Income tax reassessment notice issued after three years without Pr. CCIT sanction u/s151, reassessment quashed as void

Reopening of assessment beyond three years was challenged on the ground of invalid sanction under s.151. The ITAT held that, for issuance of notice under s.148 after three years, statutory approval must be granted by the Pr. CCIT, not the PCIT, and any sanction by the wrong authority is a jurisdictional defect. Since the approval in the case was accorded by the PCIT, the notice under s.148 was void ab initio, rendering the consequent reassessment and the first appellate order unsustainable. The notice, reassessment, and appellate order were quashed and the appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the reassessment initiation for assessment year 2015-16 was invalid because the notice issued under section 148 was barred by limitation under section 149, rendering the consequent reassessment and the appellate order unsustainable.

(ii) Whether the reassessment initiation for assessment year 2016-17 was invalid because the notice issued under section 148 beyond three years was sanctioned by an incompetent authority under section 151, rendering the notice, the consequent reassessment, and the appellate order unsustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Limitation for issuance of notice under section 148 (AY 2015-16)

Legal framework: The Court examined the limitation requirement for issuing a notice under section 148 by reference to section 149, and applied the Supreme Court's determination on how limitation operates for notices issued in the relevant period (including the effect of treatment of certain notices as section 148A(b) show-cause notices and the corresponding computation of remaining/surviving time available to issue a valid notice under the new regime).

Interpretation and reasoning: The Court found that for the relevant assessment year, the impugned notice under section 148 dated 30.06.2021 fell beyond the permissible period, and that the Supreme Court's final ruling governing such time-bar objections controlled the outcome. The revenue's reliance on the earlier Supreme Court decision concerning the treatment of certain notices was not accepted as overriding the later and final decision on limitation, and the revenue could not controvert that the notice exceeded the allowable time.

Conclusions: The notice under section 148 for AY 2015-16 was held time-barred. Consequently, the reassessment proceedings and the appellate order were held bad in law and were quashed. The revenue's appeal on merits became academic and was not adjudicated.

Issue (ii): Validity of sanction under section 151 for notice under section 148 issued beyond three years (AY 2016-17)

Legal framework: The Court applied section 151, which prescribes the "specified authority" whose prior approval is mandatory for issuance of a notice under section 148/148A. It specifically applied the statutory distinction that where more than three years have elapsed from the end of the relevant assessment year, sanction must be granted by the higher specified authority (Principal Chief Commissioner-level), not by the Principal Commissioner-level authority.

Interpretation and reasoning: The Court examined the notice itself, noted that it recorded prior approval by the Principal Commissioner dated 25.06.2022 for issuance of the notice dated 29.06.2022, and accepted the contention that the case fell beyond three years. On that basis, the Court held that approval by the Principal Commissioner was not legally competent under section 151 for such a notice. The revenue did not controvert the factual position or advance an argument validating the sanction.

Conclusions: The notice under section 148 for AY 2016-17 was held bad in law for want of sanction by the competent specified authority. Consequently, the reassessment proceedings and the appellate order were quashed. The revenue's appeal was dismissed as academic without adjudicating the other issues.

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