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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: DR. BRR KUMAR & Shri T.R. SENTHIL KUMAR
Assessee Represented: Ms. Mira Patel, A.R. Revenue Represented: Shri Sher Singh, CIT-DR Date of hearing : 30-07-2025 Date of pronouncement : 07-08-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the assessee as against the Revision order dated 10-03-2025 passed by Principal Commissioner of Income Tax (Central), Surat At Vadodara arising out of the reassessment order passed under section 147 r.w.s. 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2018-19.
A.Y.2018-19 Page No 2 Shreeji Developers Vs. PCIT
The Grounds of Appeal raised by the Assessee are as follows:
All the grounds of appeal in this appeal are mutually exclusive and without prejudice to one another. Invalid Revision u/s. 263
1. The learned Principal Commissioner of Income Tax (Central), Surat at Vadod ("PCIT") has erred in fact and in law in exercising jurisdiction under section 263 of the Act to revise the reassessment order passed under section 147 read with section 144, despite the fact that the statutory conditions precedent for invoking such extraordinary powers were not satisfied.
2. The learned PCIT has erred in fact and in law in setting aside the reassessment order on the ground that it was passed without proper verification, inquiry, or application of mind, despite the fact that the Deputy Commissioner of Income Tax, Central Circle-1, Baroda ("the AO"), had passed the order after proper application of mind.
3. The learned PCIT has erred in fact and in law in not dropping the proceedings initiated under section 263 despite the fact that the reassessment order is neither erroneous nor prejudicial to the interests of the Revenue.
4. The learned PCIT has erred in fact and in law in invoking jurisdiction under section 263 of the Act to apply the provisions of section 184(5), even though the reassessment was completed by the AO under section 144 without there being a complete failure on the part of the Appellant to comply with the notices issued during the reassessment proceedings. Without prejudice to the above, Disallowance under section 184(5) of the Act:
5. Without prejudice to the above, the learned PCIT has erred in fact and in law in disputing the allowability of interest paid to partners amounting to Rs. 19,79,921, despite the fact that the said interest has been duly offered to tax by the respective partners under section 28(v) of the Act.
6. The learned PCIT has erred in fact and in law in setting aside the reassessment order with a direction to the AO to disallow the interest paid to partners, without appreciating that section 184(5) of the Act stipulates that such interest shall not be chargeable to tax in the hands of the partners under section 28(v) if disallowed to the firm, whereas, in the A.Y.2018-19 Page No 3 Shreeji Developers Vs. PCIT present case, the interest has already been duly offered to tax by the partners in their respective returns for the year under consideration.
7. The learned PCIT has erred in fact and in law in not dropping the proceedings initiated under section 263, despite the fact that the conditions under section 184(5) of the Act, specifically, that such interest shall not be chargeable to tax in the hands of the partners, were not fully satisfied in the Appellant's case.
8. The learned PCIT has erred in fact and in law in not dropping the revisionary proceedings under section 263, despite the fact that the reassessment order is not prejudicial to the interests of the Revenue, as the partners have duly offered the interest income to tax under section 28(v) of the Act.
9. The Appellant craves leave to add to, alter, amend, substitute, delete, or otherwise modify all or any of the above grounds of appeal
at any time before or during the hearing of the appeal.
3. At the outset, Ld. Counsel for the assessee submitted that the reassessment order passed u/s 147 r.w.s. 144 of the Act was held to be invalid by Ld. Commissioner of Income Tax (Appeals) vide order dated 17-06-2025 by holding that Sanctioning Authority for reopening of assessment is beyond 3 years period is PCCIT, whereas the Sanctioning Authority in this case was given by PCIT which is invalid in law. Thus, rendering the reassessment proceedings as null and void. Consequently the present Revision order passed by Ld. PCIT has no legs to stand, therefore the Revision order is liable to be quashed.
4. Ld. CIT-DR appearing for the Revenue could not controvent the order passed by Ld. CIT(A) quashing the reassessment proceedings as null and void.
We have heard rival submissions and perused the materials available on record. Though Ld. PCIT passed this Revision order on A.Y.2018-19 Page No 4 Shreeji Developers Vs. PCIT 10-03-2025 and the Ld. CIT(A) passed the appellate order on 17- 06-2025 quashing the entire reassessment order itself as invalid in law by observing as follows:
“5.3 The Hon'ble Delhi High Court in Ashok Kumar Makhija (supra) and the Mumbai ITAT in Arihant Engineers (supra) reinforced that the specified authority under Section 151(ii) is mandatory, and any deviation invalidates the reassessment. Hon'ble Jurisdictional ITAT in the case of Dalpat Baraiya v. Income Tax Officer vide dated 03.04.2025 has held as under: "7 We have given our thoughtful consideration and perused the materials available on record including the Paper Book filed by the Assessee. Section 149 of the Act prescribes time limit for issuance of notice u/s. 148 of the Act. Clause (a) to sub-section (1) of Section 149 prescribes three years limitation and clause (b) of sub-section (1) of Section 149 deals with the cases beyond three years but not more than 10 years have elapsed from the end of the relevant assessment year. Further sub-section (2) of section 149 provides that issuance of notice is subject to the approval given as per the provisions of Section 151 of the Act by the Specified Authority. 7.1. Clause (i) of Section 151 describes the Specified Authority as Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than 3 years have elapsed from the end of the relevant assessment year. Whereas clause (ii) of Section 151 describes the following Officers as the specified authority namely Principal Chief Commissioner of Principal Director, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year. It is undisputed fact, the reopening of assessment in the present case is done beyond three years period. Hence the Specified Authority under clause (u) of Section 151 namely PCCIT or Principal Director or Chief Commissioner or Director General are the Sanctioning Authority required to approve the reopening of assessment. Whereas in this case, approval was obtained from the PCIT-3, Ahmedabad on 23-08-2022. 7.2. Since the Sanctioning Authority for reopening of assessment was obtained from a wrong Specified Authority, the entire reopening itself is bad in law and liable to be quashed. Further this issue is no more res- integra by the land mark decision of the Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal reported in [2024] 167 taxmann.com 70 deciding the same against the department.
A.Y.2018-19 Page No 5 Shreeji Developers Vs. PCIT 7.3. Further the Bombay High Court in the case of Holiday Developers (P.) Ltd. vs. ITO reported in [2024] 159 taxmann.com 178 held that where more than three years had expired from the end of assessment year 2018- 19, sanctioning authority under section 151 (u) should have been Principal Chief Commissioner and not Principal Commissioner and, thus, order under section 148A(d) and notice under section 148 issued on basis of approval granted by Principal Commissioner were to be quashed and set aside. 7.4. The Delhi High Court in the case of Ashok Kumar Makhija vs. Union of India reported in [2024] 162 taxmann.com 514 held that where reopening of case was occurring after a lapse of more than three years, appropriate authority for issuance of notice under sections 148 and 148A(b) should be either Principal Chief Commissioner or Principal Director General; approval from principal CIT was not valid.
Respectfully following the above judicial precedents, the sanction obtained for reopening of assessment from a wrong Specified Authority is not sustainable in law, consequently the entire reassessment proceedings is liable to be quashed.
In the result, the appeal filed by the Assessee is hereby allowed." 5.4 Hon'ble Ahmedabad ITAT in the case of Nayanaben Vijaykumar Lakum v. ITO [ITA No. 544/Ahd/2025, dated May 13, 2025] held that a notice u/s 148 issued after three years, with approval from the PCIT instead of the PCCIT, was invalid, rendering subsequent proceedings null and void. 5.5 In the appeal pertaining to the Assessment Year 2018-19, the notice u/s. 148 of the Act was issued on 13.04.2022 with approval granted by the Principal Commissioner. However, approval under provisions of section 151 of the Act to sanction of issue of notice u/s. 148 of the Act must be by the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General if more than 3 years have elapsed from the end of the relevant Assessment Year. In view of the above judicial precedents including the decision of the Hon'ble Ahmedabad ITAT in the aforementioned case, the sanction obtained for reopening of assessment from a wrong Specified Authority is not sustainable in law. Accordingly, a notice u/s 148 issued after three years with approval from the PCIT instead of the PCCIT was invalid, rendering entire subsequent reassessment proceedings null and void. The ground No 2 is allowed.”
Since the reassessment order itself is held to be invalid in law, there cannot be any Revision proceedings against the invalid order.
A.Y.2018-19 Page No 6 Shreeji Developers Vs. PCIT Thus the impugned order passed by Ld. PCIT (Central) is hereby quashed.
In the result, the appeal filed by the Assessee is hereby allowed.
Order pronounced in the open court on 07-08-2025 Sd/- Sd/- (DR. BRR KUMAR) (T.R. SENTHIL KUMAR) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad: Dated 07/08/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file.