Sanction under Section 151 is required from specified authority; absence renders reassessment proceedings invalid and ineffective.

Challenge concerned validity of notice under Section 148 and order under Section 148A(d) where sanction after three years was furnished by an authority not specified by Section 151 before the Finance Act, 2023 amendment. The article explains that the 2023 proviso operates prospectively and does not validate prior sanctions, that limitation extensions in Section 149 cannot be read into Section 151 pre-amendment, and that sanction by an incorrect authority creates a jurisdictional defect vitiating reassessment proceedings, rendering notices and consequential orders invalid.

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Issues: Whether the notice issued under Section 148 of the Income-tax Act, 1961 and the order under Section 148A(d) of the Income-tax Act, 1961 are invalid for want of sanction by the competent authority under Section 151 of the Income-tax Act, 1961 after the expiry of three years from the end of the relevant assessment year.

Analysis: Section 151 of the Income-tax Act, 1961 prescribes the specified authority competent to grant sanction for initiation of proceedings under Section 148/148A after expiry of three years from the end of the relevant assessment year. Prior to the amendment by Finance Act, 2023 w.e.f. 01.04.2023, the authority specified for sanction after three years was the Principal Chief Commissioner or Chief Commissioner (or equivalent) under Section 151(ii). The proviso subsequently inserted by Finance Act, 2023 does not operate retrospectively to validate sanctions granted before 01.04.2023. Binding decisions of the jurisdictional High Court and coordinate benches interpret Sections 149 and 151 as separate; the limitation extensions in Section 149 provisos cannot be read into Section 151 prior to its amendment. In the present matter the sanction for proceedings beyond three years was accorded by an authority not specified by Section 151(ii) prior to the 2023 amendment, resulting in a jurisdictional defect that vitiates the reassessment proceedings. Consequently, proceedings founded on such invalid sanction cannot stand and related merits issues fall away.

Conclusion: The notice under Section 148 of the Income-tax Act, 1961, the order under Section 148A(d) of the Income-tax Act, 1961, and all consequential reassessment proceedings are invalid and are quashed; decision is in favour of the assessee.

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