INCOME TAX OFFICER, WARD 3(1), HYDERABAD vs. STYPACK PRIVATE LIMITED , HYDERABAD

Facts

The assessee company reported substantial long-term capital gains (LTCG) from share sales. The Assessing Officer (AO), based on information from a search and seizure operation on an accommodation entry provider, alleged that the shares were rigged and the LTCG was a colorable device to convert unexplained money. The AO treated the LTCG as an unexplained cash credit under Section 68 of the Income Tax Act, 1961, and initiated reassessment proceedings by issuing a Section 148 notice for AY 2018-19.

Held

The Income Tax Appellate Tribunal quashed the reassessment order on jurisdictional grounds. It found that the AO had issued the Section 148 notice for AY 2018-19 (beyond three years from the end of the assessment year) after obtaining approval from the Principal Commissioner of Income Tax (PCIT), Hyderabad-1. However, as per Section 151(ii) of the Act (post-Finance Act, 2021 amendments), for cases where more than three years had elapsed, approval from a higher authority (Principal Chief Commissioner or Principal Director General) was mandatory. Since the approval was from an authority not statutorily vested with jurisdiction, the reassessment proceedings were invalid and void-ab-initio.

Key Issues

1. Whether the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, were validly invoked. 2. Whether the prior approval for issuing the Section 148 notice was obtained from the statutorily specified authority as mandated by Section 151 of the Income Tax Act, 1961, especially when more than three years had elapsed from the end of the relevant assessment year.