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Facts
The assessee filed an ITR for AY 2017-18, claiming exempt income. Subsequently, the AO received information regarding accommodation entries totaling Rs. 1,33,51,500 relating to share transactions, leading to the initiation of reassessment proceedings. The AO issued a notice under Section 148 (pre-amended law) on 16.04.2021, which was later treated as a show cause notice under Section 148A(b) following the Ashish Agrawal judgment. A fresh notice under Section 148 was issued on 27.07.2022 after obtaining approval from the Principal Commissioner of Income Tax, leading to an assessment order u/s 147 r.w.s. 144 r.w.s. 144B. The CIT(A) quashed the assessment, holding that the notices were invalid as they were issued by the Jurisdictional AO and not the Faceless AO, and citing High Court judgments.
Held
The Tribunal upheld the assessee's cross-objection, ruling that the notice issued under Section 148 on 27.07.2022 for AY 2017-18 (beyond the three-year limitation) was invalid. The approval for this notice was obtained from the Principal Commissioner of Income Tax, who was not the competent authority as per Section 151(ii) of the Income Tax Act, 1961, as amended by the Finance Act, 2021. Therefore, the assumption of jurisdiction by the AO was invalid, and the consequential assessment order passed under Section 147 r.w.s. 144 r.w.s. 144B was quashed.
Key Issues
Whether the reassessment proceedings initiated by the Assessing Officer were valid, specifically concerning the competency of the authority granting approval for the notice issued under Section 148 for an assessment year beyond the three-year limitation period as per Section 151(ii) of the Income Tax Act, 1961, post-Finance Act, 2021 amendments.
Sections Cited
147, 148, 148A, 151, 144, 144B, 10(38), 69, 251(1), 132, 132A, 133A, 139, 153A, 153C
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Income Tax Appellate Tribunal, Visakhapatnam Bench
per the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law. Therefore, we propose to modify the judgments and orders passed by the respective High Courts as under: (i) The respective impugned section 148 notices issued to the respective assessees shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and treated to be show cause notices in terms of section 148A(b). The respective assessing officers shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees can reply to the notices within two weeks thereafter; (ii) The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a) be dispensed with as a onetime measure vis-à-vis those notices which have been issued under Section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts; (iii) The assessing officers shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b) in respect of each of the concerned assessees; (iv) All the defences which may be available to the assessee under section 149 and/or which may be available under the Finance Act, 2021 and in law and whatever rights are available to the Assessing Officer under the Finance Act, 2021 are kept open and/or shall continue to be available and; (v) The present order shall substitute/modify respective judgments and orders passed by the respective High Courts quashing the similar notices issued under unamended section 148 of the IT Act irrespective of whether they have been assailed before this Court or not. 9. There is a broad consensus on the aforesaid aspects amongst the learned ASG appearing on behalf of the Revenue and the learned Senior Advocates/learned counsel appearing on behalf of the respective assessees.
We are also of the opinion that if the aforesaid order is passed, it will strike a balance between the rights of the Revenue as well as the respective assesses as because of a bonafide belief of the officers of the Revenue in issuing approximately 90000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer. Therefore, we have proposed to pass the present order with a view avoiding filing of further appeals before this Court and burden this Court with approximately 9000 appeals against the similar judgments and orders passed by the various High Courts, the particulars of some of which are referred to hereinabove. We have also proposed to pass the aforesaid order in exercise of our powers under Article 142 of the Constitution of India by holding that the present order shall govern, not only the impugned judgments and orders passed by the High Court of Judicature at Allahabad, but shall also be made applicable in respect of the similar judgments and orders passed by various High Courts across the country and therefore the present order shall be applicable to PAN INDIA.
In view of the above and for the reasons stated above, the present Appeals are ALLOWED IN PART. The impugned common judgments and orders passed by the High Court of Judicature at Allahabad in W.T. No. 524/2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under: (i) The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show cause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assessees can reply to the show cause notices within two weeks thereafter; (ii) The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) is hereby dispensed with as a onetime measure vis-à- vis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required; (iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted); (iv) All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available.
The present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 01.04.2021 issued under section 148 of the Act are set aside and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under Section 148 of the Act issued after 01.04.2021 are under challenge.
The impugned common judgments and orders passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only. All these appeals are accordingly partly allowed to the aforesaid extent. In the facts of the case, there shall be no order as to costs.”
(emphasis supplied by us)
Apart from that, we find that the CBDT vide Instruction No.01/2022 directing the implementation of the judgment of the Hon’ble Supreme Court in the case of Union of India & Ors Vs. Ashish Agrawal, Civil Appeal No.3005/2022, dated 04.05.2022, while laying down the procedure that is required to be followed by the jurisdictional Assessing Officers/Assessing Officer, had, inter alia, held that if it is a fit case to issue notice u/s. 148 of the Act, the Assessing Officer shall serve on the assessee a notice u/s 148 after obtaining approval of the specified authority u/s. 151 of the new law.
We, thus, in terms of our aforesaid observation, concur with the Ld. AR that in the present case before us for A.Y. 2017-18, wherein notice u/s. 148 of the Act was issued on 27.07.2022, i.e., beyond a period of three years from the end of the assessment year, the A.O. was statutorily obligated to have obtained the approval from either of the authorities specified u/s. 151(ii) of the extant law, viz. Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General. However, as the A.O. had obtained the approval from the Pr. Commissioner of Income Tax, i.e., an authority who was not vested with any jurisdiction as per the mandate of Section 151 of the Act (as made available on the statute w.e.f 01.04.2021), therefore, the assessment so framed by him u/s.147 r.w.s. 144 r.w.s. 144B of the Act, dated 08.05.2023, being devoid and bereft of a valid assumption of jurisdiction, cannot be sustained and is liable to be quashed. Accordingly, we quash the assessment framed by the A.O. under Section 147 r.w.s. 144 r.w.s. 144B of the Act, dated 08.05.2023, in terms of our aforesaid observations.
As we have quashed the assessment framed by the A.O. under Section 147 r.w.s. 144 r.w.s. 144B of the Act, dated 08.05.2023, for want of a valid assumption of jurisdiction for issuing notice u/s. 148 of the Act, therefore, we refrain from adverting to and dealing with the contentions based on which the revenue has assailed before us the order passed by the CIT(A), which, thus, having been rendered as academic in nature, are left open.
In the result, the appeal of the revenue is dismissed, while the additional ground of cross-objection of the assessee is allowed in terms of our aforesaid observations.
Order pronounced in the Open Court on 9th September, 2025.