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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SANDEEP SINGH KARHAILSHRI BIJAYANANDA PRUSETH
The present appeal by the Revenue and cross-objection by the assessee has been filed against the impugned order dated 17/10/2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2017-18.
In its appeal, the Revenue has raised the following grounds: - “(i) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A), NFAC has erred in deleting the addition made on account of unexplained cash deposits during the demonetization period without appreciating that the assessee had failed to discharge the statutory onus of explaining the nature and source of such deposits despite repeated opportunities? (ii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A), NFAC has erred in holding that the Assessing Officer was required to conclusively establish that the cash deposits constituted taxable Income, ignoring the settled position that the primary burden to explain the source of cash deposits lies upon the assessee as provisions of Section 69A of the Act? (iii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A), NFAC has erred in not appreciating that an audit report cannot substitute the requirement of furnishing documentary evidences explaining abnormal cash deposits made during the demonetization period, and that the failed to submit any cogent evidence or satisfactory explanation regarding the availability and source of cash in hand? (iv) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A), NFAC has erred in holding that the Assessing Officer exceeded the scope of reassessment proceedings, without appreciating that it is held at Explanation to Section 147 of the Act once reassessment is validly initiated, the Assessing Officer may examine all issues which come to notice during the course of such proceedings? (v) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A), NFAC has erred in deleting the addition made on account of unexplained unsecured loans ignoring the fact that the assessee failed to establish the identity, creditworthiness of the creditors and genuineness of the loan transactions as mandated under section 68 of the Act. (vi) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A), NFAC has erred in deleting the disallowance of business expenses and interest without appreciating that the assessee failed to produce supporting bills, vouchers or documentary evidences to substantiate the genuineness of such expenses. (vii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A), NFAC has erred in ignoring the non-compliance by the assessee to notices issued u/s 142(1) of the Act and in deleting the additions without appreciating the adverse inference that arises from such non- compliance.”
While in its cross-objection, the assessee has raised the following grounds: -
1. That on the facts and circumstances of the case and in law, the Hon'ble CIT(A) has grossly erred in not adjudicating on the ground that the order issued u/s 148A(d) of the Act, was a non speaking order passed by the Ld. AO, thereby vitiating the principles of natural justice.
2. That on the facts and in law, the Hon'ble CIT(A) erred in not adjudicating on the ground that the provisions of section 69A of the Act are attracted only WHARE the assessee is found to be the owner of unexplained money, bullion, jewellery OR other valuable article which is not recorded in the books of account, whereas in the present case the amount so added was duly recorded In the audited books of account, a fact expressly not disputed by the AO, and therefore the addition made by the Assessing Officer is beyond the scope and mandate of section 69A and liable to be deleted.
3. That on the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in as much as not considering and disposing off the additional evidence produced before his Honours.
4. That on the Facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in upholding the action of reopening of the assessment by the Income Tax officer, ward 28(3)(1) ('the Jurisdictional AO i.e., "JAO') in the case of the Assessee, ignoring the fact that the matter is squarely covered by the Hon'ble Bombay High Court's (Jurisdictional High Court) Judgement in the case of Hexaware Technologies Ltd. v Assistant Commissioner of Income- tax, Circle 15(1)(2) [2024] 162 taxmann.com 225 (Bombay), i.e., binding on the Ld. AO.
5. That on the Facts and circumstances of the case and in law, the Hon'ble CIT(A) has grossly erred in upholding the validity of the impugned notice issued u/s 148, ignoring the fact that no DIN was quoted on the notice Issued u/s 148 of the Act, in contravention to CBDT circular 19/2019 dated 14.08.2019.
The Respondent craves the right to add, alter, DELETE any of the grounds of Appeal as stated herein above.”
4. The assessee, vide its application dated 02/04/2026, raised the following additional grounds in its cross-objection: - “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of the assessment without appreciating that the re-assessment was carried out contrary to the scheme of Sections 147 to 151 of the Act.
On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of the assessment without appreciating that the underlying notice under Section 148 of the Act itself was bad in law and invalid on account of incorrect sanction/approval obtained from the PCIT, beyond a period of three years from the end of the relevant A.Y. 2017-18.”
5. Since the issue raised by way of additional ground in the cross- objection is a legal issue, which can be decided on the basis of the material available on record, the same is admitted in view of the ratio laid down by the Hon’ble Supreme Court in NTPC vs. CIT, reported in (1989) 229 ITR 383 (SC).
6. In its appeal, the Revenue has raised the grounds challenging the relief granted by the learned CIT(A) on merits. On the other hand, the assessee has filed the cross-objection challenging the initiation of reassessment proceedings under section 147 of the Act. As the issues raised by the assessee vide its cross-objection are jurisdictional issues, which go to the root of the matter, we are considering the same at the outset.
During the hearing, the learned Authorised Representative (“learned AR”), at the outset, by referring to the additional grounds filed by the assessee, submitted that the sanction of the appropriate authority under section 151 was not sought prior to the issuance of notice under section 148 of the Act and thus, the assessment order passed under section 147 read with section 144B of the Act is void ab initio.
The brief facts of the case are that the assessee is an individual and was engaged in trading in food grains, dals, cereals, pulses, dry fruits, etc., in the APMC Market, Vashi, Mumbai. For the year under consideration, the assessee filed his return of income on 27/10/2017, declaring a total income of Rs. 10,84,400. The return filed by the assessee was processed vide intimation issued under section 143(1) of the Act. Subsequently, on the basis of the information that the assessee had deposited cash amounting to Rs. 71,00,000 in his bank account during the demonetisation period, the Assessing Officer (“AO”) issued notice under section 148 of the Act on 17/06/2021.
In view of the decision of the Hon’ble Supreme Court in Union of India vs. Ashish Agrawal reported in (2022) 444 ITR 1 (SC), the original notice issued under section 148 of the Act on 17/06/2021 was deemed to be issued under section 148A(b) of the Act. Vide show cause notice dated 25/05/2022, the information and material relied upon by the Revenue were provided to the assessee and time was granted to the assessee to respond to the same within two weeks in terms of provisions of section 148A(b) of the Act.
Rejecting the objections filed by the assessee, an order under section 148A(d) of the Act was passed on 28/07/2022 declaring that it is a fit case for issuance of notice under section 148 of the Act. Thereafter, on the same date, i.e. on 28/07/2022, notice under section 148 of the Act was issued by the Jurisdictional Assessing officer. After considering the submissions of the assessee filed during the reassessment proceeding, the AO passed the order dated 23/05/2023 under section 147 read with section 144B of the Act assessing the total income of the assessee at Rs. 2,62,44,344.
The learned CIT(A), vide impugned order, granted relief to the assessee on merits and deleted the addition made by the AO. Being aggrieved, the Revenue is in appeal before us. While the assessee has filed the cross-objection, inter alia, raising the jurisdictional ground that the sanction of the appropriate authority under section 151 was not sought prior to the issuance of notice under section 148 of the Act.
We have considered the submissions of both sides and perused the material available on record. Before proceeding further, it is essential to note the provisions of the Act that are relevant to the issue at hand. The relevant provisions of section 148 of the Act, as amended by the Finance Act 2021, read as follows: –
“148. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice: Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section: ………. Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to in section 151.”
Therefore, as per the first proviso to section 148 of the Act, it is evident that for issuing notice under the section, the AO is required to obtain prior approval of the Specified Authority. The second proviso to section 148 further provides that no such approval shall be required where the AO, with the prior approval of the Specified Authority, has passed the order under section 148A(d) of the Act. Further, Explanation 3 clarifies that the Specified Authority for the purpose of section 148 shall be the Specified Authority as referred to in section 151 of the Act.
Further, section 151 of the Act deals with the Specified Authority for section 148 and section 148A of the Act, and the same reads as follows: – “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 Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.”
Therefore, from the plain reading of section 151 of the Act, it is evident that in case where more than three years have elapsed from the end of the relevant assessment year, the Specified Authority for the purpose of granting prior approval, as required under section 148 of the Act, is Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
As per the assessee, in the present case, the period of three years from the end of the relevant assessment year, i.e., 2017-18, expired on 31.03.2021 and even if the extension granted by the Taxation and Other Laws (Regulations and Amendment of Certain Provisions) Act, 2020 (“the TOLA”) is granted, the Specified Authority as per the provisions of section 151(i) of the Act, after its amendment by the Finance Act, 2021, could have granted the approval only till 30/06/2021. However, in the present case, the necessary approval, as per the provisions of section 151, for passing the order under section 148A(d) of the Act, was obtained after the aforesaid date from the Principal Commissioner of Income Tax. Accordingly, as per the assessee, the Revenue has not followed the mandatory provisions of the Act while initiating the reassessment proceedings, and the sanction of the Specified Authority is not in conformity with the law prevalent at the time of grant of sanction.
We find that while deciding a similar issue, the Hon’ble Jurisdictional High Court in Alag Property Construction (P.) Ltd. vs. ACIT, reported in [2025] 179 taxmann.com 578 (Bombay), after considering the decision of the Hon’ble Supreme Court in Union of India &Ors. v. Rajeev Bansal, reported in (2024) 469 ITR 46 (SC), held that after the expiry of three years from the end of the relevant assessment year, the Specified Authority as per the provisions of section 151 of the Act is Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. The relevant findings of the Hon’ble High Court, in the aforesaid decision, are reproduced as follows: -
“8. On bare reading of the above extract of the judgment of the Hon'ble Supreme Court in the case of Rajeev Bansal (supra), we find that the Hon'ble Supreme Court had clarified as under: (a) Under the substituted provisions of re-assessment as introduced by the Finance Act, 2021, the Assessing Officer is required to obtain prior approval or sanction of the 'specified authority' at four stages - at the first stage under Section 148A(a), at the second stage under Section 148A(b), at the third stage under Section 148A(d), and at the fourth stage under Section 148. In the case of Ashish Agarwal (supra) the Hon'ble Supreme Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b) of the Act only. Therefore, the Assessing Officer was required to obtain prior approval of the 'specified authority' according to Section 151 of the new regime before passing an order under Section 148A(d) or for issuing a notice under Section 148. (b) Under the new regime, if income escaping assessment is more than Rupees 50 lakhs, a reassessment notice could be issued after the expiry of three years from the end of the relevant previous year only after obtaining the prior approval of the Principal Chief Commissioner or the Principal Director General or the Chief Commissioner or the Director General. (c) Section 151(ii) of the new regime prescribes an approval of a higher 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 vitiates their jurisdiction to issue a notice under section 148. (d) Grant of sanction by the specified authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice.
In the present case, the period of three years from the end of the A.Y. 2017-18 fell for completion on 31st March 2021. As the expiry date fell during the time period of 20th March 2020 and 31st March 2021, under Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short "TOLA"), the authority specified under Section 151(i) of the new regime could have granted sanction only till 30th June 2021.
On perusal of the order dated 18.08.2022, passed under Section 148A(d) of the Act we find that the aforesaid order was passed after taking approval from Principal Commissioner of Income Tax (Respondent No.2). Since the aforesaid order was passed, as well as the notice under section 148 was issued, after the expiry of three years from the end of A.Y. 2017- 18, as per the substituted provisions of re-assessment, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. Accordingly, we conclude that in the present case, the approval has been obtained from the authority specified under Section 151(i) of the new regime instead of the authority specified under Section 151(ii) of the new regime.
The Hon'ble Supreme Court in the above case has drawn an illustration in para 78 of its order in the context of A.Y. 2017-18 (which is also the relevant Assessment year in the present Writ Petition) wherein it is categorically held that the authority specified under section 151(i) can accord sanction only upto 30.06.2021. This illustration makes it absolutely clear that when the period of three years from end of relevant Assessment Year expired between 20.03.2020 and 31.03.2021, the extension by virtue of TOLA was upto 30.06.2021 and not beyond. Thus, it can be said that the period of three years from the end of the relevant Assessment Year (in the present case A.Y. 2017-18) expired on 30.06.2021, whereas Respondent No.1, despite passing order under section 148A(d) on 18.08.2022, and issuing notice under section 148 on 23.08.2022 [in respect of Assessment Year 2017-18], has obtained approval of Respondent No.2 who is not the authority as prescribed under section 151(ii). 12. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of Respondent No.1 to issue a notice under Section 148 of the Act. 13. We are clearly of the view that the present matter stands covered by the decision of Hon'ble Supreme Court in the case of Rajeev Bansal (supra) and we are bound by it. Accordingly, we hold that the order dated 18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated and 23.08.2022 are bad in law, and hence, are required to be quashed and set aside. 14. We accordingly set aside the impugned order dated 18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated 23.08.2022, and all other proceedings/orders emanating therefrom.”
From the perusal of the order dated 28/07/2022 passed under section 148A(d) of the Act, which forms part of the paper book from pages 10-12, we find that the same was issued after seeking approval from Principal Commissioner of Income Tax – 27, Mumbai. Furthermore, the three-year period from the end of the relevant assessment year, i.e., 2017-18, as extended by the provisions of the TOLA, also expired in the present case on 30/06/2021.
Therefore, respectfully following the decision of the Hon’ble Jurisdictional High Court in Alag Property Construction (P.) Ltd. (supra), we are of the considered view that notice under section 148 of the Act issued on 28/07/2022 is in contravention of the provisions of section 151 of the Act, as the sanction of the concerned Specified Authority was not obtained. Accordingly, we are of the considered view that the notice issued under section 148 of the Act is void ab initio and bad in law and therefore is quashed. Consequently, the entire reopening proceedings and assessment order passed under section 147 read with section 144B of the Act are also quashed. Accordingly, the additional grounds raised by the assessee in its cross-objections are allowed.
Since the relief has been granted to the assessee on the afore-noted jurisdictional aspect, the other grounds raised by the assessee in its cross- objection are rendered academic, and therefore, are left open.
Accordingly, the grounds raised by the Revenue in its appeal on merits are rendered infructuous and, therefore, are dismissed.
In the result, the Cross Objection by the assessee is allowed, while the Revenue’s appeal is dismissed. Order pronounced in the open Court on 10/04/2026
Sd/- Sd/- BIJAYANANDA PRUSETH SANDEEP SINGH KARHAIL ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10//04/2026