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Facts
The Revenue filed an appeal against the order of the CIT(A) who had quashed the reassessment proceedings initiated by the Assessing Officer. The primary issue was that the notice under section 148 was issued after the expiry of three years from the end of the relevant assessment year, and the approval was obtained from the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner of Income Tax (PCCIT) or Chief Commissioner of Income Tax (CCIT), as required by Section 151(ii) of the Act.
Held
The Tribunal held that the approval for issuing the notice under section 148 was not obtained from the prescribed authority as per Section 151(ii) of the Act. This non-compliance with the statutory requirement goes to the root of the jurisdiction and renders the reassessment proceedings invalid.
Key Issues
Whether the reassessment proceedings are valid when the notice under section 148 was issued beyond three years from the end of the assessment year and approval was obtained from an incorrect authority?
Sections Cited
147, 148, 148A, 151, 144B, 250
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Income Tax Appellate Tribunal, “F” BENCH MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MAKARAND V MAHADEOKAR
Assessee by Shri Madhur Agarwal Revenue by Shri Vivek Permpurna Date of Hearing 05.03.2026 Date of Pronouncement 09.03.2026 आदेश / ORDER
PER MAKARAND V MAHADEOKAR, AM:
This appeal is directed against the order dated 31.10.2025 passed by the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], under section 250 of the Income Tax Act, 1961[hereinafter referred to as “the Act”], for the Assessment Year 2017–18, arising out of the assessment order dated 22.05.2023 passed by the Assessing Officer under section 147 r.w.s. 144B of the Act pursuant to notice issued under section 148 of the Act.
The Revenue has raised following grounds of appeal:
Johratussharaf Syedna Mufaddal Saifuddin, Mumbai 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in quashing the reassessment order passed u/s 147 r.w.s 144B merely on the ground of approval u/s 151 should be granted by PCCIT/CCIT instead of PCIT, without appreciating that the notice dated 17.06.2021 was issued under the erstwhile section 148, and the same was treated as 148A(b) notice only due to the Hon’ble Supreme Court’s decision in Union of India vs. Ashish Agarwal.
Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in interpreting the Supreme Court judgment in Union of India v. Ashish Agarwal (2022), as rendering the reassessment notice under section 148 invalid, when the Hon’ble Supreme Court had expressly preserved such notices as show-cause notices under section 148A(b) and mandated compliance with procedural safeguards? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that reopening of assessment for A.Y. 2017-18 was squarely within time as per TOLA Notification No. 20/2021 & 38/2021 and CBDT Instruction No. 01/2022, where the requirement of fresh sanction u/s 151 (post-Finance Act 2021) does not apply to ‘deemed notices’.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in quashing the reassessment order merely holding that there is no fresh tangible material to reopen the assessment, without appreciating the fact that the Ld. CIT(A) in its order for A.Y. 2018-19 in assessee’s own case, has accepted that the material found pertains to A.Y. 2017-18 on the basis of assessee’s acceptance of the same, thus deleting the disallowance of long term capital gain of Rs. 17,06,16,696/- is on wrong interpretation of the facts.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the notice issued lacked a mandatory Document Identification Number (DIN), without appreciating the fact that the Notice u/s. 148 dated 17.06.2021 and Notice u/s. 148A(d) dated 30.7.2022,
Johratussharaf Syedna Mufaddal Saifuddin, Mumbai were issued through DIN : ITBA/AST/S/148/2021- 22/1033524059(1) and DIN : ITBA/COM/F/17/2022- 23/1041361736(1) respectively. 6. The appellant craves leave to add, amend, modify or withdraw any ground of appeal at the time of hearing.
2. The brief facts of the case are such that the assessee filed the return of income for the year under consideration. Subsequently, the Assessing Officer initiated reassessment proceedings and issued notice under section 148 dated 30.07.2022 after passing an order under section 148A(d). The reassessment was completed by passing an order under section 147 r.w.s. 144B making certain additions.
3. Aggrieved thereby, the assessee filed appeal before the CIT(A). The CIT(A), after considering the assessment order, the submissions of the assessee and the judicial precedents relied upon, held that the reassessment proceedings were vitiated by jurisdictional defects as the notice under section 148 was issued without fresh tangible material, without proper approval of the competent authority under section 151, and without a valid Document Identification Number (DIN). The CIT(A) further held that the Assessing Officer had acted mechanically on borrowed information without independent application of mind. On merits also, the CIT(A) observed that conversion of the company into an LLP at book value did not constitute a “transfer” giving rise to capital gains and the alleged income represented only a notional book entry without real accrual. Accordingly, the reassessment was held to be void and the addition of Rs. 17,06,16,696/- made on account of long-term capital gain was deleted.
4. Aggrieved by the order of CIT(A), the revenue is in appeal before us. Since Ground No. 1 challenges the validity of Johratussharaf Syedna Mufaddal Saifuddin, Mumbai reassessment proceedings, being a jurisdictional issue going to the root of the matter, the same is taken up for adjudication first.
During the course of hearing before us, the learned Authorised Representative (AR) placed on record a copy of the notice issued under section 148 dated 30.07.2022 and submitted that the said notice has been issued beyond the period of three years from the end of the relevant assessment year. It was submitted that as per the provisions of section 151(ii) of the Act, where more than three years have elapsed from the end of the relevant assessment year, the approval for issuance of notice under section 148 is required to be obtained from the Principal Chief Commissioner of Income Tax (PCCIT) or Chief Commissioner of Income Tax. The learned AR submitted that in the present case the approval has been obtained from the Principal Commissioner of Income Tax (PCIT) instead of the authority prescribed under section 151(ii) of the Act. According to the learned Authorised Representative, since the approval has been obtained from an authority not prescribed under the statute, the reassessment proceedings are without jurisdiction and liable to be quashed.
In support of the aforesaid contention, the learned Authorised Representative relied upon the decision of the Co-ordinate bench in the case of Devanshi Sharma vs. ITO (ITA No. 7007/Mum/2025 dated 10.02.2026)as well as the judgment of the Hon’ble Bombay High Court in the case of Alag Property Construction (P.) Ltd. vs. ACIT [2025] 179 taxmann.com 578 (Bom).
The learned Departmental Representative relied upon the order of the Assessing Officer.
Johratussharaf Syedna Mufaddal Saifuddin, Mumbai 8. We have heard the rival submissions and perused the material placed on record. The short issue arising for our consideration is whether the reassessment proceedings initiated under section 147 are valid in law when the notice issued under section 148 dated 30.07.2022 has been issued after expiry of three years from the end of the relevant assessment year and the approval has been obtained from the Principal Commissioner of Income Tax instead of the authority prescribed under section 151(ii) of the Act.
At this stage, it would be relevant to refer to the provisions of section 151 of the Act, which prescribe the specified authority for granting sanction for issuance of notice under section 148.The Hon’ble Supreme Court, while dealing with the issue of approval of the specified authority, in the case of Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70has explained the scheme of section 151 under the new reassessment regime.
The Hon’ble Bombay High Court in the case of Alag Property Construction (P.) Ltd. vs. ACIT(supra) has considered an identical issue and after reproducing relevant paras from the judgment in case of Rajeev Bansal held that 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. Relevant paras are reproduced below:
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 Johratussharaf Syedna Mufaddal Saifuddin, Mumbai 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 section151(ii).
Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section151(ii) vitiates the jurisdiction of Respondent No.1 to issue a notice under Section 148 of the Act.
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 dated18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148dated and 23.08.2022 are bad in law, and hence, are required to be quashed and set aside.
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 there from.
In the present case, it is an undisputed fact that the notice under section 148 dated 30.07.2022 has been issued after expiry of three years from the end of Assessment Year 2017-18. It is also not in dispute that the approval for issuance of notice has been obtained from the Principal Commissioner of Income Tax. However, as per the mandate of section 151(ii) of the Act, where more than three years have elapsed from the end of the relevant assessment year, the approval is required to be obtained from the Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax.
Johratussharaf Syedna Mufaddal Saifuddin, Mumbai 12. Thus, the approval obtained in the present case is not from the authority prescribed under the statute. The sanction granted by the wrong authority goes to the root of jurisdiction and renders the reassessment proceedings invalid.
Similarly, the coordinate bench in the case of Devanshi Sharma vs. ITO (supra) has followed the said judgment of Hon’ble jurisdictional High Court to decide the issue in favour of the assessee.
Respectfully following the binding judgment of the Hon’ble Bombay High Court, we hold that the notice issued under section 148 dated 30.07.2022 as well as the consequential reassessment proceedings are invalid in law.
Accordingly, the assessment order passed under section 147 r.w.s. 144B of the Act is liable to be quashed.
Since the jurisdictional issue relating to the validity of reassessment proceedings has been decided in favour of the assessee, the reassessment itself having been held to be invalid, the grounds raised by the Revenue challenging the deletion of addition on merits do not survive for consideration and are rendered infructuous. Accordingly, the same do not call for adjudication.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 09.03.2026
Sd/- Sd/- (SAKTIJIT DEY) (MAKARAND V MAHADEOKAR) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 09/03/2026
Johratussharaf Syedna Mufaddal Saifuddin, Mumbai KRK, Sr. PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. प्रत्यथी / The Respondent. 2. संबंधधत आयकर आयुक्त / The CIT(A) 3. 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण,मुम्बई/ DR, ITAT, Mumbai 5. 6. गार्ड फाईल / Guard file. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy//
उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai