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Facts
The revenue filed an appeal against the deletion of an addition of Rs. 60 crores made by the AO for unexplained cash deposits. The assessee, in their cross-objection, challenged the validity of the notices issued under Section 148, alleging lack of proper sanction from the competent authority.
Held
The Tribunal held that the notices issued for reassessment, both under the old and new regime, were not sanctioned by the appropriate authorities as required by Section 151 of the Act. Consequently, the reassessment proceedings were quashed as bad in law and void ab initio.
Key Issues
Whether the reassessment notices were issued with the proper sanction from the competent authority as required by Section 151 of the Income Tax Act, and if not, whether the entire reassessment proceedings are void ab initio.
Sections Cited
147, 148, 69A, 151, 148A, 143(1), 3(1), 46A
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
Per: Smt. Beena Pillai, J.M.: The present cross appeals filed by revenue and assessee arises out of order dated 25/07/2024 passed by NFAC, Delhi, for assessment year 2016-17 on following revised grounds of appeal :
(Revenue appeal) “1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A)/NFAC has erred in deleting the addition made by the AO of Rs. 60,00,00,000/-, being unexplained cash deposits u/s 69A of the Act, and allowing the appeal of the assessee by accepting the cash sales declared by hum which mdependently are unverfiable ?"
2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A)/NFAC has erred in deleting the addition made by the AO of Rs. 60,00,00,000/-, being unexplained cash deposits u 698 of the Act, uathout considering the fact that assessment was re opened on the basis of creditable information from the bank and the FAO issued notice u/s. 148 to frame the assessment taking the deposited cash as income escaped from ussessment.? 3. "Whether on the facts and circumstances of the case and in law, the Ld CITTA)/NFAC has erred in deleting the addition made by the FAO of Rs. 60,00,00,000/-, being unexplained cash deposits u/s 69A of the Act, without considering the fact that the FAO has possessed information that the assessee entered into transaction with parties, who had no business rationale and assessee has failed to prove the genuineness of transactions during the re-assessment proceedings "
4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in deleting the addition made by the FAO of Rs 60,00,00,000/ being unexplained cash deposits u/s 69A of the Act by accepting the submission of the assessee during the appellunt proceedings and 3 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain allowing the appeal when the preponderance of probability was against the assessee?"
5. Whether on the facts and circumstances of the case and in laws, the LCTTIA) has right in admitting additional essdences/materials, such as audited books of accolots purchaseanle registers and other relevant documentary evidences during the oppellont priceedings without prouding che opportunity to the FAO for examining the aume u/r. 46A 6. "Whether on the facts and circumstances of the case and in law, the Lit CIT(A) has erred in deleting the addition made by the AO of Rs 60,00,00,000/-, being unexplained cash depoasts us 69A of the Act, despite the fact that the FAO has clearly mentioned in the assessment order that non- submission of the stock register, purchase register, relevant bills along with the contra confirmations related to the purchases by the assessee and in absence of audited accounts to prove the genuineness of the transactions and thus the purchases and sales were also unverifiable ?"
7. Whether on the facts and circumstances of the case and in love, the Ld. CIF(A) has erred in deleting the addition made by the AO Rs. 60,00,00,000/ being unexplained cash deposits us 69A of the Act, despite the fact that the assessee was unable to prove the cash deposits with corresponding documentary evadence as pointed out by the AO in the order 8. The appellant craves leave to amend or alter any grounds or add a new grounds which may necessary” CO No. 224/Mum/2024 (By assessee)
“ The following grounds of Cross Objections are without prejudice to one another.
1. The reassessment order u/s. 147 dated 25/05/2023 is illegal and invalid being without any authority in law and without jurisdiction.
2. The notice u/s. 148 dated 30/06/2021 is without any authority as required u/s. 151 and hence is illegal, invalid and non est.
3. The notice u/s. 148 dated 30/06/2021 being non est the directions of the Hon'ble Supreme Court in the Ashish Agarwal's 4 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain case the assesses case and accordingly, the further proceedings, orders and notices and in particular the reassessment order u/s. 147 dated 25/05/2023 are illegal and invalid.
4. The order u/s. 148A(d) dated 30/07/2022 and the consequent notice u/s. 148 dated 30/07/2022 are illegal and invalid.
5. The order u/s. 148A(d) dated 30/07/2022 and the notice u/s. 148 dated 30/07/2022 are without any authority as required u/s. 151 and hence are illegal, invalid and non est.
6. The notice u/s. 148 dated 30/07/2022 is illegal and invalid being issued by the jurisdictional Assessing Officer and not by a Faceless Assessing Officer, as is required by the provisions of section 151A of the Act, and accordingly, the faceless reassessment order u/s. 147 dated 25/05/2023, is illegal and invalid.
7. The reassessment order u/s. 147 dated 25/02/2025 has been passed mechanically and without application of mind and accordingly illegal and invalid.
8. The Assessee (Cross Objector) craves leave to amend, alter, add or delete any or all of the above the grounds of Cross Objection.”
At the outset the Ld.AR submitted that, the assessee in its cross objection vide Ground 2,3,5 and 7 has raised legal issue that goes to the root cause of the case and may be considered. He submitted that, assessee has sought to raise legal issue challenging validity of notice issued u/s.148 under the old regime of the Act dated 30/06/2021 and notice dated 25/02/2025 under new regime, without being approved by the competent authority as required u/s.151 of the Act, making these notices invalid, non-est and consequential proceedings to be void ab initio.
5 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain 2.1 The Ld.DR submitted that in revenue’s appeal, challenge is against the addition being deleted by the Ld. CIT(A) by not following the procedure laid down under Rule 46A. 2.2 We have perused the legal issue raised by the assessee. It is noted that these grounds goes to the root cause of the assessment proceedings. We therefore first we take up grounds 2,3,5 & 7 raised by the assessee in the cross objection. Brief facts of the case leading to the legal issue are as under: 3. Assessee is an individual and filed its return of income for year under consideration on 03/03/2017, declaring total income of Rs. 3,18,760/-. The return was processed u/s. 143(1) on 23/03/2017. 3.1 Subsequently, based on information received from the DRI the assessee’s case was reopened by issuing notice u/s.148 of the Act as per the old provisions on 30/06/2021. The assessing officer received information that, assessee received cash that was deposited during the year under consideration amounting to Rs.60 crores. The assessment was completed vide order dated 25/05/2023 by making addition in the hands of the assessee u/s. 69A by treating Rs.60crores as unexplained money. 3.2 On an appeal before the Ld. CIT(A) addition stood deleted against which the revenue is in appeal.
The assessee filed cross objection challenging the validity of both notices issued u/s.148 under the old regime as well as new regime, as it is issued without taking approval from appropriate authority as required u/s. 151 of the Act.
6 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain 4.1 The Ld.AR submitted that, as per the decision of Hon’ble Supreme Court in case of Union of India (UOI) Vs. Rajiv Bansal reported in (2024) 67 taxmann.com 70. Hon’ble Supreme Court categorically recorded the authorities who has to grant sanction. He submitted that, after 1/04/2021 based on different criteria’s, new regime specifies the authorities who grant has to sanction u/s. 151 of the Act. He emphasised that, the respective appropriate authorities must sanction the issuance of notice u/s.148, for the assessing officer to assume jurisdiction to proceed with the assessment based on the. 4.2 The Ld.AR submitted that, the first notice issued u/s. 148 of the Act was on 30/06/2021. In terms of the decision of Hon’ble Supreme Court in case of Union of India (UOI) Vs. Ashish Agrawal reported in (2022) 138 taxmann.com 64, prior approval must obtain from the appropriate authorities specified u/s.151 of the new regime. He submitted that as per section 151 of the new regime the appropriate authorities are based on two criteria’s as under: “(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.”
7 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain 4.3 The Ld.AR emphasised that, in the present facts of the case the appropriate authority who sanctioned notice dated 30/06/2021 was Range - 93 Mumbai, and the amount having escaped assessment is more than 50 lakhs. The Ld.AR submitted that the appropriate authority as per section 151 of the new regime should, be Principle Chief Commissioner or Principle Director General or Chief Commissioner or Director General. He submitted that assessee’s case would fall under section 151(ii)(d), as the notice dated 30/06/2021 was issued after 3 years. The Ld.AR submitted that since the said notice itself is bad in law, TOLA will not apply to the present facts of the case and subsequent proceedings would automatically become bad in law and void ab initio. 4.3 The Ld.AR also submitted that, the second notice issued after following procedure laid down u/s.148A under new regime dated 30/07/2022 is also issued without taking sanction from the appropriate authority as specified u/s.151 of the Act. He submitted that notice dated 30/07/2022 issued under the new regime, is issued with the approval from Principle Commissioner of Income Tax – 51, Mumbai, whereas the appropriate authority as per section 151(ii)(d) of the Act should have been Principle Chief Commissioner or Principle Director General or Chief Commissioner or Director General.
On the contrary, the Ld.DR placed on record the objections obtained from the assessing officer in respect of grounds raised by the assessee. He thus supported the orders passed by the authorities below.
8 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain We have perused the submissions advance by both sides in the light of record placed before us.
Hon’ble Supreme Court in case of Union of India (UOI) Vs. Rajiv Bansal (Supra) observed that, the notice has to be sanctioned by the appropriate authorities as a mandatory pre condition for the assessing officer to assume jurisdiction u/s.148 to carry out assessment. Hon’ble Supreme Court also observed that, section 151 links specified authority who has to grant sanction with the time when notice is issued. Hon’ble Supreme Court emphasised that, section 151(ii) prescribes a higher level of authority where the notice is issued beyond 3 years from the end of the relevant assessment year, Hon’ble Supreme Court categorically held that any non compliance by the assessing officer with the strict limits prescribed u/s. 151, would affect their jurisdiction to issue a notice u/s. 148 of the act.
In order for TOLA to come to rescue the initial notice issued under the old regime, the sanction must be as prescribed by the new regime to derive sufficient jurisdiction for the AO to issue notice u/s.151. Hon’ble Supreme Court also emphasised that, the appropriate authority would be as on the date of issue of notice, even though the notice is issued under the old regime and the notice is to be treated to be issued under the new regime as per the ratio of Hon’ble Supreme Court in case of Union of India (UOI) Vs. Ashish Agrawal (supra). We refere to the following observations of Hon’ble Supreme Court in case of Union of India (UOI) Vs. Rajiv Bansal (supra):
9 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain “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 151(2) Before expiry of four Joint Commissioner of the old regime years from the end of the relevant assessment year Section 151(1) After expiry of four Principal Chief of the old regime years from the end of Commissioner or Chief the relevant Commissioner or Principal assessment year Commissioner or Commissioner Section 151(i) of Three years or less Principal Commissioner or the new regime than three years from Principal Director or the end of the relevant Commissioner or Director 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) 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 10 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain (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 11 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain 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 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; 12 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain 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 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)
13 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain 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.”
Based on the above in the present facts of the case, the first notice dated 30/06/2021 should have been approved by Principle Chief Commissioner/Principle Director General/Chief Commissioner/Director General as per section 151(ii)(b). It is noted that the notice dated 30/06/21 has been approved by Range 19(3), Mumbai.
It is further noted that subsequent notice issued u/s.148A dated 30/07/2022 was issued by Principle CIT – 90 as against Principle Chief Commissioner/Principle Director General/Chief Commissioner/Director General. We are therefore of the opinion that the assessment has not been reopened by obtaining the sanction of the appropriate authorities as per section 151(ii)(d) of the Act. The assessing officer has not assumed valid jurisdiction to issue notice u/s. 148 of the Act. We therefore quash the notices dated 30/06/2021 and 30/07/2022 to be bad in law and void ab initio.
As consequence the entire reassessment proceedings becomes bad in law. Since the quashed the reassessment notices and consequential assessment the challenge proceeding are quashed by the revenue on merits becomes infractous.
14 CO No. 224/Mum/2024 & A.Y. 2016-17 Uttamchand Rajmal Jain In the result the cross objection filed by the assessee stands allowed in terms of grounds 2, 5 and 7 and the appeal filed by the revenue stands dismissed. Order pronounced in the open court on 24/04/2025 Sd/- Sd/- (RENU JAUHRI) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 24/04/2025 Poonam Mirashi, Stenographer Copy of the order forwarded to:
(1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.