ACIT, CIRCLE 24(1) MUMBAI, MUMBAI vs. NILKAMAL CRATES & CONTAINERS, MUMBAI

& CO No. 146/Mum/2025 Nilkamal Crates & Containers

4. Whether on facts and circumstances of the case the Ld. CIT(A) was correct in holding that the assessee was entitled to deduction u/s. 35(1)(ii) without appreciating that assessee was in connivance with Vivekananda Yoga Anusandhana Samsthana (VYASA) and entered into organized scam to claim deduction u/s. 35(1)(i)of the 1. T. Act, 1961 and also the fact that the trust viz. Vivekananda Yoga Anusandhana Samsthana (VYASA) had admitted during search that they had provided accommodation entries of donation to the donors.”

CO No. 146/Mum/2025 by assessee a) The learned CIT(A) erred in not adjudicating and thereby dismissing Ground Nos. 1 to 5 raised by the Appellant in the appeal filed before the First Appellate Authority. b) The Appellant submits that the assessment framed u/s 144B read with section 147 is illegal, void and without jurisdiction and therefore, required to be quashed. c) The Appellant submits that the notice u/s 148 and order u/s 148A(d) both dated 31.07.2022, are bad in law as the prior sanction of the appropriate authority as provided in section 151 had not been obtained. d) The Appellant further submits that the said notice u/s 148 and the said order u/s 148A(d) are bad in law as the said order notice/order were issued by the Income Tax Officer not having jurisdiction. e) The Appellant also submits that original notice u/s 148 dated 28.06.2021, on the facts and circumstances of the case, was invalid and therefore, the subsequent proceedings including issuance of the said notice u/s 148 and passing of the said order u/s 148A(d) were illegal and void. f) The Appellant finally submits that the said order u/s 148A(d) and issuance of the said notice u/s 148 are illegal, void and without jurisdiction as the mandatory conditions specified u/s 149(1)(b) had not been satisfied.”

& CO No. 146/Mum/2025 Nilkamal Crates & Containers Being aggrieved, the revenue instituted the present appeal to assail the finding of Ld. CIT(A) on merits. On the other hand, assessee preferred to file a cross objection (CO) before the tribunal.

4. At the outset, the ld. Counsel representing the assessee (ld. AR) submitted that legal contentions raised by the assessee before the ld. CIT(A) are dismissed without adjudication, as the appeal of assessee was decided on merits in favour of the assessee, stating that the grounds of appeal challenging the validity of assessment proceedings are dismissed for statistical purposes, since the assessee has already got the relief on quantum additions as per paragraph no. 5.2.5 of the impugned order. It is further submitted by the ld. AR that, a legal ground raised by the assessee before the ld. CIT(A) is again raised by the assessee in the C.O. challenging the validity of approval granted under section 151 of the Act.

& CO No. 146/Mum/2025 Nilkamal Crates & Containers

7. It is clarified that the reopening proceedings are completed under the amended provisions of the Act u/s 148A. The approval in present case falls in the category, where reopening had been invoked after three years from the end of the relevant AY, thus, the approval was to be granted by specified authorities as per clause-(ii) of section 151 of the Act, whereas in the present case the approval was obtained from authority specified under clause-(i) of section 151 of the Act. Further, Ld. AR relied on the decision of ITAT, & CO No. 146/Mum/2025 Nilkamal Crates & Containers Mumbai in the case of Aakruti Ketan Mehta Vs NFAC in for AY 2016-17 (26.08.2024), wherein a similar issue was came up and decided following the judgment of Hon’ble Apex Court in the case of Ashish Agarwal (supra) and Hon’ble Bombay High Court in the case of Siemens Financial Services Pvt. Ltd. vs. DCIT [2023] 457 ITR 647. It was the prayer that the notice issued under section 148A(d) and section 148 of the Act, after obtaining the approval of Pr.CIT who was not the specified authority to do so, whereas, in present case, the approval should have been granted by the Pr.CCIT or Pr. Director General or Chief Commissioner or Director General as per clause-(ii) of section 151 of the Act. Consequently, the proceedings initiated on the foundation of invalid approval are bad-in-law and liable to be quashed.

& CO No. 146/Mum/2025 Nilkamal Crates & Containers 9. We have considered the rival submissions perused the material available on record and the judicial pronouncement relied upon by the assessee in support of the legal contention raised. The identical issue has been dealt with and decided by the Co-ordinate Bench of ITAT, Mumbai, as relied upon by the Ld. AR of the assessee, in the case of Aakruti Ketan Mehta vs. NFAC in for AY 2016-17 dated 26.08.2024, wherein the pertinent observations of Tribunal following the decisions of Hon’ble Apex Court in the case of Ashish Agarwal (supra) as well as Hon’ble Bombay High Court in the case of Siemens Financial Services Pvt. Ltd. (supra) are extracted as under:

8. We heard the rival contentions and perused the record. Though the AO had initially issued notice u/s 148 under old provisions, yet, subsequently, the AO has regularized the same as per the decision rendered by Hon‟ble Supreme Court in the case of Ashish Agarwal (supra). Hence, the reassessment proceedings have been continued under new provisions only. Hence the AO has issued notice u/s 148A(b) and also passed order u/s. 148A(d) of the Act. The provisions of section 148A(d) of the Act would require the AO to pass order on the question, viz., whether or not it is a fit case to issue a notice u/s. 148 of the Act. In terms of that section, the order has to be passed with the prior approval of the “specified authority . We also noticed that the specified authority is defined u/s. 151 of the Act. If the notice was issued after expiry of three years from the end of the relevant assessment year, the approval has to be obtained by the AO from “Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.”

9. In the instant case, the assessment year involved is AY 2016-17 and the order u/s. 148A(d) of the Act has been passed on 30-06-2022, i.e., after expiry of three years after the end of the assessment year 2016-17. Hence, in terms of sec. 151 read with 148A(d) of the Act, the approval should have been obtained by the AO from & CO No. 146/Mum/2025 Nilkamal Crates & Containers Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. On the contrary, in the instant case, the AO has obtained approval from Principal Commissioner, which is contrary to the requirement of sec. 151 of the Act.

10. The question on the validity of notices issued/order passed without obtaining approval from appropriate authority has been examined by the Hon‟ble Bombay High Court in the case of Siemens Financial Services Pvt. Ltd., (supra), wherein it was held as under:-

“20 Under section 151 "specified authority" for the purposes of section 148 and section 148A shall be, if three years or less than three years have elapsed from the end of the relevant assessment year, Principal Commissioner or Principal Director or Commissioner or Director. If more than three years have elapsed from the end of the relevant assessment year, then Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

21 Admittedly, in this case, the approval/sanction for order under section 148A(d) of the Act has been granted by the Principal Commissioner of Income- tax-8. The entire controversy is, therefore, (a) whether the Principal Commissioner was the specified authority, who could have granted the approval/sanction? (b) if not, the effect thereof?

In our view, the approval is not valid. Hence, the impugned order passed under section 148A(d) read with notice issued under section 148 of the Act dated July 31, 2022 is not valid and has to be quashed and set aside.

The first proviso to section 148 of the Act refers to the approval of the specified authority being obtained before a notice under section 148 of the Act can be issued. Explanation 3 to section 148 of the Act specifies that the meaning of the term "specified authority" as provided for in section 151 of the Act is to apply for the purpose of section 148.

Section 148A(d) of the Act also requires the Assessing Officer to pass an order after considering the reply of the assessee as to whether or not it is a fit case to issue a notice under section 148 of the Act and such an order under section 148A(d) of the Act has to be passed with the prior approval of the specified authority. The Explanation to section 148A of the Act also incorporates the meaning of "specified authority" as provided for in section 151 of the Act.

& CO No. 146/Mum/2025 Nilkamal Crates & Containers As per section 151 of the Act, the "specified authority" who has to grant his sanction for the purposes of section 148 and section 148A is the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year. The present petition relates to the assessment year 2016-17, and as the impugned order and impugned notice are issued beyond the period of three years which elapsed on March 31, 2020 the approval as contemplated in section 151(ii) of the Act would have to be obtained which has not been done by the Assessing Officer. The impugned notice mentions that the prior approval has been taken of the "Principal Commissioner of Income-tax-8" ("PCIT-8") which is bad in law as the approval should have been obtained in terms of section 151(ii) and not section 151(i) of the Act and the Principal Commissioner of Income- tax8 cannot be the specified authority as per section 151 of the Act. Further, even in the affidavit-in-reply, the Department has accepted that the approval obtained is of the "Principal Commissioner of Incometax-8" and, hence, such an approval would be bad in law.

The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, enacted on September 29, 2020 and came into force on March 31, 2020 ([2020] 428 ITR (St.) 29). It, inter alia, provided for a relaxation of certain provisions of the Income-tax Act, 1961. Where any time limit for completion or compliance of an action such as completion of any proceedings or passing of any order or issuance of any notice fell between the period March 20, 2020 to December 31, 2020, the time limit forcompletion of such action stood extended to March 31, 2021. Thus, the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act only seeks to extend the period of limitation and does not affect the scope of section 151.

26 The Assessing Officer cannot rely on the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act and the notifications issued thereunder as section 151 has been amended by the Finance Act, 2021 and the provisions of the amended section would havde to be complied with by the Assessing Officer, with effect from April 1, 2021. Hence, the Assessing Officer cannot seek to take the shelter of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act as a subordinate legislation cannot override any statute enacted by Parliament. Further, the notification extending the dates from March 31, 2021 till June 30, 2021 cannot apply once the Finance Act, 2021 is in existence. The sanction of the specified authority has to be obtained in accordance with the law existing when the sanction is obtained and, therefore, the sanction is required to be obtained by applying the amended section 151(ii) of the Act and since the sanction has been obtained in terms of section 151(i) of the Act, the impugned CO No. 146/Mum/2025 Nilkamal Crates & Containers order and impugned notice are bad in law and should be quashed and set aside.”

10. Since, the legal issue raised in the instant case is squarely covered by the decisions of Hon’ble Apex Court and Hon’ble Bombay High Court, which are followed by the ITAT, Mumbai in the case of Aakruti Ketan Mehta (supra), thus, as per the facts of the present matter, wherein undisputedly the reopening u/s 147 had been invoked after three years of the relevant assessment year and the approval was granted by ld. Pr. CIT, which could not be controvert by the revenue though any evidence, except clarifying that such defect is curable in terms of provisions of section 292B of the Act, being a minor defect, we find force in the argument of the Ld. AR. Further, while dealing with this specific issues by the Hon’ble Bombay High Court in the case of Siemens Financial Services Pvt. Ltd. (supra), wherein the order u/s 148A(d) was passed on 31.07.2022 for AY 2016-17 with prior approval of Pr. CIT i.e., after 3 years from the end of relevant assessment year, it had been categorically held that sanction of specified authority has to be obtained in accordance with the law, existing when the sanction is obtained and therefore, the sanction is required to be obtained by applying the amended section 151(ii) of the Act but since the sanction has been obtained in terms of section 151(i) of the Act, the impugned order and impugned notice are bad-in-law and should be quashed and set-aside. Respectfully following the aforesaid analogy drawn by Hon’ble Bombay High Court, under akin facts and circumstances, we hold that the order passed under & CO No. 146/Mum/2025 Nilkamal Crates & Containers section 148A(d), notice issued under section 148 and the consequential proceedings thereafter are bad-in-law, thus, are liable to be set-aside and quashed.

2. Counsels state that in all these Petitions the issue of improper sanction having been obtained has been raised among other grounds. Counsels state that the issue of improper sanction has been decided by this Court in the case of Siemens Financial Services Private Limited v. Deputy Commissioner of Income Tax and Others', wherein the Court has held that for Assessment Year 2016-2017, the sanction should have been given under Section 151 (ii) and not under Section 151(i) of the Income Tax Act, 1961 ( the Act") and consequently the sanction is invalid. The Court has stated that in view of the invalid sanction, the notice issued itself will be invalid and has to be quashed. We would also add, if the notice has to be quashed even where there is an assessment order passed subsequently, those assessment orders having been passed relying on an incorrect sanction, will also have to be quashed. Ordered accordingly.

3. In view of the above, all consequential notices/demands issued under Section 156 or 271 of the Act will also have to be quashed. Ordered accordingly.

5. Counsels further state that the findings in Siemens Financial Services Private Limited (supra) will squarely apply to the Assessment Year 2017-2018 as well. Therefore, all such notices issued for Assessment Year 2017-2018, the assessment orders and the consequential orders are also quashed and set aside.”

& CO No. 146/Mum/2025 Nilkamal Crates & Containers

12. Further in the case of Ramesh B. Mehta vs. ITO, Mumbai [W.P. No. 271 of 2023 (Bombay), the Hon’ble Bombay High Court had referred to the decision of Hon’ble Apex Court in the case of Ashish Agarwal (supra) as well as Union of India Vs. Rajeev Bansal (supra) and have held as under:

“4-Initially, Respondent No.1 had issued notice under section 148 (under the erstwhile law of re-assessment) on 19.05.2021 [placed at Exhibit B of the Petition] for Assessment Year 2016-17. Subsequently, in consequence of the judgment of the Hon'ble Supreme Court in the case of Union of India vs. Ashish Agarwal (2022) 444 ITR 1 (SC), the communication dated 23.05.2022 [placed at Exhibit C of the Petition], was sent to the Petitioner intimating that the aforesaid notice issued under Section 148 of the Act (under old regime) would be treated as a show-cause notice issued in terms of Section 148A(b) of the Act (under new regime introduced by the Finance Act, 2021 w.e.f. 01.04.2021). It is claimed by the Petitioner that when the said notice was issued, he was travelling and was unaware about the issuance thereof. Thereafter, Respondent No.1 passed an order under section 148A(d) on 13.07.2022 [placed at Exhibit E1 of the Petition] along with the notice dated 15.07.2022 issued under section 148 of the Act (Exhibit F of the Petition]. Undisputedly, the above referred order under section 148A(d) and notice under section 148 were passed/issued in pursuance of the provisions of the substituted law of re-assessment as amended by the Finance Act, 2021 and which came into force from 01.04.2021.

5. The Petitioner has contended that in the present case, the order under section 148A(d) dated 13.07.2022 was passed beyond three years from the end of the relevant Assessment Year 2016-17. Consequently, according to the provisions of section 151(ii), when more than three years have elapsed from the end of the relevant assessment year, the specified authority for obtaining the approval was either the Principal Chief Commissioner (PCCIT) or Principal Director General (PDGIT), or where there is no PCCIT or PDGIT, the Chief Commissioner (CCIT) or the Director General (DGIT). However, in paragraph 7 of the order dated & CO No. 146/Mum/2025 Nilkamal Crates & Containers 13.07.2022 passed under section 148A(d), Respondent No.1 has stated that before passing the said order, prior approval of Respondent No.2 i.e. the Principal Commissioner of Income Tax-27, Mumbai, was obtained and the said order was passed thereafter. This aspect remains uncontroverted by the Respondents.

6. In these facts, the limited point to be examined is whether the order dated 13.07.2022 passed under section 148A(d) for the Assessment Year 2016-17 after obtaining approval of Respondent No.2 [i.e. the PCIТ-27, Mumbai], was in accordance with the provisions of section 151.

"iii. Sanction of the specified authority 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 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 Section 151 (2) of the Before expiry of four years Joint Commissioner old regime from the Joint Commissioner end of the relevant assessment year Section (1) of the old After expiry of four years Principal Chief regime from the end of the relevant Commissioner or Chief assessment year Commissioner or Principal Commissioner or Commissioner Section 151 (i) of the Three years or less than Principal Commissioner new regime three years from the end of or Principal Director or the relevant assessment Commissioner or & CO No. 146/Mum/2025 Nilkamal Crates & Containers year Director Section 151 (ii) of the More than three years have Principal Chief new regime elapsed from the end of the Commissioner or relevant assessment year Principal Director General or Chief Commissioner or Director General

8. On bare reading of the above extract of the judgment of Hon'ble Supreme Court in the case of Rajeev Bansal (supra), we find that the Hon'ble Supreme Court had clarified as under:

8.1 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: (i) at first stage under Section 148A(a); (ii) at second stage under Section 148A(b); (iii) at third stage under Section 148A(d); and (iv) at 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. 8.2 Under 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 assessment year only after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. 8.3 Section 151(ii) of the substituted provisions prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance with the provisions of section 151 CO No. 146/Mum/2025 Nilkamal Crates & Containers vitiates the jurisdiction of the Assessing Officer to issue a notice under section 148. 8.4 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.

& CO No. 146/Mum/2025 Nilkamal Crates & Containers 11. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of the Respondent No. 1 to issue a notice under Section 148 of the Act.

Order pronounced in the open court on 03-02-2026.