Prior sanction requirement under the new regime: improper lower-authority approval renders post-three-year reassessment notice invalid and time-barred.

The new-regime prior-sanction requirement mandates that notices under section 148 issued beyond three years after the end of the assessment year must be approved by the higher specified authority linked to the elapsed time and alleged escaped income; where approval is given by a lower authority, the statutory sanction is absent and the notice is time-barred. Applying that principle, a reassessment notice issued after three years with alleged escaped income below the threshold was sanctioned by a Principal Commissioner rather than the higher-authority specified, rendering the notice invalid and the reassessment proceedings quashed.

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Issues: Whether the reassessment notice dated 28/07/2022 issued under section 148 of the Income-tax Act, 1961 (new regime) after the expiry of three years was validly sanctioned in accordance with section 151 of the Income-tax Act, 1961 and related provisions, and if non-compliant, whether the reassessment proceedings must be quashed.

Analysis: The new regime introduced by Finance Act, 2021 requires prior sanction by the specified authority under section 151 before an assessing officer may pass an order under section 148A(d) or issue a notice under section 148; the level of the specified authority is linked to the time elapsed since the end of the relevant assessment year and to the amount of income alleged to have escaped assessment. For notices issued beyond three years from the end of the assessment year where the escaped income is less than the statutory threshold, the specified authority under section 151(ii)(b) must be of a higher rank (Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General). The statutory time limits are to be read with the temporal relief provided by TOLA where applicable. In the present facts, the income alleged to have escaped assessment was Rs. 37,76,422/-, the notice under the new regime was issued beyond three years, and approval was granted by the Principal Commissioner rather than by one of the higher authorities specified under section 151(ii)(b); therefore the statutory sanction requirement was not satisfied and the notice is time-barred and without valid sanction.

Conclusion: The reassessment notice dated 28/07/2022 issued under section 148 of the Income-tax Act, 1961 is bad in law for non-compliance with section 151; the notice and the consequent reassessment proceedings are quashed and set aside. The legal grounds in the cross-objection are allowed and the Revenue appeal becomes infructuous; the Revenue's appeal is dismissed and the assessee's cross-objection is partly allowed.

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