Reopening of income-tax assessment requires material showing escapement over fifty lakh assets; defective sanction voids reassessment

Reopening of income-tax assessment beyond three years requires possession of material indicating escapement of income represented as assets exceeding fifty lakh rupees; absence of such material renders a notice under the extended ten-year window unsustainable, resulting in invalid reassessment. Where reassessment proceedings fall outside the three-year period, sanction must be obtained from the competent higher authority specified for such cases; sanction from an incorrect authority vitiates initiation of reassessment and any consequent order, leading to relief for the taxpayer.

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Issues: Whether the reassessment proceedings and notices issued under sections 148/148A beyond three years from the end of the relevant assessment year are valid where (a) the escaped income is below Rs. 50 lakhs and (b) prior sanction was obtained from an authority not specified under section 151(ii) of the Income-tax Act, 1961.

Analysis: The amended framework governing time limits and prior approval for issuance of reassessment notices (including section 149(1)(b) and section 151(ii)) must be applied to notices issued after 1 April 2021. Under that framework, notices issued beyond three years but on grounds of escapement require either escaped income exceeding the statutory monetary threshold or valid prior sanction from the authorities specified in section 151(ii). Where escaped income is below the threshold prescribed for issuance beyond three years, and where sanction for reopening was obtained from an authority not specified in section 151(ii), the statutory conditions for valid issuance of a notice beyond three years are not satisfied. Following established authority on the scope of TOLA and the statutory sanction requirement, a reopening initiated on such a basis is jurisdictionally defective and vitiates ensuing reassessment proceedings.

Conclusion: The reassessment proceedings and the reassessment order are invalid and the appeal is allowed in favour of the assessee.

Ratio Decidendi: A notice under section 148 issued beyond three years is invalid unless (i) escaped income exceeds the statutory monetary threshold permitting issuance within the extended period under section 149(1)(b), or (ii) prior sanction for reopening is obtained from the specific authorities enumerated in section 151(ii); failure to satisfy either requirement renders the reassessment jurisdictionally invalid.

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