Sanctioning authority misidentification invalidates reopening beyond the three-year threshold, resulting in quashing of the consequent notice and order.

Challenge concerned validity of reopening and related procedural order when the recorded sanctioning authority did not match the authority required for actions taken beyond the three-year reopening threshold. The legal principle applied is that statutory prescription of the identity of the sanctioning authority is mandatory; a sanction granted by a different authority is invalid and renders consequent notices and orders void. Applying that principle, the impugned notice and order issued under a defective sanction were set aside, while leaving other rights and contentions open.

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Issues: Whether the sanction for issuance of notice under Section 148 and for passing order under Section 148A(d) of the Income-tax Act, 1961, issued by the Principal Commissioner of Income Tax (PCIT) on 7 April 2022 (for Assessment Year 2018-2019) is valid when the statute requires sanction by the Principal Chief Commissioner of Income Tax (PCCIT) for action beyond three years under Section 151(ii) of the Income-tax Act, 1961.

Analysis: The petition challenges both the Section 148 notice and the Section 148A(d) order dated 7 April 2022 on the ground that the sanctioning authority recorded in those instruments is the PCIT, Mumbai. The matter relates to Assessment Year 2018-2019 and the impugned actions were taken on 7 April 2022, that is, beyond three years from the end of the relevant assessment year. Section 151(ii) of the Income-tax Act, 1961 requires that for actions taken beyond the three-year period the sanctioning authority must be the PCCIT. The proviso to Section 151 was inserted with effect from 1 April 2023 and is not applicable to the present case. The Court applied the settled principle that where the statutory requirement as to the identity of the sanctioning authority is not complied with, the sanction is invalid and consequent actions taken under that defective sanction must be set aside. The Court followed its earlier ruling in Siemens Financial Services Private Limited and similar authorities and noted the parties' agreement on the applicability of that precedent to the facts of this case.

Conclusion: The sanction issued by the Principal Commissioner of Income Tax is invalid for actions taken beyond three years under Section 151(ii) of the Income-tax Act, 1961; accordingly the notice dated 7 April 2022 under Section 148 and the order dated 7 April 2022 under Section 148A(d) are quashed and set aside.

Final Conclusion: The petition is allowed and the impugned notice and order dated 7 April 2022 are quashed and set aside; all other rights and contentions are kept open.

Ratio Decidendi: Where statutory action for reopening beyond the three-year period requires sanction by a specified higher authority under Section 151(ii) of the Income-tax Act, 1961, a sanction granted by a different authority (here PCIT) is invalid and renders consequential notices and orders made thereunder void.

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