2025 (8) TMI 454 - HC - Income Tax

Reopening Notice Beyond Four Years Invalid Without Joint Commissioner's Approval Under Section 148

Prabhakar Nerulkar Versus Principal Commissioner of Income Tax, Panaji, National Faceless Assessment Centre, Delhi, Income-tax Officer, Ward 2 (1), Panaji, The Union of India.

Prabhakar Nerulkar Versus Principal Commissioner of Income Tax, Panaji, National Faceless Assessment Centre, Delhi, Income-tax Officer, Ward 2 (1), ... ISSUES: Whether the notice under Section 148 of the Income Tax Act, 1961, issued after expiry of four years from the end of the relevant assessment year, was validly issued with the requisite prior approval under Section 151 of the Act.Whether the satisfaction for issuance of notice under Section 148 after four years must be that of the Joint Commissioner or the Principal Commissioner, as per the provisions of Section 151(1) and (2) of the Income Tax Act.Whether the procedural requirements under Section 151, as amended by the Finance Act, 2015 and subsequent amendments including the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA, 2020), have been complied with in the issuance of the notice and consequential assessment orders.Whether the reassessment proceedings initiated under the old regime provisions of Sections 147 to 151 of the Income Tax Act after 01.04.2021 are valid, or whether the new regime provisions apply.Whether the consequential assessment order under Section 147 and the order under Section 264 of the Income Tax Act are sustainable in the absence of valid notice under Section 148. RULINGS / HOLDINGS: The notice under Section 148 issued on 31.03.2021 for AY 2015-16 is liable to be quashed and set aside as it was issued without obtaining the satisfaction of the Joint Commissioner, which is mandatory under Section 151(2) of the Income Tax Act for notices issued after four years but before six years from the end of the relevant assessment year.Section 151(2) mandates that for issuance of notice after expiry of four years but within six years, the satisfaction must be of the Joint Commissioner, and not the Principal Commissioner or Commissioner; the satisfaction of the PCIT alone is insufficient and cannot substitute the satisfaction required of the Joint Commissioner.The reassessment proceedings for AY 2015-16 fall under the old regime as the four-year period expired between 20.03.2020 and 31.03.2021, prior to the new regime's commencement on 01.04.2021; hence, the approval must comply with the old regime's requirements.The procedural safeguards under Section 151 are designed to prevent harassment through mechanical reopening of assessments and must be strictly followed; failure to obtain sanction from the correct specified authority renders the notice and consequent assessment invalid.Consequently, the assessment order passed under Section 147 and the order under Section 264 of the Income Tax Act are also liable to be quashed as they flow from the invalid notice under Section 148. RATIONALE: The Court applied the statutory framework of the Income Tax Act, 1961, particularly Sections 148, 149, 151, and 148A, as amended by the Finance Act, 2015, the Finance (No. 2) Act, 2024, and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.The Court relied on the interpretation of Section 151, which differentiates the specified authority for sanction based on the time elapsed since the end of the relevant assessment year: the Joint Commissioner's satisfaction is required for notices issued after four years but within six years under the old regime, while the Principal Commissioner's satisfaction is required after six years.The Court referred to authoritative precedents emphasizing strict compliance with the statutory mandate that the satisfaction for sanction must be of the specified authority alone, rejecting any delegation or substitution by a higher authority.The Court considered the impact of the TOLA Act, 2020, and the Apex Court's decision in Union of India v. Rajeev Bansal, which clarified the applicability of old and new reassessment regimes and the corresponding time limits and sanctioning authorities.The Court noted that the reassessment notice was issued after the four-year period expired but before the new regime's commencement, thus governed by the old regime, requiring sanction from the Joint Commissioner, which was not obtained.No dissenting or concurring opinions were recorded.