Reopening assessment beyond three years under Section 147 needs Chief Commissioner's approval under Section 151(2)

The ITAT Delhi held that reopening an assessment under section 147 beyond three years requires approval from the Pr. Chief Commissioner or Chief Commissioner under section 151(2). Approval from the Pr. CIT was invalid, rendering the notice issued under section 148 without proper authority and therefore bad in law. The Tribunal relied on the Supreme Court ruling in Rajiv Bansal and subsequent ITAT Mumbai decisions, confirming that approval from the correct authority is mandatory before issuing such notices. The assessee's appeal was allowed due to the defective approval.

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ISSUES:

Validity of reopening assessment under section 147 of the Income Tax Act without valid notice under section 148.Jurisdictional authority required for sanction of reopening notice under amended section 151(2) of the Income Tax Act when notice is issued beyond three years from the end of the relevant assessment year.Legal sustainability of proceedings initiated against a deceased person.Compliance with principles of natural justice, specifically regarding communication of reasons for reopening assessment.Validity of addition of undisclosed expenditure based on credit card transactions claimed as corporate expenses reimbursed by a related company.Denial of opportunity to present evidence and rebut findings by the assessing officer.

RULINGS / HOLDINGS:

The notice issued under section 148 dated 25.07.2022 was held to be bad in law and void ab initio because prior approval was obtained from the Principal Commissioner of Income Tax instead of the Principal Chief Commissioner or Chief Commissioner as mandated by section 151(2) for notices issued beyond three years from the end of the relevant assessment year.The consequent reassessment made under section 143(3) read with section 147 of the Act pursuant to the invalid notice was also held to be bad in law and void ab initio and was quashed.Since the reassessment was quashed on the jurisdictional ground of invalid sanction and notice, other grounds raised by the assessee were not adjudicated as they were considered academic at this stage.

RATIONALE:

The Court applied the statutory framework of section 151 of the Income Tax Act, 1961, as amended, which prescribes the specified authority from whom prior approval must be obtained before issuing a notice under section 148 for reopening assessment. The authority varies depending on whether the notice is issued within or beyond three years from the end of the relevant assessment year.The Court relied on the decision of the Supreme Court in Union of India vs. Rajiv Bansal, which clarified the time limits and corresponding authorities for sanction under section 151, emphasizing that sanction from the Principal Chief Commissioner or Chief Commissioner is mandatory for notices issued after three years.The Court also considered the impact of the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA), which extends time limits for compliance falling between 20 March 2020 and 31 March 2021, but found it inapplicable to the facts since the notice was issued in 2022.The Court noted the procedural changes introduced by the Finance Act, 2021, including the insertion of section 148A, and the Supreme Court's directions in Union of India vs. Ashish Agarwal regarding waiver of prior approval requirements under sections 148A(a) and 148A(b), but reaffirmed that prior approval under section 151 remains a jurisdictional precondition for issuing a notice under section 148 beyond three years.The Court referenced a coordinate bench decision which held similarly that approval from the appropriate authority under amended section 151(2) is mandatory and non-compliance renders the notice and reassessment invalid.

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