Reopening beyond three years quashed for invalid sanction under amended Section 151(ii); Section 148 notice void ab initio

ITAT Mumbai held that the reopening of assessment for AY 2016-17 beyond three years was invalid due to lack of proper sanction under amended section 151(ii). The AO had obtained approval from the Pr. CIT instead of the Principal Chief Commissioner, Principal Director General, Chief Commissioner, or Director General, as mandated. Consequently, the notice issued under section 148 was held to be without authority of law, rendering the entire reassessment proceedings under section 147 void ab initio. Following its earlier view in a similar matter, the ITAT quashed the notice and reassessment, allowing the assessee's appeal.

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Assessee's appeal concerned reopening of assessment for AY 2016-17 by notice under section 148 dated 30.06.2022. The assessee confined challenge to the "validity of reopening under section 147 and issuance of notice under section 148." The reassessment was initiated beyond three years from the end of the relevant assessment year, attracting the amended regime introduced by Finance Act 2021 with effect from 01.04.2021. Under amended section 151(ii), where reopening is beyond three years, the Assessing Officer must obtain prior "sanction/approval" from the Principal Chief Commissioner, Principal Director General, Chief Commissioner, or Director General. The record showed that approval was taken only from the Principal Commissioner of Income Tax, as recorded in the section 148 notice itself. The Tribunal held such approval to be "invalid," rendering the section 148 notice "without sanction of law" and the ensuing section 147 proceedings "void ab initio." Relying on ACIT v. Manish Financial (ITAT Mumbai), the Tribunal quashed the notice and reassessment; remaining grounds were treated as academic and not adjudicated.

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