Reopening of assessment under TOLA: notice and sanction requirements invalidated where approval was granted by incorrect authority

Validity of reopening of assessment is examined in light of limitation suspension under TOLA and the new reassessment regime. The assessment years three-year period expired during the TOLA suspension, so the authority specified for post-expiry approvals under the new regime ought to have been the higher sanctioning authority; instead approval was granted by a lower authority and a notice was issued after the three-year period. Applying the principle that notices falling in the interregnum are deemed dated earlier, the revenue lacked time to complete the new-regime procedure, rendering the subsequent notice void ab initio and quashed in favour of the assessee.

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Issues: Whether the notice issued under section 148 of the Income-tax Act, 1961 (new regime) dated 30/07/2022 and the consequent reassessment are valid where the three-year period for AY 2017-18 expired on 31/03/2021 and the procedural regime of TOLA and required prior approval under Section 151 were applicable.

Analysis: The Tribunal examined the temporal effect of the substituted reassessment regime (Sections 149 and 151) read with Section 3(1) of TOLA as interpreted in Ashish Agarwal. For AY 2017-18 the three-year limitation expired on 31/03/2021, which fell within the TOLA period; therefore the extended surviving period under TOLA ran only until 30/06/2021 for issuance of a notice equivalent to Section 148 under the new regime. The Tribunal further examined the sanctioning authority requirement under Section 151 of the new regime and found that since the notice and assessment action occurred after the expiry of the three-year period, approval ought to have been granted by the authority specified in Section 151(ii) (Principal Chief Commissioner or Chief Commissioner). In the present case the approval recorded was by an authority under Section 151(i) (a lower authority), and the notice under the new regime dated 30/07/2022 was therefore issued beyond the surviving period and without proper statutory sanction.

Conclusion: The notice dated 30/07/2022 under section 148 of the Income-tax Act, 1961 is void ab initio and the consequent reassessment proceedings are bad in law; Ground No.1 is allowed and the appeal of the assessee is allowed.

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