AO's section 148 notice invalid without proper section 151(1) approval from Principal Chief Commissioner after four years

ITAT Indore held that the AO's notice u/s 148 was invalid due to lack of proper approval under section 151(1). The AO had obtained approval from Joint Commissioner under section 151(2) within four years but issued the notice after four years without securing fresh approval from Principal Chief Commissioner or higher authority as mandated by section 151(1). The tribunal rejected revenue's arguments regarding TOLA protection and section 292BB applicability, ruling that obtaining lower-authority approval within four years and using it after expiry constitutes circumvention of statutory requirements, creating jurisdictional defect making entire proceedings illegal.

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Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Merits of the additions/adverse conclusions made by the Assessing Officer (AO).

Summary:

Issue 1: Legality of the Notice Issued Under Section 148
The assessee challenged the legality of the notice issued under Section 148 and the subsequent assessment order under Section 147 on the grounds of illegal approval under Section 151. The assessee argued that the AO issued the notice after the expiry of four years from the end of the relevant assessment year, without obtaining the required approval from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as mandated by Section 151(1).

The Tribunal found merit in the assessee's argument, noting that the AO issued the notice on 30.03.2021 based on an approval dated 23.10.2019 from the Joint Commissioner, which is valid only within four years under Section 151(2). The Tribunal emphasized that Section 151(1) requires approval from higher authorities if the notice is issued after four years, and the AO's failure to obtain such approval rendered the notice invalid.

The Tribunal also rejected the revenue's argument that the notice was saved by the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (TOLA), citing decisions from the Hon'ble Mumbai High Court which clarified that TOLA does not amend the provisions of Section 151.

Furthermore, the Tribunal dismissed the revenue's reliance on Section 292BB, which deals with irregularities in the service of notice, finding it inapplicable to the issue of invalid approval.

Consequently, the Tribunal quashed the AO's order, deleted the additions made, and directed the AO to allow depreciation on the full value of assets in subsequent years.

Issue 2: Merits of Additions/Adverse Conclusions by AO
Since the Tribunal quashed the AO's order on the grounds of invalid notice, it did not adjudicate the other grounds raised by the assessee regarding the merits of the additions/adverse conclusions.

Result:
- Assessee's Appeal: Allowed.
- Revenue's Appeal: Dismissed.

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