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Facts
The assessee challenged an order confirming an addition of cash deposit, raising a legal ground regarding the validity of reassessment proceedings. The assessee argued that the notice issued under Section 148 and order under Section 148A(d) were invalid because the approval was granted by the Principal Commissioner of Income Tax instead of the Principal Chief Commissioner of Income Tax, which is the competent authority when more than three years have elapsed from the assessment year.
Held
The Tribunal, relying on various High Court and ITAT judgments, held that since more than three years had elapsed from the end of the relevant assessment year (A.Y. 2017-18), the sanction for initiating reassessment proceedings must come from the Principal Chief Commissioner of Income Tax as per Section 151(ii). As the approval was incorrectly granted by the Principal Commissioner of Income Tax, the notice under Section 148 and the order under Section 148A(d) were deemed ab-initio void and were quashed.
Key Issues
Whether the reassessment proceedings initiated under Section 148 and 148A(d) are valid if the sanction for the notice, when more than three years have elapsed from the assessment year, is granted by an authority lower than the one mandated by Section 151 of the Income Tax Act, 1961.
Sections Cited
250, 69A, 115BBE, 148, 148A(d), 151, 147
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Assessee by Shri Nikhil S Pathak and Shri Mayuresh Doshi – AR’s Revenue by Shri Prashant B. Gandhale– JCIT(DR) Date of hearing 24/04/2025 Date of pronouncement 29/04/2025 आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the assessee is against the order of ld.Commissioner of Income Tax(Appeals)[NFAC], passed under section 250 of the Income Tax Act, 1961, dated 12.12.2024 for Assessment Year 2017-18. The assessee has raised the following grounds of appeal :
“1. On the facts and in the circumstances of the case and in law, the learned CIT (A) not justified in confirming the addition of cash deposited in bank Rs.27,01,120/- u/s 69A r. w. s. 115 BBE of the Act.
2. On the facts and in the circumstances of the case and in law, the cash deposited in bank Rs.27,01,120/-is out of regular business from explainable sources and duly reflected in the books of accounts in view of above addition made may please be deleted.
3. The appellant craves, to consider each of the above grounds of appeal
without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of appeal.” 1.1 The Assessee raised a Legal Ground which is as under : “1] The assessee submits that the notice issued u/s 148 and u/s 148A(d) is invalid in law since the approval as envisaged u/s 151 has not been obtained from the Pr. Chief Commissioner of Income Tax and therefore, the reasst. Order passed u/s 147 be declared null and void.” Submission of ld.AR :
2. Ld.AR for the Assessee filed a paper book. Ld.AR submitted that in this case, a notice u/s.148 of the Act and order u/s.148A(d) was approved by ld.Principal Commissioner of Income Tax, Pune whereas, as per section 151 of the Act, the Competent Authority to approve notice u/s.148 of the Act and an order u/s.148A(d) was ld.Principal Chief Commissioner of Income Tax. Therefore, the notice is ab-intio-void. The ld.AR for the Assessee relied on the following decisions : “1. Holiday Developers (P.) Ltd vs. ITO [2024] 159 taxmann.com 178 (Bombay).
2. HareshkumarDungarmal Jina vs. DCIT & Others in & 1934/PUN/2024
3. M/s.Arthbharti Nagari SahakariPatsansthaMaryadit Vs. ITO in ITA No.1848/PUN/2024.
4. Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC).” 2.1 The ld.AR filed copies of all the above decisions.
Submission of ld.DR : 3. The ld.DR for the Revenue relied on the order of Assessing Officer and ld.CIT(A). Ld.DR also filed a report from ITO, Ward- 1, Satara, dated 16.04.2025.
3.1 The ld.DR further pleaded that there has been an Amendment in the Section 151 in 2023 which needs to be considered as retrospective. The ld.DR also relied on the Hon’ble Supreme Court in the case of Ashish Agarwal. In the written submission, ld.DR has submitted as under : “3.3.14 Upon holistic reading of the judgment, it can be inferred that retrospective amendments are generally not acceptable in cases involving substantive changes to the Act or introduction of new tax concepts. The Hon'ble Court emphasized that the lawmakers' intent is paramount in enacting statutes. The Court also held that if a literal interpretation of a statute leads to ambiguity or undermines its intended purpose, any subsequent clarificatory amendment should be construed retrospectively. The Court further held that the mere mention or omission of a term suggesting retroactivity is not, in itself, sufficient to determine the retrospective application of an amendment. However, it has to be ensured that the clarificatory amendment doesn't introduce substantive changes to the existing statute. Instead, it should supplement the original enactment to remove ambiguities arising from literal interpretation.”
Findings &Analysis : 4. 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.
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 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.
In view of these facts and circumstances, we do not see any reason to just grant Rule and keep the matter pending.
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 hasaccorded the sanction is the PCIT, Thane-
1. 1. The matter pertains to Assessment Year ("AY") 2018-2019 andsince the impugned order as well as the notice are issued on 7th April 2022, both have been issued beyond aperiod 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 andimpugned notice both dated 7th April 2022 under Sections 148A(d) and 148 of the Act are hereby quashedand 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 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.
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.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 29th April, 2025.