Reassessment quashed for invalid s.151 sanction; notice under s.148 issued beyond three-year limit, appeal allowed

ITAT Delhi allowed the assessee's appeal, holding the reassessment proceedings invalid due to lack of proper sanction under s.151. The order under s.148A(d) was passed on 29.07.2022 and notice u/s 148 issued on 30.07.2022, i.e., beyond three years from the end of the relevant assessment year. In such cases, statutory approval was required from the PCCIT, but sanction was erroneously obtained from the PCIT. Treating this jurisdictional defect as fatal, ITAT quashed the reassessment proceedings and allowed the additional ground challenging reopening.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Validity of reassessment proceedings under sections 147/148 where the mandatory sanction under section 151, for a notice issued beyond three years from the end of the relevant assessment year, was granted by the Principal Commissioner of Income Tax instead of the Principal Chief Commissioner of Income Tax.

1.2 Necessity to adjudicate other jurisdictional, natural justice, and merits-related grounds when reassessment itself is held invalid for want of proper sanction under section 151.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of reassessment where sanction under section 151 was granted by PCIT instead of PCCIT for reopening beyond three years

Legal framework (as discussed)

2.1 The reassessment proceedings were initiated under sections 147/148 of the Income-tax Act, with an order under section 148A(d), and the requirement of prior sanction under section 151 for issuance of notice under section 148 was examined.

2.2 The Court relied on the ratio of the jurisdictional High Court in decisions examining section 151 in the context of reassessment beyond three years, including the interpretation that the Taxation & Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) does not alter the identification of the "competent authority" under section 151 for granting sanction.

Interpretation and reasoning

2.3 The notice under section 148 for the relevant assessment year was issued beyond three years from the end of the assessment year; therefore, in terms of section 151, sanction ought to have been obtained from the Principal Chief Commissioner of Income Tax, being the competent authority for such cases.

2.4 The record showed that sanction had been accorded only by the Principal Commissioner of Income Tax and not by the Principal Chief Commissioner of Income Tax.

2.5 The Tribunal, following the jurisdictional High Court's decision in a case where it was expressly held that: (a) TOLA has no bearing on determining the competent authority under section 151; and (b) sanction by the PCIT for reassessment beyond three years does not satisfy the statutory requirement when sanction of PCCIT is mandated, held that the same legal position squarely applied.

2.6 A further jurisdictional High Court decision was noted as having taken a similar view on invalidity of reassessment where the approval under section 151 was granted by the wrong authority.

2.7 On this basis, the Tribunal held that obtaining sanction from an authority not prescribed by section 151 for the given time frame is a jurisdictional defect, rendering the entire reassessment process invalid and vitiating the assumption of jurisdiction under section 147.

Conclusions

2.8 The sanction under section 151 having been granted by the Principal Commissioner instead of the Principal Chief Commissioner, the reassessment proceedings initiated under sections 147/148 were held invalid and were quashed.

2.9 The additional ground challenging the assumption of jurisdiction on this specific facet of section 151 approval was allowed.

Issue 2: Need to examine remaining grounds on jurisdiction, natural justice, and merits

Interpretation and reasoning

2.10 Once the reassessment proceedings themselves were quashed on the foundational jurisdictional defect of improper sanction under section 151, the Tribunal considered that adjudication of other grounds-relating to other aspects of jurisdiction under section 147, alleged violation of principles of natural justice, and merits of the additions-was rendered academic.

Conclusions

2.11 In view of quashing of the reassessment proceedings, the Tribunal declined to examine or decide the remaining grounds on law and facts, and expressly left them open.

2.12 The appeal was allowed on the basis of the allowed additional ground concerning invalid approval under section 151.

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