assessment year or Commissioner or Director Section 151(ii) of More than three years Principal Chief the new regime have elapsed from the end Commissioner or of the relevant Principal Director assessment year 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 PART E 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 PART E 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 expires on 31 March 2021 because the new regime comes into effect on 1 April 2021." 7.2. Further the Bombay High Court in the case of Holiday Developers (P.) Ltd. vs. ITO reported in [2024] 159 taxmann.com 178 held that where more than three years had expired from the 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. 7.3. The Delhi High Court in the case of Ashok Kumar Makhija vs. Union of India reported in [2024] 162 taxmann.com 514 held that where reopening of case was occurring after a lapse of more than three years, appropriate authority for issuance of notice under sections 148 and 148A(b) should be either Principal Chief Commissioner or Principal Director General; approval from principal CIT was not valid.
8. Respectfully following the above judicial precedents, the sanction obtained for reopening of assessment from a wrong Specified Authority is not sustainable in law, consequently the entire reassessment proceedings is liable to be quashed. 7.1 In the instant case the assessment year involved is 2017-18 and notice u/s 148 has been issued on 29-07-2022, which is evidently beyond the period of three years from the end of the relevant assessment year and therefore, sanction for issue of notice was to be obtained from the Principal Chief Commissioner or Chief Commissioner Of Income Tax whereas approval of PCIT, Centre-Mumbai-4, has been obtained and therefore the approval not been in accordance with law. Respectfully following the coordinate bench(supra), the notice u/s 148 of the Act issued therefore, suffer from jurisdiction defect and therefore, notice being bad in law the entire reassessment proceedings stand quashed. The ground No. 1c of the cross objection of the assessee is allowed.
Since we have quashed the entire reassessment preceding the ground raised by the revenue on merit are and other ground raised in cross objection rendered merely academic and therefore we are not adjudicating upon at this stage.
In the result, the appeal of the Revenue is dismissed whereas cross-objection of the assessee are partly allowed.
Order pronounced in the open Court on 09/05/2025.