2025 (10) TMI 643 - AT - Income Tax

Reopening notice u/s 148 held invalid for AY 2017-18 due to missing s.151(ii) sanction and late issuance

ITAT (Delhi) held the notice issued u/s 148 for AY 2017-18 invalid because the reopening lacked the requisite sanction: approval was not granted by the ... Reopening of assessment u/s 147 - sanction by specified authority i.e. Principal Chief Commissioner of Income Tax as mandated u/s 151(ii) - HELD THAT:- We observed that the Notice dated 29.07.2022 issued u/s 148 is not a valid notice, as the approval was not granted by the specified authority i.e. Principal Chief Commissioner of Income Tax as mandated u/s 151(ii). We further observe that the impugned notice u/s 148 for AY 2017-18 was issued on 29.07.2022, after obtaining the approval Pr.CIT, Delhi i.e. beyond the period of three years from the end of the relevant assessment year and thus, in terms of sec.151(ii) the same was required to be approved by the Principal Chief Commissioner or Principal Director General or where there is no such authority, by Chief Commissioner or Director General. We observe that in the case of the assessee, the said notice u/s 148 was not issued with the prior approval of the Principal Chief Commissioner or any other authority specified u/s 151(ii) of the Act. Appeal of assessee allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice issued under section 148 of the Income-tax Act is valid where it is issued beyond three years from the end of the relevant assessment year without prior approval by the authority specified in section 151(ii) (Principal Chief Commissioner/Principal Director General or, where none, Chief Commissioner/Director General). 2. Whether failure to obtain the specified prior approval under section 151(ii) renders subsequent proceedings (including any action under section 148A and assessment orders) void and liable to be quashed. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of a section 148 notice issued beyond three years without authority specified in section 151(ii) Legal framework: Section 148 authorises issuance of notice for reopening assessment; section 148A prescribes pre-notice procedural safeguards in certain cases; section 151(ii) prescribes that where a notice under section 148 is issued after the period of three years from the end of the relevant assessment year, such notice must be issued with prior approval of the Principal Chief Commissioner or Principal Director General or, where there is no such authority, by the Chief Commissioner or Director General. Precedent treatment: The Tribunal relied on the reasoning adopted by the jurisdictional High Court in a recent decision holding that notices issued after the three-year period without the specified prior approval are not sustainable; that High Court decision in turn relied on earlier authorities addressing the mandatory nature of statutory approval under section 151(ii). Interpretation and reasoning: The Tribunal observed that the impugned notice dated 29.07.2022 was issued after the three-year period and that there was no prior approval by the authority specified in section 151(ii). On this statutory construction, the approval requirement is mandatory for notices issued beyond the three-year threshold; absence of such prior approval means the jurisdictional condition precedent for issuing the notice was not satisfied. The Tribunal treated the statutory scheme and the High Court's reasoning as determinative and followed it. Ratio vs. Obiter: Ratio - The mandatory character of section 151(ii) approval for section 148 notices issued beyond three years is essential; a notice issued without such specified prior approval is invalid. Any observations about related procedural provisions (e.g., distinctions between subsections of section 148A) that do not affect this mandatory approval requirement are obiter. Conclusion: The notice issued under section 148 without prior approval as required by section 151(ii) is invalid. Issue 2 - Consequence of invalid notice: sustainability of subsequent proceedings and assessment Legal framework: An invalid notice under section 148 (for want of required prior approval) vitiates the jurisdictional foundation for further action under the Act, including actions taken pursuant to section 148A and any resultant assessment or demand. Precedent treatment: The Tribunal followed the High Court's pronouncement that where the section 148 notice (and any related order under section 148A) is not sustainable, subsequent proceedings including assessment orders and demands founded on such notice must be set aside. Interpretation and reasoning: Because the initial notice was found to be invalid for lack of mandatory approval, the Tribunal held that subsequent steps (administrative action under section 148A and the assessment order) lacked lawful foundation. The Tribunal applied the principle that jurisdictional defect in the initiating step nullifies downstream proceedings that depend on it. Ratio vs. Obiter: Ratio - An assessment and any demand founded on a section 148 notice that is invalid for want of prescribed prior approval under section 151(ii) cannot be sustained and must be quashed. Any remarks about remittal or further inquiry were not necessary to the holding and therefore obiter. Conclusion: The assessment proceedings founded on the invalid section 148 notice were quashed and the appeal allowed on that ground. Ancillary point - Scope of adjudication where assessment quashed Legal framework & reasoning: Where an assessment is quashed on a pure legal ground (invalidity of notice/defect in jurisdiction), the tribunal may refrain from adjudicating other factual or legal grounds raised by the assessee that were not reached; such grounds remain open for future adjudication if proceedings are lawfully revived. Conclusion: Other grounds raised by the taxpayer were left undecided and kept open because the primary legal issue disposing of the matter was the invalidity of the notice; no determination was made on the merits of those other grounds.