Section 148 Reassessment Notices Must Follow Strict Time Limits and Proper Approval Under Section 151

The ITAT Mumbai held that reassessment notices issued under Section 148 must comply with the time limits under the Income Tax Act read with TOLA, as affirmed by the SC in Union of India v. Rajeev Bansal. A notice issued beyond the surviving time limit is time-barred. Further, the AO's notice under Section 148 dated 29/07/2022 was invalid as the prior approval required under amended Section 151 must be obtained from the PCCIT, not the PCIT. Since the approval was from the PCIT, the notice was held invalid, rendering the subsequent assessment order liable to be quashed.

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ISSUES:

Whether the reopening notice issued under Section 148 of the Income Tax Act for AY 2015-16 is valid in light of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the Supreme Court's decision in Union of India v. Rajeev Bansal.Whether the prior approval for issuance of notice under Section 148 read with Section 148A(d) of the Income Tax Act was validly obtained from the appropriate authority as required under Section 151 of the Income Tax Act (new regime effective from 1 April 2021).Whether the procedural requirements under Section 151 of the Income Tax Act (new regime) and TOLA have been complied with for notices issued after 1 April 2021.Whether the assessment orders consequent to invalid reopening notices are liable to be quashed.

RULINGS / HOLDINGS:

Regarding AY 2015-16, the reopening notice issued on 30/04/2022 is invalid as per the Supreme Court's decision in Union of India v. Rajeev Bansal, where the Revenue conceded that "for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA."The prior approval for issuance of notice under Section 148 of the Act dated 29/07/2022 was obtained from PCIT instead of the higher authority PCCIT as mandated by Section 151(ii) of the new regime; therefore, the notice is invalid and the consequent assessment order is liable to be quashed.The Supreme Court's ruling in Ashish Agarwal clarifies that while approval under Section 148A(a) and 148A(b) can be waived, the approval under Section 148A(d) and Section 148 must be obtained from the specified authority under Section 151 of the new regime.Non-compliance with the strict time limits and authority requirements under Section 151 of the new regime affects the jurisdiction of the assessing officer to issue notices under Section 148.In light of the above, the impugned notices and resultant assessment orders are set aside, and other issues raised remain open.

RATIONALE:

The Court applied the statutory framework of the Income Tax Act, specifically Sections 148, 148A, 149, and 151, as amended by the Finance Act 2021, and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), which provides time-limit relaxations due to COVID-19.The Supreme Court's authoritative decisions in Union of India v. Rajeev Bansal, Deepak Steel and Power Limited v. CBDT, and ACIT v. Nehal Ashit Shah were relied upon to interpret the applicability of TOLA and the mandatory nature of prior approval under Section 151 of the new regime.The Court recognized the concession by the Revenue in the Supreme Court that reopening notices issued after 1 April 2021 for AY 2015-16 do not comply with TOLA's prescribed period, rendering such notices invalid.The Court emphasized that Section 151 imposes a jurisdictional condition requiring prior approval from the specified higher authority depending on the time elapsed since the end of the relevant assessment year, and that non-compliance invalidates the issuance of notices under Section 148.The Court noted the procedural relief granted by the Supreme Court in Ashish Agarwal, which waived certain prior approval requirements under Sections 148A(a) and 148A(b), but upheld the necessity of approval under Section 148A(d) and Section 148 under the new regime.No doctrinal shift was made; rather, the Court adhered strictly to the Supreme Court's authoritative pronouncements and statutory provisions governing reopening of assessments and procedural safeguards for the assessee.

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