Notice validity under section 148: quashed where prescribed prior sanction was absent and the limitation threshold was not met.

For issuance of a notice under section 148 after three years from the end of the relevant assessment year, prior approval must be obtained from the higher sanctioning authority prescribed by section 151(ii) where applicable; absence of such prescribed sanction renders the notice void ab initio and consequent reassessment proceedings invalid. Separately, a section 148 notice issued after three years is time barred if the alleged escaped income falls below the statutory threshold in section 149(1)(b); where that threshold is not met the notice is void ab initio. Both defects led to quashing of the reassessment and assessment order.

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Issues: (i) Whether the notice under section 148 of the Income-tax Act, 1961 issued on 26/07/2022 is valid where prior approval required under section 151 was granted by an authority not empowered after expiry of three years from the end of the relevant assessment year; (ii) Whether the notice under section 148 is barred by limitation under section 149(1)(b) of the Income-tax Act, 1961 where the alleged escaped income is less than Rs. 50 lakh and notice was issued after three years from the end of the relevant assessment year.

Issue (i): Validity of notice under section 148 in absence of sanction from the authority prescribed by section 151 for the period after three years.

Analysis: The Court examined the amended reassessment regime (Finance Act, 2021) and section 151 which prescribes higher authorities where more than three years have elapsed. Following the jurisdictional High Court decision applying Rajeev Bansal (SC) and the statutory timeline including TOLA extension, the order under section 148A(d) and the consequential section 148 notice were scrutinised for conformity with the prescribed authority for sanction. The Tribunal found that sanction was obtained from Principal Commissioner (section 151(i) authority) after the extended three-year period expired and that the statutory scheme required sanction from the higher authority under section 151(ii) for issuance of a notice beyond three years.

Conclusion: The notice under section 148 issued on 26/07/2022 is void ab initio for want of sanction from the authority prescribed by section 151 and is therefore quashed; consequential reassessment proceedings and assessment order are set aside. (Decision in favour of the assessee)

Issue (ii): Validity of notice under section 148 having regard to limitation under section 149(1)(b) where escaped income is less than Rs. 50 lakh.

Analysis: Section 149(1)(b) permits issue of notice after three years and up to ten years only where escaped income is Rs. 50 lakh or more. The Tribunal noted that the alleged escaped income was Rs. 26 lakh, below the Rs. 50 lakh threshold, and the notice was issued after three years from the end of the relevant assessment year; accordingly the notice was barred by limitation.

Conclusion: The notice under section 148 is barred by limitation under section 149(1)(b) and is void ab initio; this conclusion favours the assessee.

Final Conclusion: The appeal is allowed because the notice under section 148 was invalid for lack of sanction by the authority prescribed under section 151 after the three-year period and was time-barred under section 149(1)(b), leading to quashing of the reassessment proceedings and the assessment order.

Ratio Decidendi: For issuance of a notice under section 148 after the expiry of three years from the end of the relevant assessment year, prior approval must be obtained from the authority specified in section 151(ii) where applicable; additionally, a section 148 notice issued after three years is invalid if the escaped income is less than Rs. 50 lakh as per section 149(1)(b).

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