2026 (2) TMI 1084 - AT - Income Tax

Time Bar under TOLA and defective approval or lacking jurisdiction invalidate reassessment notices and quash assessments.

A notice treated as a deemed show-cause under Section 148A(b) must yield any fresh notice within the surviving period computed under Section 149 read with ... Reopening of assessment u/s 147 - Period of limitation - scope of new regime - TOLA - surviving period - HELD THAT:- In the instant case, fresh notice u/s 148 of the Act under the amended law was issued beyond the period of limitation i.e. after the expiry of surviving period as prescribed in the case of Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] In the present case, the notice u/s 148 of the Act was issued on 25.07.2022 and reply in response to notice u/s 148A(b) was filed by the assessee on 01.06.2022 thus, the surviving period of 15 days expired on 16.06.2022. Thus, we hold that the notice issued u/s 148 on 25.07.2022 is barred by limitations and is invalid notice and consequent reassessment order passed u/s 147 r.w.s.144 r.w.s.144B is thus, quashed. Assumption of jurisdiction approval from an authority competent to grant approval u/s 151 or not? - In the present case for both the assessment years, the notices u/s 148 have been issued on 23.07.2022 i.e., after expiry of three years from the end of relevant assessment years, therefore, sanction/approval for issue of notice u/s 148 must be obtained from Principal Chief Commissioner of Income-tax or Principal Director General or Chief Commissioner or Director General however, the same was granted by Pr.CIT, Delhi-15. Notices u/s 148 for both the assessment years were issued on 23.07.2023 after obtaining the approval from Pr.CIT on 21.7.2023 thus, the approval was defective and consequent notices issued u/s 148 based on defective approval were invalid. Thus, the consequent orders passed by both the Assessment Years are quashed. Accordingly, Grounds of appeal of the assessee are allowed. Jurisdiction to pass re-assessment order u/s 148 - territorial jurisdiction over the assessee - HELD THAT:- As per CBDT instruction No. 1/2011 dt. 31.1.2011, the territorial jurisdiction over the assessee lies with the ITO as the income of the assessee was below Rs. 20.00 lacs. It is an admitted position that in the present case, the notice u/s 148 was issued by the AO who was not having jurisdiction over the assessee thus, the reassessment order passed on wrong assumption of jurisdiction in the case of assessee is invalid. As following the judgements of Vimal Gupta [2017 (10) TMI 1670 - DELHI HIGH COURT] and Sapna Rastogi [2024 (8) TMI 1517 - ITAT DELHI] the re-assessment order passed is without jurisdiction as the notice u/s 148 was issued by the AO having no jurisdiction over the assessee and there was no order passed u/s 127 of the Act for transfer of jurisdiction. Issues: (i) Whether the notice issued under Section 148 (dated 25.07.2022) for assessment year 2014-15 is time barred and the consequent reassessment order is invalid; (ii) Whether the notices issued under Section 148 (dated 23.07.2022) for assessment years 2016-17 and 2017-18 are invalid for being granted approval by an authority not competent under Section 151; (iii) Whether the notice and reassessment for assessment year 2019-20 are invalid for want of jurisdiction because the officer who issued the notice lacked pecuniary/territorial jurisdiction and there was no transfer order under Section 127.Issue (i): Whether the notice under Section 148 dated 25.07.2022 for AY 2014-15 was issued beyond the surviving period available after the deemed notice under Section 148A(b) and is therefore time barred.Analysis: The decision applies the legal framework established by the Hon'ble Supreme Court in Rajeev Bansal and Ashish Agarwal and the interplay with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). Under that framework a notice originally issued under the old regime is deemed to be a show cause notice under Section 148A(b); time for the assessing officer to complete action is limited to the surviving period calculated from the original issuance date up to 30.06.2021 as extended by TOLA, with exclusions for the period of stay and two weeks allowed for the assessee to reply. Once the assessee filed its first reply on 01.06.2022, the surviving period of 15 days expired on 16.06.2022 and the assessing officer was required to complete the Section 148A(d) action and issue any fresh Section 148 notice within that surviving period. The AO issued Section 148 on 25.07.2022 which is beyond the surviving period; therefore the notice was issued after the time limit prescribed by the combined scheme of Section 149 read with TOLA and the controlling Supreme Court decisions.Conclusion: The Section 148 notice dated 25.07.2022 for AY 2014-15 is time barred and the consequent reassessment order is quashed. (In favour of the assessee)Issue (ii): Whether Section 148 notices dated 23.07.2022 for AYs 2016-17 and 2017-18 are invalid because the approval under Section 151 was granted by an authority not competent under the amended statute.Analysis: Section 151 as substituted by the Finance Act, 2021 prescribes the specified authority whose approval is required where more than three years have lapsed from the end of the relevant assessment year. The approval for issuing notices after the three-year period must come from the Principal Chief Commissioner/Principal Director General or, where applicable, the Chief Commissioner/Director General. The record shows that approval was granted by Pr. Commissioner of Income-tax (Pr.CIT) whereas the statutory scheme required approval from the higher specified authority for notices issued after expiry of three years. Reliance on Rajeev Bansal and supportive High Court/Tribunal precedents confirms that defective or improper sanction vitiates the jurisdiction to issue a reassessment notice.Conclusion: The Section 148 notices for AYs 2016-17 and 2017-18 issued on 23.07.2022 after approval by an authority not competent under Section 151 are invalid and the consequent reassessments are quashed. (In favour of the assessee)Issue (iii): Whether the reassessment for AY 2019-20 is invalid because the officer who issued the Section 148 notice lacked pecuniary/territorial jurisdiction and there was no transfer order under Section 127.Analysis: CBDT Instruction No. 1/2011 allocates pecuniary jurisdiction; where returns declare income below the specified threshold the ITO (not ACIT) retains jurisdiction absent a proper transfer order under Section 127. The record does not show any Section 127 transfer to vest jurisdiction in ACIT, Circle-43(1). Precedent of the jurisdictional High Court and coordinate benches holds that initiation of reassessment by an officer without pecuniary/territorial jurisdiction vitiates the notice and assessment since jurisdictional conditions cannot be cured by consent or subsequent steps.Conclusion: The reassessment for AY 2019-20 based on a notice issued by an officer lacking jurisdiction (and with no Section 127 transfer) is invalid and the assessment order is quashed. (In favour of the assessee)Final Conclusion: The Tribunal allowed the assessee's appeals and quashed the reassessment notices and consequent assessment orders for the decided assessment years on the grounds of time bar, defective statutory approval, and lack of jurisdiction, resulting in the appeals being allowed in favour of the assessee.Ratio Decidendi: Where a reassessment notice is deemed under Section 148A(b) and TOLA applies, any fresh Section 148 notice must be issued within the surviving period computed under Section 149 read with TOLA; further, a Section 148 notice issued after expiry of the surviving period, issued with defective sanction under Section 151, or issued by an officer lacking pecuniary/territorial jurisdiction (absent a valid Section 127 transfer) is invalid and vitiates the reassessment.