2025 (10) TMI 1154 - AT - Income Tax

Reopening under s.148 void where approval came from PCIT-7 not required authorities under s.151(ii); notice u/s148A(d) invalid

ITAT DELHI - AT set aside reassessment proceedings for the assessment year where reopening occurred after more than three years, holding the notice u/s ... Validity of Reassessment proceedings - as alleged approval u/s 151 as not legally obtained from the competent authority - reopening was made for A.Y which is beyond three years - HELD THAT:- We find in the instant case that the initial notice u/s 148 for AY 2014-15 was issued on 16.04.2021 under the amended provisions. The admitted fact is that the reassessment proceedings relates to A.Y 2014-15 and on the basis of the order u/s 148A(d) dated 25.07.2022, the notice u/s 148 was issued on 25.07.2022 with the prior approval of PCIT-7, Delhi. We find that the issuance of notice u/s 148 under the amended provisions, have been initiated after lapse of more than 3 years, therefore the provision of section 151(ii) will kick in. The specified authority to grant approval for reopening the assessment, passing order u/s 148A(d) and issuing notice u/s 148, where more than three years have lapsed from the end of the relevant assessment year, would be PCCIT/CCIT. Notice in the present appeal has been issued with the approval of the PCIT-7 Delhi which is in violation of the provisions of section 151(ii) r.w explanation to section 148A. The issue of legality of reopening of assessment under the amended provisions of section 148, 148A, 149 and 151 has been answered in Ashok Makhija Vs. UOI [2024 (5) TMI 447 - DELHI HIGH COURT] held, that as per section 151 and considering the fact that the reopening of the case was occurring after a lapse of more than three years, the appropriate authority for issuance of the notice under sections 148 and 148A(b) of the Act should have been either the Principal Chief Commissioner or Principal Director General, or in their absence, the Chief Commissioner or Director General, instead of the Principal Commissioner of Income-tax, who did not fall within the specified authorities outlined in section 151. No hesitation in holding that the order u/s 148A(d) and notice u/s 148 is bad in law and deserves to be quashed as void ab initio. Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether approval for issuance of notice under section 148 (as amended) and for passing order under section 148A(d), where more than three years have lapsed from the end of the relevant assessment year, must be granted by the authorities specified in section 151(ii) (PCCIT/CCIT or their equivalents), and whether approval by a Principal Commissioner of Income-tax (PCIT) satisfies section 151(ii). 2. Whether a notice issued under section 148 (as amended) with prior approval from an authority not falling within section 151(ii) is invalid and void ab initio. 3. Ancillary raised point: whether the assessee's request to cross-examine the revenue's witness (statement recorded without the assessee present) warranted consideration; and if so, whether failure to grant that opportunity affected the validity of proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Competent authority for approval where reopening occurs after more than three years (Legal framework) Legal framework: The amended provisions governing reassessment (sections 148, 148A, 149 and 151) prescribe that where reassessment is initiated after the expiry of three years from the end of the relevant assessment year, prior approval for issuance of notice under section 148 and for passing of order under section 148A(d) must be obtained from the specified higher authorities enumerated in section 151(ii) (PCCIT/CCIT or their statutory equivalents). Precedent Treatment: The Tribunal relied on the authoritative decision of the jurisdictional High Court which interpreted section 151 to require approval by the higher authorities named in section 151(ii) where more than three years have elapsed; approval by the Principal Commissioner (PCIT) was held to be outside the list of competent authorities in that context. Interpretation and reasoning: The Tribunal found that, as the reassessment proceedings in question were initiated after more than three years for the relevant assessment year, section 151(ii) applied. The notice and order relied upon by the Revenue bore approval of PCIT-7, Delhi. Because PCIT does not fall within the specific authorities enumerated in section 151(ii), the approval did not comply with the statutory prescription. The Tribunal reasoned that statutory language is mandatory for competence to approve such reopening after three years; non-compliance renders the action a nullity. Ratio vs. Obiter: Ratio - The mandatory character of section 151(ii) in respect of the identity of the approving authority for reopenings after three years is treated as the decisive legal rule applied to quash the proceedings. The reliance on the High Court decision is adopted as binding precedent on the point. Conclusion: The approval by PCIT-7 was not a competent approval under section 151(ii) where more than three years had lapsed; therefore, the approval was invalid. Issue 2 - Consequence of invalid approval: validity of notice under section 148 (Legal framework) Legal framework: A statutory requirement as to competence for grant of prior approval is condition precedent to the validity of subsequent steps (order under section 148A(d) and notice under section 148). Non-compliance with mandatory statutory approval undermines the vires of the notice/assessment proceedings initiated on that basis. Precedent Treatment: The Tribunal adopted the High Court's holding that notices issued with approval from an authority not falling within section 151(ii) must be quashed as they are beyond the powers conferred by the statute. Interpretation and reasoning: Given the mandatory nature of section 151(ii), the Tribunal held that order under section 148A(d) dated 25.07.2022 and the consequent notice under section 148 dated 25.07.2022 (issued with approval of PCIT-7) were invalid. The Tribunal treated the defect as jurisdictional - the authority purported to assume jurisdiction without statutorily required approval - and therefore the notice and order are void ab initio. Ratio vs. Obiter: Ratio - A notice under section 148 (as amended) issued after the three-year period with approval from an authority not specified under section 151(ii) is void ab initio; such jurisdictional defect must be quashed without adjudication on merits. Conclusion: The order under section 148A(d) and the notice under section 148 were quashed as void ab initio for lack of competent approval; reassessment proceedings could not stand and therefore merits of the assessment were not examined. Issue 3 - Request to cross-examine revenue's witness (Legal framework) Legal framework: Principles of natural justice and procedural safeguards (including opportunity to cross-examine witnesses whose statements are relied upon) are relevant to fairness of adjudicatory process; however, where proceedings are vitiated for want of jurisdiction, courts/tribunals may decline to examine procedural prejudice. Precedent Treatment: The Tribunal noted the factual claim that the assessee sought opportunity to cross-examine a revenue witness whose statement was recorded in the assessee's absence, but the Tribunal did not engage in detailed precedent analysis on this point because the jurisdictional defect was dispositive. Interpretation and reasoning: The Tribunal observed the allegation but declined to decide the cross-examination grievance on merits, as the jurisdictional infirmity (invalid approval under section 151(ii)) rendered further inquiry unnecessary. The Tribunal expressly refrained from adjudicating the merits once it concluded that assumption of jurisdiction itself was bad in law. Ratio vs. Obiter: Obiter (insofar as factual observation) - The failure to grant opportunity to cross-examine was noted but not decided; the Tribunal's decision to quash proceedings rested on jurisdictional grounds and not on any finding concerning breach of natural justice. Conclusion: The Tribunal did not adjudicate the cross-examination complaint because the proceedings were quashed on jurisdictional grounds; no decision was made on whether denial of cross-examination constituted a separate ground for invalidation. Overall Conclusion The Tribunal held that where reassessment proceedings are initiated after expiry of more than three years from the end of the relevant assessment year, the prior approval required by section 151(ii) must be granted by the authorities specified therein; approval by a Principal Commissioner (PCIT) is not competent. Consequently, the order under section 148A(d) and the notice under section 148 issued with approval of PCIT-7 were void ab initio and were quashed; the Tribunal did not proceed to determine merits or the cross-examination grievance in view of this jurisdictional defect.