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Facts
The assessee received a notice u/s.148 of the Income-tax Act for AY 2017-18 on 29.07.2022, which was beyond the three-year limitation period from the end of the assessment year. The escapement of income was less than Rs. 50.00 lakh.
Held
The Tribunal held that the notice issued u/s.148 of the Act was barred by limitation as it was issued beyond the prescribed three-year period. Consequently, the re-assessment proceedings and the assessment order were quashed.
Key Issues
Whether the notice issued u/s.148 of the Income-tax Act is barred by limitation when issued beyond three years from the end of the assessment year, and if so, whether the re-assessment proceedings are invalid.
Sections Cited
147, 148, 144B, 250, 151
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
Appellant by : Shri Vinay Kawadia (through virtual) Respondent by : Shri Sanjay Dhivare Date of hearing : 11.08.2025 Date of pronouncement : 03.09.2025 आदेश / ORDER The captioned appeal at the instance of assessee pertaining to A.Y. 2017-18 is directed against the order dated 29.05.2025 of National Faceless Appeal Centre (NFAC) Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of Assessment Order dated 26.04.2023 passed u/s.147 r.w.s144 r.w.s144B of the Act.
2. The first legal issue raised in the assessee is that the assessment proceedings u/s.147 r.w.s.144 r.w.s.144B of the Act order dated 26.04.2023 deserves to be quashed as the notice u/s.148 of the Act is barred by limitation.
At the outset, Ld. Counsel for the assessee submitted that the escapement of income is less than Rs.50.00 lakh and ld. Assessing Officer (AO) was required to issue notice u/s.148 of the Act within three years from the end of the assessment year 2 Vishal Vijay Jaiswal and the last date to issue such notice was 31.03.2021 whereas notice has been issued to the assessee on 29.07.2022 and therefore such notice is barred by limitation. In support of its contention, reliance was placed on the judgment of Hon’ble Apex Court in the case of UOI Vs.Rajeev Bansal (2024) 167 taxmann.com 70 (SC) and the decision of this Tribunal in the case of Kai Ganpatrao Sakharam Pawar Nagari Sahakari patsanstha vs. ITO in order dated 29.04.2025.
4. On the other hand, ld. DR supported the order of ld.CIT(A).
I have heard the rival contentions and perused the record placed before me. I note that the assessee is an individual and on the basis of information available with the department about the deposit of cash of Rs.27,99,250/- during the demonetization period in the bank account held with State Bank of India, Faizpur Branch assessee was issued notice u/s.148 of the Act on 29.07.2022 after obtaining approval from Pr.CIT, Nashik. Admittedly, the alleged escapement of income is less than Rs.50.00 lakh and the time limit for issuing the notice u/s.148 of the Act is three years from the end of the assessment year. However, notice has been issued beyond three years, i.e.on 29.07.2022. It has been pleaded by the ld. Counsel for the assessee that such notice u/s.148 of the Act being barred by limitation renders the re-assessment proceedings as invalid and void ab initio. I note that in the decision of this Tribunal referred by ld. Counsel for the assessee in the case of Kai Ganpatrao Sakharam Pawar Nagari Sahakari patsanstha vs. ITO (supra) similar issue challenging the validity of notice u/s.148 of the Act has been raised on the 3 Vishal Vijay Jaiswal ground of being barred by limitation and the finding of this Tribunal reads as under :
“Findings & Analysis :
We have heard both the parties and perused records. Both the parties have argued only on the Legal Issue. In this case, during the hearing on 08.04.2025, ld.DR sought time to obtain comments from AO and verify the Legal Ground raised by the Assessee. Accordingly, the case was adjourned to 24.04.2025. Today i.e.24.04.2025 we heard the case. The ld.DR filed a report of the Assessing Officer.
4.1 It is an admitted fact that notice u/s.148 was issued on 18.07.2022 and order u/s.148A(d) was passed on 18.07.2022.Both these were approved by the ld.Principal Commissioner of Income Tax- 3, Pune vide No.PN/Pr.CIT-3/148/APPROVAL/2022-23/1021 dated 08/07/2022. Section 151 of the Income Tax Act is reproduced here as under :
[Sanction for issue of notice. 151. 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.]
5. In this case, it is an admitted fact that more than three years have been lapsed from the end of the Assessment Year. Therefore, as per Section 151 of the Act, the Competent Authority to approve the notice u/s.148 and order u/s.148A(d) of the Act, is the ld.Principal Chief Commissioner of Income or ld.Chief Commissioner of Income Tax. However, in this case, notice has been approved by ld.Principal Commissioner of Income Tax.
5.1 The Hon’ble Jurisdictional High Court in the decision of Holiday Developers (P.) Ltd, Vs. ITO [2024] 159 taxmann.com 178 (Bombay) dated 29.01.2024 has held as under :
Quote “1. Petitioner is impugning a order under section 148A(d) and the notice, both dated 7th April 2022 passed under section 148 of the Income Tax Act, 1961 ("Act"). Of-course Petitioner has also impugned the notice dated 17th March 2022 issued under section 148A(b) of the Act. Various grounds have been raised but one of the primary grounds for challenging the notice under 4 Vishal Vijay Jaiswal section 148A(d) and the notice under section 148 of the Act both dated 7th April 2022 is that order as well as the notice both mention the authority that has granted approval, is the Principal Commissioner of Income Tax ("PCIT"), Mumbai 5 and the approval has been granted on 7th April 2022.
Mr. Gandhi is correct in saying that the Assessment Year ("AY") is 2018-19 and, therefore, since more than three years have expired from the end of the assessment year, Sanctioning Authority under section 151(ii) of the Act should be the Principal Chief Commissioner of Income Tax ("PCCIT") and not the PCIT. Mr. Gandhi says, as held in Siemens Financial Services (P.) Ltd. v. Dy. CIT [2023] 154 taxmann.com 159/457 ITR 647 (Bom.),the sanction is invalid and consequently, the order and the consequent notice under section 148A(d) and section 148, respectively, of the Act should be quashed and set aside.
3. In view of these facts and circumstances, we do not see any reason to just grant Rule and keep the matter pending.
4. As held in Siemens (Supra), the order passed under section 148A(d) and notice issued under section 148 of the Act both are quashed and set aside.” Unquote.
5.2 Similarly, the Hon’ble Bombay High Court in the case of Pradeep Himatlal Shah Vs. ITO [2025] 170 taxmann.com 471(Bombay) has held as under :
“4. The impugned order and the impugned notice both dated 7th April 2022 state that the Authority that has accorded the sanction is the PCIT, Thane-1. The matter pertains to Assessment Year ("AY") 2018-2019 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 Section151(ii) of the Act. The proviso to Section 151 of the Act has been inserted only with effect from 1st April2023 and, therefore, shall not be applicable to the matter at hand.
5. In the circumstances, as held by this Court in Siemens Financial Services (P) Ltd v. Dy. CIT [2023] 154taxmann.com 159/457 ITR 647 (Bombay)., the sanction is invalid and consequently, the impugned order and impugned notice both dated 7th April 2022 under Sections 148A(d) and 148 of the Act are hereby quashed and set aside.”(emphasis supplied)
5.3 The Hon’ble Jurisdictional High Court in the case of Agnello Oswin Dias Vs. ACIT [2024] 161 taxmann.com 16 (Bombay) has held as under :
“4. The impugned order and the impugned notice both dated 22nd April 2022 state that the Authority that has accorded the sanction is the PCIT, Mumbai-5. The matter pertains to Assessment Year ("AY") 2018-2019 and since the impugned 5 Vishal Vijay Jaiswal order as well as the notice are issued on 22nd April 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCCIT as provided under Section151(ii) of the Act. The proviso to Section 151 of the Act has been inserted only with effect from 1st April2023 and, therefore, shall not be applicable to the matter at hand.
5. In the circumstances, as held by this Court in Siemens Financial Services (P.) Ltd. v. Dy. CIT [2023] 154taxmann.com 159/457 ITR 647 (Bom.), the sanction is invalid and consequently, the impugned order and impugned notice both dated 22nd April 2022 under sections 148A(d) and 148 of the Act are hereby quashed and set aside.”
5.4 Thus, Hon’ble Bombay High Court explained the Amendment made in 2023 is applicable w.e.f. 01.04.2023. 5.5 And also, ITAT Pune in the case of Hareshkumar Dungarmal Jain vs. DCIT in quashed the Notice u/s.148 of the Act, dated 13.04.2022 for A.Y.2018-19.
In the above referred decision of Hon’ble Bombay High Court, the assessment year involved is A.Y.2018-19 and order udder section 148A(d) of the Act, was passed on 07.04.2022. In the case of the assessee, Kai Ganpatrao Sakharam Pawar Nagari Sahakari Patsnastha, the assessment year is A.Y.2017-18 and order under section 148A(d) of the Act, is dated 18.07.2022. Therefore, the facts are absolutely identical. Hence, respectfully following the decision of Hon’ble Bombay High Court(supra) and ITAT Pune (supra), the order under Section 148A(d) of the Act, and notice under section 148 are quashed. Accordingly, the legal ground raised by the assessee is allowed. We have already mentioned that both parties only argued on the legal ground, hence, the remaining grounds are dismissed as unadjudicated. Accordingly, grounds of appeal raised by the assessee are partly allowed.”
6. Now from going through the decision of this Tribunal, I find that the same is squarely applicable on the facts of the instant case and in the absence of any binding precedent in favour of the Revenue placed by ld. DR, I am inclined to hold that the notice u/s.148 of the Act in the case of the assessee for carrying out the re-assessment proceedings is barred by limitation and therefore since no valid notice u/s.148 of the Act has been issued the re-assessment proceedings carried thereafter are invalid and void ab initio. Assessment order in question for A.Y. 2017-18 is hereby quashed. Legal ground 6 Vishal Vijay Jaiswal raised by the assessee is allowed. Dealing with the remaining grounds raised by the assessee would be merely academic in nature since I have already quashed the assessment proceedings.
In the result, appeal of the assessee is allowed.