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Facts
The assessee, an agriculturist, sold ancestral land and admitted capital gains. The Assessing Officer (AO) issued a notice under Section 148 after more than three years from the end of the assessment year, with approval from the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner or Chief Commissioner as required by Section 151.
Held
The Tribunal held that the sanction for reopening the assessment was obtained from an incorrect authority (PCIT instead of PCCIT/CCIT) as the reopening was initiated after more than three years. Therefore, the entire reassessment proceedings are bad in law and liable to be quashed.
Key Issues
Whether the reopening of assessment is invalid due to obtaining approval from the wrong authority under Section 151 of the Income Tax Act, 1961, when the reopening is initiated beyond three years from the end of the assessment year.
Sections Cited
147, 148, 151, 148A, 54B, 149, 151A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Smt. Annapurna Gupta & Shri T.R. Senthil Kumar
Assessment Year. 2016-17 Dalpat Baraiya Income Tax Officer C/o. M.S. Chhajed & Co. Ward-3(3)(1), CA, “Kamal Shanti”, Vs Ahmedabad Nr. Sardar Patel Statue, Ahmedabad-380014 Gujarat PAN: CHWPB8348D (Respondent) (Appellant) Assessee Represented: Shri Mahesh Chhajed, A.R. Revenue Represented: Shri B.P. Srivastava, Sr. D.R. Date of hearing : 06-02-2025 Date of pronouncement : 03-04-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the appellate order dated 13.08.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the reassessment order passed under section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2016-17.
A.Y. 2016-17 Page No 2 Dalpat Baraiya vs. ITO
Brief facts of the case is that the assessee is an Agriculturist and engaged in agriculture activities from his ancestral land. Since there is no other income, assessee did not file the Return of Income. During the Financial Year 2015-16, the assessee sold along with others ancestral land for a total consideration of Rs.4,86,00,000/- and his 1/4th share Rs.1,21,50,000/-. The assessee purchased some other land and filed Return of Income admitting capital gain of Rs.12,97,910/-. The assessee was issued with 148 notice dated 27-08-2022 for the Asst. Year 2016-17 after getting approval from Ld. PCIT on 23-08-2022 which is more than three years from the end of the relevant assessment year. As per Section 151 of the Act, the sanction ought to have been obtained from Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax. Thus the approval granted u/s. 148A(d) of the Act by PCIT is invalid in law. The assessee failed to response to the various notices issued as well as the final show cause notice dated 18-05-2023 issued by the Assessing Officer, therefore the long term capital gain of Rs.1,08,02,090/- being assessee’s 1/4th share is added as the income of the assessee and demanded tax thereon.
Aggrieved against the reassessment order, the assessee filed an appeal before Ld. CIT(A). The Ld. CIT(A) held that the reinvestment in agricultural land was not accepted since the sale of the land was converted into non-agricultural purpose, therefore the claim of deduction u/s. 54B of the Act was denied by observing as follows: “I have perused the assessment order of the AO and reasoned explanation given by him for adding the amount of Rs.1,21,00,000/- in the total income of the appellant. It is clear that there is not enough evidence submitted by A.Y. 2016-17 Page No 3 Dalpat Baraiya vs. ITO the appellant to discharge the onus. Coming to the substantive part of addition, it is seen that appellant has not furnished any corroborative evidence to discharge its claim and there are glaring gaps in the meagre submissions. The AO has done considerable due diligence to establish his claim. 6.3 The assessee invested the sale proceed in other agricultural land and claimed deduction u/s 54B of the Income Tax Act, 1961 but at the time of execution of conveyance deed, the nature of land was converted into non- agricultural purpose. Deduction u/s 54B of the Income Tax Act, 1961 cannot be allowed since the land in question was non-agricultural. Benefit of deduction u/s 54B of the Income Tax Act, is being denied & assessee' share is being taxed as income.
7. I have considered the submission of the appellant made during the course of appellate proceeding and find no evidentiary value in the submission. Firstly, the submission made by the appellant are only in the nature of narration and no supporting documents has been filed. Even if the appellant's contention is to be accepted, then also it has to file corroborative evidence to support its claim. However, no evidence has been filed by the appellant. A mere narration cannot be taken as proof of the factual position. The appellant has not been able to give any convincing or cogent explanations about the additions made. 7.1 In view of these facts, I am of the opinion that no interference is called for in the AO's order and therefore, the addition made by the AO amounting to Rs. 1,21,00,000/- is sustained and the grounds of appeal are dismissed.”
Aggrieved against the appellate order, the assessee is in appeal before us raising the following Grounds of Appeal:
1. The order passed by the Ld. CIT (A) is against law, equity & justice.
2. Reopening of assessment is void & illegal as approval U/S 148A(d) of the Act is granted by PCIT after 3 years instead of PCCIT.
3. Proceedings U/S 148A and notice issued U/S 148 of the Act is bad & illegal as it has been done by JAO in violation of instruction of CBDT &in Sec. 151A of the Act.
A.Y. 2016-17 Page No 4 Dalpat Baraiya vs. ITO
4. The Ld. CIT(A) has erred in law & on facts in upholding the validity of reopening of assessment.
5. The Ld. AO has grievously erred in making this addition without giving sufficient and specific opportunity to the appellant and thereby violating the principles of natural justice.
6. The Ld. CIT(A) has erred in law and on facts in upholding addition made by the Ld. A.O of Rs. 1,08,02,090/- (net) being 1/4th value of sale consideration inspite of sale consideration disclosed by the appellant in ROI and not allowing indexed cost, transfer cost and reinvestment in land. 7. The appellant Craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal.
At the outset, Ld. Counsel appearing for the assessee submitted that the jurisdiction to reopen the assessment itself is bad in law since the reopening of assessment is done beyond three years period, then the Sanctioning Authority is either PCCIT or CCIT as per Section 151 of the Act. In this case, three years from the end of the relevant assessment year 2017 is 31-03-2020 whereas approval for reopening of assessment was wrongly sought by the Assessing Officer from PCIT and approval was granted on 23-08-2022 by the PCIT. Whereas as per clause (ii) of Section 151 of the Act either the PCCIT or CCIT are the Specified Authority for granting sanction to issue of 148 notice. Since the approval has been obtained from the wrong specified authority, the entire reassessment proceedings itself is bad in law and liable to be quashed.
5.1. In this connection, Ld. A.R. relied upon the following Case Laws: (i) Holiday Developers (P.) Ltd. vs. ITO [2024] 159 taxmann.com 178 (Bombay)
A.Y. 2016-17 Page No 5 Dalpat Baraiya vs. ITO
(ii) Agnello Oswin Dias vs. ACIT [2024] 161 taxmann.com 16 (Bombay) (iii) Ashok Kumar Makhija vs. Union of India [2024] 466 ITR 283 (Delhi) (iv) ACIT vs. Surya Ferrous Alloys (P.) Ltd. [2024] 169 taxmann.com 736 (Mumbai-Trib) (v) Davos International fund vs. ACIT(T)-(2)(1)(2)
(vi) Keshri Rice Industries vs. DCIT [2025] 170 taxmann.com 425 (Raipur –Trib.)
Ld. CIT-DR could not contravent the above facts and admitted in the present case, approval for reopening was granted only by PCIT- 3, Ahmedabad.
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 A.Y. 2016-17 Page No 6 Dalpat Baraiya vs. ITO 151 describes the following Officers as the specified authority namely Principal Chief Commissioner or 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 (ii) 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, the same is reproduced as follows:
A.Y. 2016-17 Page No 7 Dalpat Baraiya vs. ITO 7.1. 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 as under:
A.Y. 2016-17 Page No 8 Dalpat Baraiya vs. ITO “73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under Section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments. 128 A table representing the prescription under the old and new regime is set out below: Regime Time limits Specified authority Joint Commissioner Section 151(2) of Before expiry of four the old regime years from the end of the relevant assessment year Section 151(1) of After expiry of four years Principal Chief the old regime from the end of the Commissioner or relevant assessment Chief Commissioner years or Principal Commissioner or Commissioner Section 151(i) of the Three years or less than Principal new regime three years from the end of Commissioner or the relevant Principal Director assessment year or Commissioner or Director Section 151(ii) of More than three years Principal Chief the new regime have elapsed from the end Commissioner or of the relevant Principal Director assessment year General or Chief Commissioner or Director General 74. The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime: (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under Section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
After 1 April 2021, the new regime has specified different authorities for granting sanctions under Section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions A.Y. 2016-17 Page No 9 Dalpat Baraiya vs. ITO in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under Section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining PART E the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under Section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non compliance by the assessing officer with the strict time limits prescribed under Section 151 affects their jurisdiction to issue a notice under Section 148.
Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre- conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will PART E accordingly extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has an extended time till 30 June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021.”
A.Y. 2016-17 Page No 10 Dalpat Baraiya vs. ITO 7.2. 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 (ii) 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.
7.3. 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.