Reassessment approval requirement under the substituted regime failed where higher-authority sanction was mandatory after three years.

Under the substituted reassessment regime, prior approval must be obtained from the authority specified by the time elapsed from the end of the assessment year. Where more than three years have passed, approval from the higher authority under Section 151(ii) is mandatory. For Assessment Year 2016-17, the TOLA extension operated only up to 30.06.2021, but the Section 148A(d) order was passed on 30.07.2022 with approval from the Principal Commissioner. That approval was not the authority prescribed by Section 151(ii), so the Section 148A(d) order and the consequential Section 148 notice were invalid and the reassessment proceedings were quashed.

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Issues: Whether, for reassessment proceedings relating to Assessment Year 2016-17 initiated under the substituted reassessment regime, prior approval for the order under Section 148A(d) and consequential notice under Section 148 could validly be obtained from the Principal Commissioner, or whether approval from the higher authority specified for cases beyond three years from the end of the assessment year was mandatory.

Analysis: The substituted regime requires prior approval of the specified authority at the relevant stage, and the authority is linked to the elapsed time from the end of the assessment year. Where more than three years have elapsed, approval must be taken from the higher authority contemplated by Section 151(ii). The period of three years from the end of Assessment Year 2016-17 fell within the TOLA window, but the extension operated only up to 30.06.2021. The impugned order dated 30.07.2022 was passed after that period and approval was taken from the Principal Commissioner, who was not the authority prescribed under Section 151(ii).

Conclusion: The approval was invalid, the order under Section 148A(d) and the consequential notice under Section 148 were vitiated, and the proceedings were liable to be quashed.

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