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Facts
The assessee filed an appeal against the order of the Commissioner of Income Tax(Appeals) for AY 2017-18. The primary ground of appeal concerned the validity of reassessment proceedings initiated under Section 148A and notice under Section 148.
Held
The Tribunal held that the notice under Section 148 and order under Section 148A(d) were issued without the approval of the competent authority as per Section 151 of the Income Tax Act, as more than three years had elapsed since the end of the assessment year. Following jurisdictional High Court decisions, the Tribunal quashed the notice and order.
Key Issues
Whether the notice under Section 148 and order under Section 148A(d) were validly issued by the Assessing Officer, considering the requirement of approval from the competent authority under Section 151 for reassessment proceedings initiated after three years from the end of the assessment year.
Sections Cited
147, 148, 143(3), 250, 148A, 151, 151A
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Assessee by CA-Sarang Gudhate and Ashwini V. Shendye – Advocate – AR’s Revenue by Shri Ratnakar Shelake – Addl.JCIT(DR) Date of hearing 30/04/2025 Date of pronouncement 30/04/2025 आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the assessee against the order of ld.Commissioner of Income Tax(Appeals)[NFAC], passed under section 250 of the Income Tax Act, 1961 for A.Y.2017-18 dated 15.01.2025. The assessee has raised the following grounds of appeal :
1. Under the facts and circumstances of the case and in law, proceedings u/s 148A is initiated and concluded by Jurisdictional Assessing Officer (JAO) instead of Faceless Assessing Officer (FAO) hence proceedings u/s 148A is violating Section 151A hence same is bad in law and accordingly subsequent Assessment Proceedings based on such illegal proceedings is also bad in law.
2. Under the facts and circumstances of the case and in law, the reopening of the assessment is beyond three years and after obtaining the approval of the Principal Commissioner instead of Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General and same is contrary to the provisions of section 151 and therefore the Assessment Proceeding is bad in law, not sustainable, needs to be quashed.
3. Under the facts and circumstances of the case and in law, Ld AO erred in issuing Notice u/s 148 as notice issued is without DIN and same is invalid. Accordingly Assessment Proceeding initiated with such notice is also bad in law.
4. Under the facts and circumstances of the case and in law, Ld CIT (A) erred in initiating entire Assessment Proceeding based on Cash Deposit made in Bank Account, which was below Rs. 50,00,000/- which is below pecuniary Jurisdiction for reopening. Accordingly, proceedings u/s 148A is without jurisdiction.
5. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal if deemed necessary at the time of hearing of the appeal.”
Submission of ld.AR : 2. Ld.AR Advocate Ashwini V. Shendye, for the assessee submitted that in this case, assessee had field Return of Income for [A] A.Y.2017-18. Notice u/s.148 was issued by the Assessing Officer on 27.07.2022. Ld.AR filed written submissions as under : “2. Ground No. 2-Assessment Proceedings reopened without proper approval 3.1 In Assessee's case, Pursuant to decision of Hon'ble Supreme Court in "UoI vs. Ashish Agarwal dated 04/05/2022. Ld Jurisdictional Assessing Officer (JAO) has issued Notice u/s 148 for the Assessment Year 2017-18 on 27th July 2022 which is after the expiry of three years from the end of the relevant assessment year. (Refer Page No. 12 to 13 of Paper Book)
3.2 From 1 April 2021, According to section 151, if notice u/s 148 is issued after three years from the end of the relevant assessment year, approval should be given by Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General of Income Tax.
The relevant extract of Section 151 is as under:
"Sanction for issue of notice.
151. Specified authority for the purposes of section 148 and section 1484 shall be.- 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 Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year;"
Emphasis Added 3.3 In Assessee's case, the approval for Issuing Notice u/s 148 for Assessment Year 2017-18 is granted on 22nd July 2022 by the Principal Commissioner of Income Tax-4. Relevant extract of Order u/s 148A(d) and Notice u/s 148 is as under: a. Approval to Order u/s 148A(d) (Refer Page No. 11 of Paper Book)
This order is passed with prior approval of Pr. CIT-4, Pune. With reference No. PN/Pr. CIT-4/148/Proposal/2022-23/1216 dated 22/07/2022" b. Approval to Notice u/s 148 (Refer Page No. 13 of Paper Book)
3. This notice is being issued after obtaining the prior approval of Pr. CIT-4, vide letter no. PN/Pr. CIT-4/148/Proposal/2022-23/1216 dated 22.07.2022 Pune 3.4 Since, the Notice u/s 148 for the Assessment Year 2017-18 is issued on 27th July 2022 i.e. after three years from the end of the relevant assessment year, the approving authority should be Principal Chief Commissioner of Income Tax (PCCIT) or Chief Commissioner of Income Tax (CCIT). However, approval is obtained by Principal Commissioner of Income Tax violating to the strict time limits prescribed u/s 151 affects their jurisdiction to issue a Notice u/s 148. Hence Notice u/s 148 issued on 27 July 2022 for the Assessment Year 2017-18 is bad in law and therefore the Assessment Proceeding based on such notice is also bad in law, not sustainable, needs to be quashed.”
2.1 Ld.AR relied on the decision of M/s.Arthbhartinagari Sahakari Patsanstha Maryadit Vs. ITO in dated 10.02.2025. 2.2 CA-Sarang Gudhate submitted that Hon'ble Bombay High court has quashed notice u/s.148 for A.Y.2018-19 approved by ld.Pr.CIT. Submission of ld.DR : 3. Ld.DR for the Revenue relied on the order of the Assessing Officer and ld.CIT(A).
Findings & Analysis : 4. We have heard both the parties and perused the records. Both the parties have pleaded only the Ground No.2. In this case, order u/s.148A(d) was passed on 27.07.2022 for A.Y.2017-18. It is noted that said order has been passed with the approval of Pr.Commissioner of Income Tax-4, Pune vide the PCIT 4, Pune’s letter No.PN/Pr.CIT-4/148/Proposal/2022-23/1216 dated 22/07/2022. 4.1 The notice u/s.148 for A.Y.2017-18 was issued on 27.07.2022 with the approval of Pr.Commissioner of Income Tax-4, Pune vide the PCIT 4, Pune’s letter No.PN/Pr.CIT-4/148/Proposal/2022- 23/1216 dated 22/07/2022. 4.2 Thus, it is an admitted fact that notice u/s.148 and order u/s.148A(d) of the Act was passed with the approval of Pr.Commissioner of Income Tax for A.Y.2017-18. 4.3 Section 151 of the I.T.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 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 [A] 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. 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 [A] 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 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 in the case of Pradeep Himatlal Shah(supra) of Hon’ble Bombay High Court, the assessment year involved is A.Y.2018-19 and order under section 148A(d) of the Act, was passed on 07.04.2022. In the case of the assessee, the assessment year is A.Y.2017-18 and order under section 148A(d) of the Act, is dated 27.07.2022. 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 Ground No.2 raised by the assessee is allowed.
6.1 Since we have decided the Ground No.2 in favour of the assessee, the other grounds becomes academic in nature. We have already mentioned that both parties only argued on the Ground No.2, hence, the remaining grounds are dismissed as unadjudicated. Accordingly, grounds of appeal raised by the assessee are partly allowed.