Section 148 notice invalid due to improper sanction from Joint Commissioner instead of required higher authority

The ITAT PUNE held that a notice u/s. 148 issued for A.Y. 2007-08 on 28.03.2014 was invalid due to improper sanction. Since more than four years had elapsed from the relevant assessment year, section 151(1) mandated prior sanction from Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner. However, the AO obtained sanction only from Joint Commissioner, which was insufficient. The tribunal ruled that statutory requirements must be strictly followed, and sanction from wrong authority vitiates the notice. This defect was held non-curable under section 292B. Decision favored the assessee.

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Issues: Validity of approval obtained u/s. 151(1) for notice u/s. 148 of the Income-tax Act, 1961

Analysis:
The appeal pertains to an order of the National Faceless Appeal Centre for the assessment year 2007-08. The appellant, a construction company, filed a return of income declaring Nil income, which was initially accepted by the assessing officer. Subsequently, based on information from search operations, the AO issued a notice u/s. 148 for escaped income assessment. The appellant challenged the validity of the approval u/s. 151 and the addition made. The CIT(A)/NFAC upheld the approval's validity and confirmed the addition, citing the decision in Pr.CIT vs. NRA Iron & Steel Pvt. Ltd.

The appellant contended that the approval obtained from the Joint Commissioner of Income-tax was invalid, as per section 151(1) requirements. The AO had not sought approval from the specified authorities as mandated by law. The appellant relied on the Hon'ble Bombay High Court's decision in Thirdware Solutions Ltd. Vs. DCIT to support their argument.

The Tribunal noted that the notice u/s. 148 was issued after the four-year period from the relevant assessment year had elapsed, necessitating approval from specific authorities as per section 151. The approval obtained from the Joint Commissioner of Income-tax was not in compliance with the statutory requirement. Citing various legal precedents, the Tribunal emphasized the importance of strict adherence to statutory provisions when exercising powers under the law.

The Tribunal held that obtaining approval from the wrong authority rendered the notice u/s. 148 invalid. It rejected the argument that the defect was curable under section 292B of the Act, as held by the Hon'ble Rajasthan High Court in Dhadda Exports and ITO and Another. Consequently, the order of the CIT(A) was deemed illegal and set aside, leading to the quashing of the reassessment proceedings.

In conclusion, the Tribunal allowed the appeal filed by the assessee, highlighting the critical importance of obtaining proper approvals as mandated by law for initiating assessment proceedings.

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