2026 (2) TMI 813 - AT - Income Tax

Sanction requirement under Section 151 defeats reassessment notice issued beyond three years without required higher-level approval, invalidating proceedings.

The article addresses validity of a reassessment notice issued under section 148 after the three-year period and explains that the amended procedure ... Validity of reopening of assessment - prior approval of the specified authority u/s 151 of the Act under the new regime -income escaping assessment is less than ₹50,00,000/- - Scope of TOLA in extending time limits for sanction under section 151 HELD THAT:- It is noted that in the new regime, if the income escaping assessment is more than ₹50,00,000/-, a reassessment notice can be issued after the expiry of three years from the end of the relevant assessment year only after obtaining prior approval of the Principal Chief Commissioner or the Principal Director General or the Chief Commissioner or the Director General. It is also noted that if the income escaping assessment is less than ₹50,00,000/-, no reassessment notice can be issued after the expiry of three years, as per section 151(1)(b) of the Act. In the present facts and circumstances of the case, the income alleged to have escaped assessment is ₹10,25,756/- and the notice issued under the new regime is beyond the period of three years. Accordingly, as per section 151(1)(b) of the Act, the notice issued on 30/07/2022 is bad in law. Appropriate authority who could sanction the said notice, issued beyond a period of three years, should have been the Principal Chief Commissioner or the Principal Director General or the Chief Commissioner or the Director General. In the present facts of the case, the said notice has been approved by the Principal Commissioner, which again does not satisfy the condition prescribed under section 151(ii)(b) of the Act. This Tribunal is, thus, of the opinion that non-compliance with the provisions of section 151 renders the notice issued under section 148 of the Act dated 30/07/2022 to be bad in law and, hence, the same deserves to be quashed and set aside. As a consequence, the reassessment proceedings initiated thereafter also become bad in law. Assessee appeal allowed. Issues: Whether the notice issued under section 148 of the Income-tax Act, 1961 dated 30/07/2022 (issued under the new regime) is valid when the alleged escaped income is Rs.10,25,756/- and the notice was issued beyond three years without obtaining sanction from the authority specified under section 151 of the Income-tax Act, 1961.Analysis: The issue engages the scheme of the provisions introduced by the Finance Act, 2021 including section 148A and the linkage to section 151 which prescribes the specified authority to grant prior sanction for issuance of reassessment notices. Under the new regime, if a notice under section 148 is issued after the expiry of three years from the end of the relevant assessment year and the income escaping assessment is less than Rs.50,00,000/-, section 151(1)(b) precludes issuance of such a notice beyond three years. Where more than three years have elapsed, section 151(ii) requires prior sanction from a higher level authority (Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General) for income above the specified threshold. The record shows alleged escaped income of Rs.10,25,756/-, the notice was issued beyond three years, and approval was granted by the Principal Commissioner rather than the higher level authority required under section 151 for notices issued after three years. Reliance on the principles articulated in the reported decision concerning the new regime (including treatment of earlier notices as deemed under section 148A and the requirement to follow section 151 sanctions for orders under section 148A(d) and issuance under section 148) demonstrates that non-compliance with the sanctioning requirement and the time-limit scheme of section 151 affects the assessing officer's jurisdiction to issue a valid notice. Given the facts that the notice was beyond three years and the sanctioning authority did not meet the threshold specified for notices beyond three years, the notice is rendered invalid and the consequent reassessment proceedings are vitiated.Conclusion: The notice issued under section 148 dated 30/07/2022 is invalid for non-compliance with section 151 of the Income-tax Act, 1961; the reassessment proceedings arising from that notice are quashed. Decision is in favour of the assessee.