Reopening of income tax assessment: sanction granted by wrong authority invalidates notice and reassessment, relief to assessee.

Reopening an assessment hinges on prior sanction by the competent authority designated under the substituted sanction regime; where more than three years have elapsed from the end of the relevant assessment year the higher specified authority must grant approval, and lower-authority sanction is jurisdictionally ineffective. The notice issued after expiry of three years was approved by the lower authority rather than the higher authority required for that period, which vitiates jurisdiction to issue the Section 148 notice and renders the consequent reassessment and penalty orders invalid and therefore quashed in favour of the assessee.

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Issues: Whether the order under Section 148A(d) and the notice under Section 148 dated 30.07.2022 (for A.Y. 2016-17), which were issued after more than three years from the end of the relevant assessment year, are valid when prior approval was obtained from an authority specified under Section 151(i) instead of the higher authority mandated by Section 151(ii).

Analysis: Under the substituted re-assessment regime introduced by the Finance Act, 2021, prior approval of the specified authority is a precondition at the stage of passing an order under Section 148A(d) and issuing a notice under Section 148. Section 151(ii) prescribes a higher level of authority to grant sanction when more than three years have elapsed from the end of the relevant assessment year. The time-limit interplay with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) extends the period for grant of sanction only where the three-year expiry date falls between 20 March 2020 and 31 March 2021; otherwise the higher authority under Section 151(ii) is mandatorily required if notices are issued after three years. Where approval is obtained from an authority not competent under Section 151(ii) for notices issued after three years, the assessing officer lacks jurisdiction to issue the Section 148 notice, and consequent proceedings are vitiated.

Conclusion: The order under Section 148A(d) dated 30.07.2022 and the notice under Section 148 dated 30.07.2022 are invalid for non-compliance with Section 151(ii). Consequentially, the reassessment order dated 30.10.2025 under Section 147 and the penalty notice dated 07.11.2025 under Section 274 read with Section 271(1)(c) are quashed and set aside.

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