Sanctioning Authority under section 151: incorrect authority invalidates section 148 notice and quashes reassessment under income-tax law.

Validity of notices under section 148 turned on whether the statutory sanction under section 151(ii) was obtained; for notices issued after more than three years the required sanction must come from the Principal Chief Commissioner or specified equivalent. Sanction by the Principal Commissioner did not satisfy section 151(ii), so the sanction process was non-compliant, rendering the section 148 notice and consequent reassessment under section 147 read with section 144B invalid. The ITAT quashed the reassessment and allowed the appeal in favour of the assessee.

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Issues: Whether the notice issued under section 148 of the Income-tax Act, 1961 for an assessment year where more than three years had elapsed was valid when prior sanction was accorded by Principal Commissioner instead of the authority specified under section 151(ii) of the Income-tax Act, 1961.

Analysis: The Court examined the amended sanctioning regime under section 151 of the Income-tax Act, 1961 which prescribes different sanctioning authorities depending on whether three years or less, or more than three years, have elapsed from the end of the relevant assessment year. For notices issued after more than three years, sanction must be obtained from the Principal Chief Commissioner or equivalent authorities as specified in section 151(ii). The Coordinate Bench decision in Manish Financials (Mumbai Bench "D") was applied, which held that where the notice was issued beyond three years but approval was obtained from Principal Commissioner instead of Principal Chief Commissioner, the approval was not in accordance with section 151(ii). The Tribunal found that the notices in the present case were issued after the three-year period had elapsed but were sanctioned by Pr. CIT-2, Mumbai rather than the authority required under section 151(ii), rendering the sanction process non-compliant with the statutory requirement. The failure to obtain sanction from the correct authority vitiated the notice under section 148 and the consequent assessment under section 147 read with section 144B.

Conclusion: The notice under section 148 and the resulting assessment orders under sections 147 r.w.s. 144B of the Income-tax Act, 1961 are invalid and the reassessment is quashed; the appeal is allowed in favour of the assessee.

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