Reassessment u/s 147 quashed for lack of valid s.151 approval; TOLA cannot change sanctioning authority

ITAT Delhi-AT held that the reassessment initiated u/s 147 was invalid as the mandatory approval u/s 151 was obtained from the PCIT instead of the competent authority, i.e., the PCCIT, because the reopening was beyond three years from the end of the relevant assessment year. The Tribunal followed HC rulings that provisions of TOLA do not alter the identification of the specified sanctioning authority under s.151. As the sanction was undisputedly granted only by the PCIT, the reassessment proceedings were vitiated in law. The reassessment was quashed and the assessee's appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether reassessment proceedings initiated under section 147 for Assessment Year 2017-18, where the notice under section 148 was issued beyond three years from the end of the relevant assessment year, were vitiated due to sanction under section 151 having been obtained from the Principal Commissioner of Income Tax instead of the Principal Chief Commissioner of Income Tax.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of reassessment where sanction under section 151 was accorded by PCIT instead of PCCIT for a notice issued beyond three years

(a) Legal framework (as discussed)

2.1 The Court examined section 147 relating to reopening of assessment and section 151 prescribing the competent authority for granting sanction to issue notice under section 148. For notices issued beyond three years from the end of the relevant assessment year, the specified sanctioning authority under section 151 was the Principal Chief Commissioner of Income Tax.

2.2 The Court referred to and relied upon the decision of the jurisdictional High Court in "Kids Dream International Private Limited vs ACIT", which, in turn, had followed the earlier decision in "Abhinav Jindal HUF vs Commissioner of Income Tax and Others". The High Court had clarified that the Taxation & Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) has no bearing on the identification of the competent authority under section 151 for granting sanction.

(b) Interpretation and reasoning

2.3 It was undisputed on record that for Assessment Year 2017-18 the reassessment proceedings were initiated after the expiry of three years from the end of the relevant assessment year.

2.4 The sanction for issuance of notice under section 148 was, however, obtained from the Principal Commissioner of Income Tax, as evident from the order under section 148 dated 21.07.2022.

2.5 Applying the law enunciated by the jurisdictional High Court in "Kids Dream International Private Limited vs ACIT", the Court held that where reassessment is initiated beyond three years from the end of the relevant assessment year, sanction must mandatorily be accorded by the Principal Chief Commissioner of Income Tax. Sanction granted by the Principal Commissioner of Income Tax is not in conformity with section 151 and, therefore, invalid.

2.6 Following the High Court's finding that TOLA does not alter or affect the determination of the competent sanctioning authority under section 151, the Court concluded that the defect in sanction was jurisdictional and went to the root of the validity of the reassessment proceedings.

(c) Conclusions

2.7 The approval obtained from the Principal Commissioner of Income Tax instead of the Principal Chief Commissioner of Income Tax for issuing notice under section 148 beyond three years was held to be invalid.

2.8 Consequently, the entire reassessment proceedings were held to be vitiated for lack of proper sanction under section 151, and the reassessment was quashed.

2.9 In view of the quashing of reassessment on this jurisdictional ground, the remaining grounds on law and on facts were not adjudicated and were left open.

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