Sanction under Section 151(ii) invalid where lower authority approved reassessment after three-year period; notice and reassessment quashed.

The note addresses validity of reassessment notices issued after the three-year limitation where sanction was accorded by a lower tax authority. It explains that, under the pre-2023 statutory text, sanction for reassessment beyond three years must be by the specified higher authority; a proviso inserted by later amendment was not operative for notices issued earlier. Sanction by a lower authority after the three-year period is therefore invalid, and consequent actions taken pursuant to such invalid sanction are vitiated, resulting in quashing of the notice and reassessment.

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Issues: Whether the notice issued under Section 148 of the Income-tax Act, 1961 and the consequential reassessment under Section 147 are invalid for want of sanction from the appropriate specified authority under Section 151 of the Income-tax Act, 1961 (assessment year 2018-19, notice dated April 2022).

Analysis: The Tribunal examined Section 151 in the statutory form applicable prior to the amendment by Finance Act, 2023 and the interaction with Section 149(1). Section 151(ii) requires that where more than three years have elapsed from the end of the relevant assessment year, sanction must be accorded by the Principal Chief Commissioner (or equivalent higher authority). The proviso later inserted into Section 151 by Finance Act, 2023 (which permits computation of the three-year period after taking into account exclusions/ extensions under the provisos to Section 149(1)) was not effective until 01.04.2023 and therefore could not be applied to notices issued in April 2022. Jurisdictional High Court decisions (cited and followed) hold that sanction given by a lower authority (PCIT/CIT) after the three-year period is invalid. Coordinate Bench decisions of the Tribunal applying the High Court precedent were considered and followed. On the facts, the show-cause order, order under Section 148A(d) and notice under Section 148 were issued in April 2022 after the three-year period had expired and the sanction was accorded by CIT/PCIT rather than PCCIT; accordingly the statutory requirement of Section 151(ii) was not satisfied and the sanction is invalid. Consequent actions taken pursuant to the invalid sanction, including the reassessment order, are vitiated; having quashed the notice for want of proper sanction, the Tribunal did not adjudicate merits of additions.

Conclusion: The notice under Section 148 and the assessment/reassessment framed under Section 147 are invalid for want of sanction by the appropriate specified authority under Section 151(ii) of the Income-tax Act, 1961; the impugned notice and resultant assessment order are quashed and the appeal is allowed in favour of the assessee.

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