Impugned reassessment notices and orders quashed for missing mandatory approval under s.151(ii) read with first proviso to s.148

HC held the impugned reassessment notices and orders invalid for lack of mandatory approval by the specified authority under s.151(ii) read with the first proviso to s.148. The court concluded the approval requirement varies with the time-limit in s.151 and, since three years had elapsed, the approvals obtained were from the wrong category of authority. Consequently the notices/orders were quashed. The court granted the revenue liberty to initiate reassessment afresh if legally permissible, subject to compliance with the statutory approval requirement and applicable time limits.

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Issues: Whether notices and orders initiating reassessment proceedings under Sections 148/148A read with Section 151 of the Income-tax Act, 1961 are sustainable where prior approval required under Section 151(ii) for issuance of such notices was not obtained.

Analysis: The court examined the statutory scheme post Finance Act, 2021, noting that the first proviso to Section 148 makes issuance of a notice under Section 148 conditional upon (i) information suggesting escaped income and (ii) prior approval of the specified authority. Section 151 specifies the category of officers who qualify as the specified authority depending on the time elapsed since the end of the relevant assessment year, distinguishing between authorities where three years or less have elapsed and where more than three years have elapsed. The conjoint reading of the first proviso to Section 148 and Section 151 establishes that obtaining prior approval from the correctly designated specified authority is mandatory before issuing a notice under Section 148. In the matters before the Court, although more than three years had elapsed from the end of the relevant assessment years, approval was obtained from authorities falling under clause (i) of Section 151 rather than the higher authority mandated by clause (ii). The court held that the absence of approval from the authority specified in Section 151(ii) vitiates the notices and consequent orders; while the revenue was granted liberty to commence reassessment afresh in accordance with law, the impugned actions could not stand.

Conclusion: The impugned notices and orders under Sections 148/148A read with Section 151(ii) are quashed for want of mandatory prior approval of the specified authority; conclusion is in favour of the assessee.

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