2025 (7) TMI 1952 - AT - Income Tax

Income-tax reassessment reopening beyond three years for AY 2016-17 failed due to wrong s.151(ii) sanction; s.148 notice quashed.

Where a notice under s.148 was issued for AY 2016-17 after expiry of three years, the dominant issue was whether the reopening was vitiated for want of ... Validity of reopening of assessment - Valid sanction from the correct 'specified authority' u/s 151(ii) - HELD THAT:- Hon’ble Mumbai Tribunal Manish Financials [2024 (12) TMI 1539 - ITAT MUMBAI] after considering decisions in the case of Ashish Aggarwal [2022 (5) TMI 240 - SUPREME COURT] and Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] have concluded that in cases where more than 3 years have elapsed noticed u/s 148 has to be approved with prior approval of Pr. CCIT only. While issuing notice u/s 148 the ld. AO has to obtain prior approval of the specified authority as defined in Section 151 and that in the cases for AY 2016-17 where more than 3 years had elapsed, compliance has to be made to mandate given in Section 151 (ii). It has been clearly ruled that any noncompliance to above would render the notices per se, infructuous and therefore to be quashed. The revenue has not been able to point out any distinguishment. Statutory provisions of the Income Tax Act as well as judicial precedents setting in the case of Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] in the case of Core Logistics [2025 (6) TMI 727 - MADRAS HIGH COURT] and Manish Financials [2024 (12) TMI 1539 - ITAT MUMBAI] clearly mandate that in cases where notice u/s 148 is to be issued beyond a period of 3 years than,AO is required to obtain prior approval of Pr. CCIT as provided in Section 151(ii) of the Act. We have noted that in the present case notice u/s 148 dated 16.07.2022 was issued with the prior approval of Pr. CIT. Accordingly, the impugned notice is not supported by authority of law and hence, hereby quashed. The consequent assessment order u/s 147 r.w.s. 144B would also not survive. Appeal of the assessee is allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the reassessment notice issued under Section 148 (dated 16.07.2022) was void for want of sanction from the correct 'specified authority' under Section 151(ii), where more than three years had elapsed from the end of the relevant assessment year. (ii) If the Section 148 notice was invalid for improper sanction, whether the consequent reassessment order under Section 147 read with Section 144B (dated 29.05.2023) could survive. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Validity of Section 148 notice for sanction by the correct specified authority Legal framework (as discussed by the Court): The Court examined that, under the post-amendment regime governing reassessment, issuance of notice under Section 148 is conditioned on prior approval from the 'specified authority' under Section 151. The Court further noted the distinction in Section 151 between cases where three years or less have elapsed (Section 151(i)) and where more than three years have elapsed (Section 151(ii)), the latter requiring approval from a higher-level authority (Principal Chief Commissioner level). Interpretation and reasoning: The Court treated sanction by the appropriate authority as a jurisdictional pre-condition to issuance of a valid notice under Section 148. It noted that, for the assessment year in question, the notice dated 16.07.2022 was issued after the lapse of more than three years from the end of the relevant assessment year. The Court found, on the record, that the approval obtained was from a Principal Commissioner, whereas Section 151(ii) required approval by the Principal Chief Commissioner (or equivalent). The Court applied the judicial mandate that reassessment notices issued in the transition period must comply with the sanction requirement under Section 151, and that non-compliance affects jurisdiction. Conclusion: Since the impugned Section 148 notice was issued with prior approval of the Principal Commissioner instead of the authority mandated by Section 151(ii), the notice was held to be not supported by authority of law and was quashed as invalid. Issue (ii): Survival of reassessment order where the foundational Section 148 notice is invalid Legal framework (as discussed by the Court): The Court proceeded on the basis that a valid Section 148 notice is foundational to assumption of jurisdiction to reassess under Section 147 and to pass the consequential reassessment order. Interpretation and reasoning: Having held that the Section 148 notice itself was invalid due to lack of sanction from the correct specified authority, the Court held that the jurisdictional defect vitiated the reassessment proceedings. Therefore, the reassessment order passed pursuant to such notice could not stand independently. Conclusion: The reassessment order under Section 147 read with Section 144B dated 29.05.2023 was held unsustainable and was set aside as a consequence of quashing the notice under Section 148. All other grounds were left open as academic.