Section 148 reassessment notices invalid due to limitation period exceeded and improper sanctioning authority approval

The ITAT Mumbai ruled in favor of the assessee, holding that reassessment notices issued under Section 148 were invalid on two grounds. First, regarding limitation, the tribunal followed the SC ruling in Rajeev Bansal, determining that for AY 2015-16, the notice issued on 30/06/2022 exceeded the surviving time limit despite TOLA relaxations extending deadlines to 30/06/2021. The CIT(A)'s reliance on Ashish Agarwal and the extended limitation period under Section 149(1)(b) was rejected. Second, concerning sanction validity under Section 151(ii), the tribunal found that notices issued after three years from the assessment year end required sanction from the Principal Chief Commissioner or Principal Director General, not the Principal Commissioner who actually provided approval. Following precedent from Manish Financials, the improper sanctioning authority rendered the notices legally invalid. Consequently, the subsequent assessment proceedings were declared null and void, and the assessee's appeal was allowed.

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ISSUES:

Whether the reassessment notices issued under Section 148 of the Income-tax Act, 1961 (the Act) are barred by limitation under Section 149 of the Act, considering the transition from the old to the new procedural regime under Sections 148A and 148.Whether the sanction for issuance of reassessment notices under Section 148 was validly obtained from the appropriate authority as required under Section 151 of the Act in the new regime.Whether notices issued by the jurisdictional Assessing Officer instead of the National Faceless Assessment Centre comply with the mandate of Section 151A of the Act.Whether the addition under Section 69 of the Act for unexplained investments was justified on the facts of the case.

RULINGS / HOLDINGS:

On limitation: The notice issued under Section 148 for the Assessment Year (AY) 2015-16 was held to be barred by limitation as it was issued beyond the surviving time limit prescribed under the new regime, following the Supreme Court's rulings in Ashish Agarwal v. Union of India and Union of India v. Rajeev Bansal. Consequently, the reassessment proceedings for AY 2015-16 were declared null and void.On sanction authority: For AYs 2016-17 and 2017-18, the reassessment notices under Section 148 were issued without obtaining sanction from the appropriate authority specified under Section 151(ii) of the Act, as the sanction was given by the Principal Commissioner instead of the Principal Chief Commissioner, rendering the notices invalid and the consequent assessments liable to be quashed.On issuance of notices: The notices issued by the jurisdictional Assessing Officer instead of the National Faceless Assessment Centre were not upheld as a ground for interference, given the procedural compliance under the Act and relevant rulings.On addition under Section 69: The addition of Rs. 68,15,933/- treated as unexplained investment under Section 69 was not adjudicated upon due to the disposal of appeals on procedural grounds.

RATIONALE:

The Court applied the statutory framework of the Income-tax Act, 1961, particularly Sections 147, 148, 149, 148A, 149(1)(b), 151, and 151A, alongside the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), which provided transitional provisions and time limit relaxations during the COVID-19 pandemic period.The Court relied heavily on the Supreme Court decisions in Ashish Agarwal v. Union of India and Union of India v. Rajeev Bansal, which clarified the interplay between the old and new reassessment regimes, the concept of "surviving time limit," and the necessity of obtaining sanction from the correct authority under Section 151 post 01/04/2021.The Court recognized that notices issued beyond the surviving time limit under the new regime are time-barred and that failure to obtain sanction from the specified authority under Section 151(ii) renders the notice invalid, affecting the jurisdiction of the Assessing Officer.The decision in the coordinate bench ruling in ACIT-19(1) v. Manish Financials was followed to emphasize strict compliance with Section 151(ii) for notices issued beyond three years from the end of the relevant assessment year.No substantive examination of the merits of the addition under Section 69 was undertaken due to the procedural invalidity of the reassessment notices.

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