Section 148 notice quashed for failure to obtain prior approval under amended Section 151(ii); reassessment dismissed

ITAT, Delhi (AT) held the notice issued under section 148 was invalid for failure to obtain the prior approval required by section 151(ii) of the amended regime. Following higher-court precedent, the tribunal quashed the section 148 notice dated 30.07.2022 for AY 2017-18 and set aside the reassessment order based on that notice. Appeal by the assessee allowed; reassessment proceedings dismissed for non-compliance with statutory approval requirement.

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ISSUES PRESENTED AND CONSIDERED

1. Whether a notice issued under section 148 of the Income-tax Act, 1961 after 01.04.2021 is valid when issued pursuant to an order under section 148A(d) but without obtaining prior approval of the specified authority as required by section 151( ii ) of the Act under the amended reassessment regime.

2. Whether a reassessment order passed pursuant to a section 148 notice that is non-compliant with the prior-approval requirement of section 151(ii) is liable to be quashed.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of section 148 notice issued under the amended reassessment regime without prescribed prior approval

Legal framework: The Finance Act, 2021 introduced amendments to the reassessment procedure effective 01.04.2021, including a requirement that, in the new regime, issuance of a notice under section 148 after initiation under section 148A requires prior approval of a specified authority under section 151 (in particular, sub-provision identifying the approving authority such as PCCIT/PDGIT or CCIT).

Precedent treatment: The Tribunal's reasoning relies on subsequent decisions of the Supreme Court interpreting the new reassessment regime, which establish that notices issued under the new regime must conform to the procedural safeguards introduced by the Finance Act, 2021, including the prior-approval requirement; High Court authority has held that non-compliance with section 151(ii) renders the notice bad in law.

Interpretation and reasoning: The admitted facts show an original notice dated prior to the Supreme Court's decision on the new regime and, following judicial direction, the Assessing Officer issued an order under section 148A(d) and thereafter issued a fresh notice under section 148. The Assessing Officer, however, obtained approval only from a PCIT rather than the specified authority identified by section 151(ii) (i.e., PCCIT/PDGIT or CCIT as applicable). The Tribunal interprets the combined statutory scheme and controlling judicial pronouncements to mean that once a notice is issued under the amended regime, the procedural step of obtaining prior approval from the specified authority is mandatory and jurisdictional. A notice issued without such prescribed prior approval is therefore in violation of section 151(ii) and cannot be treated as a valid notice under section 148.

Ratio vs. Obiter: Ratio - The compulsory nature of prior approval under section 151(ii) for issuance of a section 148 notice under the amended regime and the consequent invalidity of a notice issued without that approval constitute the dispositive legal holding. Obiter - Observations that other grounds raised in the appeal remain academic because the notice has been quashed are incidental and do not form part of the core holding on statutory compliance.

Conclusion on Issue 1: The section 148 notice dated 30.07.2022 is invalid for non-compliance with the mandatory prior-approval requirement of section 151(ii) under the amended reassessment regime and is therefore liable to be quashed.

Issue 2 - Consequence of invalid notice: quashing of reassessment order and effect on merit issues

Legal framework: A valid initiating notice is a jurisdictional precondition for reassessment proceedings; absence of jurisdictional compliance vitiates subsequent orders emanating from that notice.

Precedent treatment: Prior court authority establishes that a reassessment order founded on an invalid notice must be quashed, and that merits of assessment become academic where the initiating notice is set aside.

Interpretation and reasoning: Having concluded that the notice under section 148 was invalid for failure to comply with section 151(ii), the Tribunal logically extends the consequence to quash the reassessment order that arose from that notice. The Tribunal declines to adjudicate merits-based grounds raised by the assessee because those grounds are rendered academic by the quashing of the notice and consequent annulment of the reassessment.

Ratio vs. Obiter: Ratio - Quashing the reassessment order that emanates from a jurisdictionally infirm section 148 notice is a necessary legal consequence and forms part of the binding decision. Obiter - Any comment on merits of the assessment or separate adjudication on other grounds is obiter and expressly withheld as unnecessary.

Conclusion on Issue 2: The reassessment order based on the impugned section 148 notice is quashed; ancillary or substantive grounds raised in the appeal need not be decided as they have become academic and infructuous.

Cross-reference and cumulative conclusion

Where a section 148 notice is issued under the amended reassessment regime (post-Finance Act, 2021 changes) the procedural requirement of prior approval under section 151(ii) is jurisdictional; failure to obtain the specified prior approval renders the notice invalid and mandates quashing of both the notice and any reassessment order flowing therefrom. Consequently, once the notice is quashed, further consideration of merits-based objections becomes unnecessary.

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