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Facts
The assessee filed a return of income declaring ₹14,20,740/-. The assessment was reopened by issuing notice u/s 148. The Assessing Officer made an addition of ₹28,86,000/- as unexplained cash credit u/s 68 of the Act. The assessee appealed to the CIT(A) but it was decided ex parte. The assessee filed an appeal before the ITAT, which was delayed by 79 days.
Held
The Tribunal held that the notice issued under section 148 of the Act on 28/07/2022 was bad in law due to non-compliance with the provisions of section 151. The Tribunal found that the approval for the notice was not obtained from the appropriate authority as prescribed under the law, and the notice was issued beyond the time limit specified.
Key Issues
Whether the notice issued under section 148 of the Act for reopening of assessment was valid, considering the provisions of section 151 and the time limits prescribed.
Sections Cited
148, 148A, 151, 68
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SMT. BEENA PILLAI
Per Smt. Beena Pillai, JM: The present appeal filed by the assessee arises out of the order dated 06/06/2025 passed by the NFAC, Delhi [hereinafter the “Ld.CIT(A)”] for A.Y. 2017-18 on following grounds of appeal:-
“1. The Ld CIT(A) failed to consider the fact that original assessment was completed u/s 143(3) of the Act vide order dt. 18.12.2019 wherein the issue of cash deposited during demonetisation was considered, therefore reasons recorded for reopening is factually incorrect and reopened on incorrect facts, therefore reopening is bad in law. 2. The Id CIT (A) failed to appreciate that the JAO have no jurisdiction to issue notice u/s 148 of the Act dated 28/07/2022 and pass order u/s 148A(d) dated 28/07/2022 as after 29/03/2022 same can be done in a faceless manner, therefore the reassessment proceedings is bad in law. 3. The Id CIT(A) failed to appreciate that the AO issued reopening notice u/s 148 on 28/07/2022, approval was required to be taken as per provisions of amended section 151 of the Act from Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, however approval is from PCIT. The approval is not in accordance with law, therefore liable to be quashed.
2 I.T.A. No. 7421/Mum/2025 4. The Id CIT (A) failed to appreciate that the reopening of assessment vide notice u/s. 148 of the Act dated 28/07/2022 is after expiry of three years from the end of the Assessment Year: 2017-18 and the income escapement is below 50 lacs, i.e. Rs.28,86,000/-, therefore reopening is bad in law. II. Addition u/s 68 of Rs. 28,86,000/-: 5. The Id. CIT (A) erred in confirming the addition made by AO of Rs.28,86,000/- in the total income of the assesse as unexplained cash credit u/s 68 of the Act without considering the submission and documents filed by the appellant wherein the assessee had explained the source of deposit along with relevant evidence, therefore the addition of Rs.28,86,000/-u/s 68 of the Act not justified. 6. The Ld. CIT(A) erred in confirming addition of Rs. 28,86,000/- treating the same as unexplained cash credit, without considering zerox copy of pay-in-slips / bank certificate as evidences for cash deposited during demonetisation period especially when no Rs. 500 cash was deposited after 03.12.2016. 7. The Assessee craves leave to add, alter modify or delete one or more ground before or at the time of hearing of Appeal.”
At the outset, Ld. AR submitted that, there is a delay of 79 days in filing the present appeal before this Tribunal. Assessee has filed an application dated 17/11/2025 seeking condonation of delay wherein it is stated as under:-
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2.1. We have perused the condonation petition filed by the assessee seeking condonation of delay of 79 days in filing the
7 I.T.A. No. 7421/Mum/2025 present appeal. The assessee has explained that the delay occurred on account of bona fide reasons, including lack of awareness of the appellate proceedings, reliance on his Chartered Accountant, and the attachment of his bank account by the Income Tax Department, which required immediate attention for arranging funds and securing release of the account. It has been submitted that there was no malafide intention or deliberate delay in filing the appeal.
2.1.1. We find that the reasons stated in the condonation petition constitute sufficient cause for the delay. The Hon’ble Supreme Court in Collector, Land Acquisition vs. Mst. Katiji & Ors. reported in (167 ITR 471) has held that a liberal approach should be adopted in matters relating to condonation of delay so as to advance substantial justice. Considering the facts and circumstances of the case and in the interest of substantial justice, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed time. Accordingly, the delay of 79 days in filing the present appeal before this Tribunal, is condoned and the appeal is admitted for adjudication on merits.
Brief facts of the case are as under:-
The assessee, an individual, filed the return of income for the year under consideration on 27/10/2017 declaring total income at ₹14,20,740/-. Subsequently, the assessment was reopened by issuance of notice u/s 148 dated 05/05/2021. In response to the said statutory notice, the assessee furnished the requisite details
8 I.T.A. No. 7421/Mum/2025 and filed the return of income declaring total income as per the original return. During the course of assessment proceedings, the Ld. AO noted that the assessee deposited cash in his bank account during the relevant year. The assessee was called upon to furnish details and supporting evidence in respect of the said deposits. The Ld.AO noted that, the assessee did not furnish bank certificates and only submitted Xerox copies of the pay-in slips or the deposit slips. The Ld. AO thus made addition of ₹28,86,000 as unexplained cash credits u/s 68 of the Act.
Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld.CIT(A).
3.1. It is submitted that before the Ld.CIT(A), the assessee could not represent himself, despite the notices being issued through the ITBA portal. The Ld.CIT(A), therefore, passed ex parte order confirming the action of the Ld. AO.
Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before the Tribunal.
The Ld.AR submitted that, assessee raised legal issue vide Ground Nos. 2, 3 & 4, challenging the validity of the notice issued u/s 148 of the Act under the new regime for reopening of the assessment. He submitted that original notice u/s 148 issued under the old regime was dated 05/05/2021, to reopen the assessment. Thereafter, the said notice was treated as a deemed notice as per the decision of the Hon’ble Supreme Court in the case of Union of India vs Ashish Agrawal, reported in (2022) 444 ITR 1. The Revenue after following the procedure as per the new regime
9 I.T.A. No. 7421/Mum/2025 u/s 148A issued notice u/s 148 of the Act on 27/05/2022, which was approved by the Principal Commissioner of Income Tax–19, Mumbai, wherein the reasons recorded states that income chargeable to tax amounting to Rs.28,86,000/- had escaped assessment for the year under consideration. The Ld.AR submitted that the notice issued under section 148A(b) and the order passed u/s 148A(d) of the Act are beyond three years and that the income escaping assessment is observed to be Rs.28,86,000/-.
4.1. The Ld. AR submitted that in present facts, the appropriate authority who has to approve the issuance of notice u/s 148 of the new regime, as per section 151 of the Act, would be the Principal Chief Commissioner of Income Tax or the Chief Commissioner of Income Tax. The Ld. AR placed reliance on the decision of the Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal, reported in [2024] 469 ITR 46, wherein it has been held that the sanctioning authority has to be in accordance with the provisions of section 151 of the Act, based on the new provisions u/s 148A of the Act.
4.2. On the contrary, the Ld. DR relied on the orders passed by the authorities below.
I have perused the submissions advanced by both sides in the light of the records placed before this Tribunal.
The limited issue that has been raised by the assessee is to examine whether the notice issued u/s 148 of the Act under the new regime dated 28/07/2022, based on the order passed u/s
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148A(d) passed on the even date, is after obtaining approval of the appropriate authority, in accordance with the provisions of section 151 of the Act.
5.1. The Ld. AR relied on the following observations from the decision of the Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal (supra):
“iii. Sanction of the specified authority
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 assessees from harassment resulting from the mechanical reopening of assessments Sri krishna (P.) Ltd. v. ITO [1996] 87 Taxman 315/221 ITR 538 (SC)/[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below:
Regime Time limits Specified authority
Before expiry of four years Section 151(2) of from the end of the relevant Joint Commissioner the old regime assessment year
Principal Chief After expiry of four years Commissioner or Chief Section 151(1) of from the end of the relevant Commissioner or Principal the old regime assessment year Commissioner or Commissioner Three years or less than Principal Commissioner or Section 151(i) of three years from the end of Principal Director or the new regime the relevant assessment Commissioner or Director year Principal Chief More than three years have Commissioner or Principal Section 151(ii) of elapsed from the end of the Director General or Chief the new regime relevant assessment year Commissioner or Director General
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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 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 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
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(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 20th March 2020 to 31st March 2021. TOLA will 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 20th March 2020 and 31st March 2021, then the specified authority under section 151(i) has an extended time till 30th 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 20th March 2020 and 31st March 2021, then the specified authority under section 151(2) has time till 31st March 2021 to grant approval.
The time limit for Section 151 of the old regime expires on 31st March 2021 because the new regime comes into effect on 1st April 2021.
For example, the three year time limit for assessment year 2017-2018 falls for completion on 31st March 2021. It falls during the time period of 20th March 2020 and 31st March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till 30th June 2021.
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Under Finance Act 2021, the assessing officer was required to obtain prior approval or sanction of the specified authorities at four stages:
a. Section 148A(a) - to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
b. Section 148A(b) - to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022;
c. Section 148A(d) - to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and
d. Section 148 - to issue a reassessment notice.
In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before various High Courts shall be deemed to have been issued under section 148-A of the Income-tax Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b). Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under section 151 for Section 148A(b). It is well established that this Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law High Court Bar Association v. State of UP [2024] 160 taxmann.com 32/299 Taxman 21 (SC)/[2024] 6 SCC 267.
This Court in Ashish Agarwal (supra) directed the assessing officers to “pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned.” Further, it directed the assessing officers to issue a notice under Section 148 of the new regime “after following the procedure as required under section 148-A.” Although this Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the
14 I.T.A. No. 7421/Mum/2025 specified authority according to Section 151 of the new regime before passing an order under section 148A(d) or issuing a notice under section 148. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable.” 5.1.1. On a bare reading of the above extract from the decision, it is noted that under the new provisions of Section 148A introduced by the Finance Act, 2021, the Ld. AO is required to obtain prior approval or sanction of the specified authority at four stages, namely:-
a. Section 148(a)-to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
b. Section 148A(b)-to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022;
c. Section 148A(d)-to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and
d. Section 148-to issue a reassessment notice.
5.2. Thus, the Ld. AO was required to obtain prior approval of the specified authority u/s 151 of the Act under the new regime before passing an order under section 148A(d) and issuing a notice u/s 148 of the Act.
15 I.T.A. No. 7421/Mum/2025 5.3. It is noted that in the new regime, if the income escaping assessment is more than ₹50,00,000/-, a reassessment notice can be issued after the expiry of three years from the end of the relevant assessment year only after obtaining prior approval of the Principal Chief Commissioner or the Principal Director General or the Chief Commissioner or the Director General. It is also noted that if the income escaping assessment is less than ₹50,00,000/-, no reassessment notice can be issued after the expiry of three years, as per section 151(1)(b) of the Act.
5.3.1. In the present facts and circumstances of the case, the income alleged to have escaped assessment is ₹28,86,000/- and the notice issued under the new regime is beyond the period of three years. Accordingly, as per section 151(1)(b) of the Act, the notice issued on 28/07/2022 is bad in law.
5.4. Even otherwise, the appropriate authority who could sanction the said notice, issued beyond a period of three years, should have been the Principal Chief Commissioner or the Principal Director General or the Chief Commissioner or the Director General. In the present facts of the case, the said notice has been approved by the Principal Commissioner, which again does not satisfy the condition prescribed under section 151(ii)(b) of the Act.
This Tribunal is, thus, of the opinion that non-compliance with the provisions of section 151 renders the notice issued under section 148 of the Act dated 28/07/2022 to be bad in law and, hence, the same deserves to be quashed and set aside. As a
16 I.T.A. No. 7421/Mum/2025 consequence, the reassessment proceedings initiated thereafter also become bad in law.
Accordingly, Ground Nos. 2, 3 & 4 stand allowed.
As the assessment proceedings stand quashed, the issues raised by the assessee on merits become academic at this stage.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 12/02/2026
Sd/-
(BEENA PILLAI) Judicial Member Mumbai Dated: 12/02/2026 SC Sr. P.S.
Copy of the order forwarded to:
(1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.