TaxTMI 
TaxTMI 
2026 (6) TMI 1264
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.... of the Act, and the total income was assessed to Rs.3,46,71,300/-. Based on information flagged under the "risk management strategy" formulated by the CBDT that the assessee had indulged in "high risk transaction" (huge cash deposits and withdrawals in various bank accounts of the assessee), the AO reopened the assessment of the assessee by issuing notice u/s. 148 of the Act on 20.04.2022 and in response, the assessee filed his return of income electronically on 09.11.2022. The AO is noted to have passed the reassessment order u/s. 147/144B of the Act on 27.03.2024 by reiterating the original assessed income of Rs.3,46,71,300/-. In other words, no addition was made while passing the reassessment order on 27.03.2024. However, the AO noted from perusal of the audit report filed by the assessee that assessee had repaid loan in cash exceeding the limit specified u/s. 269T to Shri. R.V. Balamurgan in mode other than by cheque or bank draft or use of electronic clearing system through a bank account. Therefore, according to the AO the assessee has violated the provisions of Section 269T of the Act and hence liable for penalty u/s. 271E for failure to comply with the provisions of Sectio....
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.... empowered person and presumption relied upon by the Commissioner of Income Tax (Appeals) is not applicable in this case. 8. The Ld. Commissioner of Income Tax (Appeals) failed to appreciate that the transactions where only between the appellant and hid son and all other transactions without outsiders had been made only through banking channels. 9. The appellant carves leave to amend or alter the grounds raised and raise fresh grounds." Without prejudice to the above grounds of appeal, the assessee has raised a legal issue challenging the levy of penalty which reads as under:- 3. The Ld. AR submitted that the notice under section 148 of the Act which is dated 20.04.2022 is beyond the period of 3 years and therefore as per the provisions of Section 151 of the Act, the AO should have obtained the approval from Principle Chief Commissioner of Income Tax (in short 'PCCIT'). The Ld. AR further submitted that in the present case the AO has obtained approval from Principle Commissioner of Income Tax (in short 'PCIT') while issuing notice under section 148 and therefore the notice is invalid by citing the decision of the coordinate bench of this Tribunal in th....
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....gned action of the Ld. CIT(A) and submitted that assessee cannot challenge the assessment order, while assailing the penalty action confirmed by the Ld.CIT(A), hence he wants us to dismiss the legal issue. 8. In his rejoinder, the Ld. AR submitted that the assessee has raised the legal issue which assessee is entitled to do because it is settled law that the jurisdiction can be challenged at any stage/proceedings and even that it can be raised before the Hon'ble Apex Court for the first time. And according to Ld. A.R, in this case, the primary proceedings is the AO's action of re-opening the assessment by issuance of notice u/s. 148 of the Act, which action is invalid in the absence of sanction from the PCCIT, which he didn't obtain, instead he got sanction only from PCIT. Hence, the AO undisputedly couldn't have exercised his power to issue notice after 01.04.2021 after the new regime came in to force, thereby, invalidating the assessment order passed u/s 147 on 28.03.2023. Hence, according to him, such an illegal action of the AO can be challenged in collateral proceedings u/s. 271E of the Act as held by the Pune Tribunal in M/s.Karia Brothers v. ITO in ITA No.2401/Pune/2024 d....
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....ight of the aforesaid averments, and other decisions discussed infra, the Ld AR wants us to adjudicate this legal issue. 11. Having heard both parties, the first aspect which needs to be examined is whether in the present proceedings wherein assessee has challenged the levy of penalty, the assessee is entitled to challenge the validity of initiation of reopening proceedings as well as the validity of the assessment order framed pursuant thereto u/s. 147 of the Act. The Ld.AR for the assessee submitted before us that it is open to an assessee in an appeal against the penalty order u/s. 271E of the Act, to challenge the validity of the order passed u/s. 147 of the Act as well as initiation of proceedings u/s. 147 of the Act. In this regard other than the case laws cited supra, the Ld.AR for the assessee placed before us two decisions one rendered by Lucknow Bench of Tribunal in the case of Inder Kumar Bachani (HUF) v. ITO 99 ITD 621 (Luck) and the Mumbai Tribunal ' G ' Bench in the case of M/s. Westlife Development Ltd. v. Principal C.I.T. in ITA No.688/Mum/2016. In both the decisions a view has been taken by the Tribunal that when an Assessment order passed u/s 147 of the Act was....
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....on'ble Supreme Court in the case of Sushil Kumar Mehta v. Gobind Ram Bohra, (1990) 1 SCC 193 and the decisions in the case of Indian Bank v. Manilal Govindji Khona (2015) 3 SCC 712. The Mumbai bench also held that if order of assessment passed u/s 147 of the Act was nullity in the eyes of law then that order cannot be revised by invoking powers u/s 263 of the Act by CIT. The Mumbai Bench has in this regard placed reliance on the decision of Delhi bench of the Tribunal in the case of Krishna Kumar Saraf v. CIT in ITA NO.4562/Del/2007 order dated 24.09.2015 wherein it was held as follows (relevant portion):- "17. There is no quarrel with the proposition advanced by Id. DR that the proceedings u/s 263 are for the benefit of revenue and not for assessee. 18. However, u/s 263 the Id. Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice U/S 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the same was non est in the eyes of law. All proceedings subsequent to the said notice are of no consequence. Further, the decision o....
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....rior court and where the Court passes an order / decree having no jurisdiction over the matter, it would amount to nullity as the same goes to the roots of the issue. Applying the said principle, we hold that the assessee can challenge the jurisdiction of Assessing Officer in passing the assessment order while challenging levy of penalty under section 271(1)(c) of the Act. In case the reassessment proceedings have been completed without proper jurisdiction entrusted upon the Assessing Officer, then the consequent penalty proceedings are also affected as basic issue of conferment of jurisdiction upon the Assessing Officer is under challenge. Accordingly, we hold so." 16. In the context of appeal against penalty order passed u/s. 271D of the Act, it is noted that Pune Bench of this Tribunal in M/s.Karia Brothers v. ITO in ITA No.2401/Pun/2024 dated 23.07.2025 has held that assessee is entitled to challenge the validity of assessment order as under (relevant portion):- "29. Since the assessee can always challenge the validity of assessment proceedings during the penalty proceedings as per the decision of Hon'ble Bombay High Court in the case of B.R. Bamasi vs. CIT (supra) ....
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....edings can be challenged even in an appeal arising out of collateral proceedings. Since we have already set out the ratio/operating portions of these decisions we do not wish to repeat the same for the sake of brevity. In the light of the aforesaid discussion, we are of the view that the invalidity of the primary proceedings for lack of jurisdiction can be challenged even in appellate proceedings arising out of a collateral proceeding. In view of the aforesaid legal position, we will now examine the legal issue. For doing that first of all we have to examine whether the AO in the present case could have validly reopened the assessment of the assessee of issuance of notice dated 20.04.2022 u/s. 148 of the Act which resulted in framing of re-assessment order u/s. 147/143(3) dated 27.03.2024. 18. We find that the AO had issued the statutory reopening notice u/s. 148 of the Act on 20.04.2022 after obtaining the prior approval of the PCIT, Madras-1 which impugned action we find is not in consonance with the Section 151 of the Act read with Section 148A/148 of the Act relevant provision as it stood at that point of time (as on 01.04.2022) reads as under : - "151. Specified au....
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....elow the rank of Joint Commissioner, in respect of an assessment year to which clause (1) or clause (ii) or clause (iii) or clause (iv) of Explanation 2 to section 148 apply except with the prior approval of the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director. Time limit for notice. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of - (1) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:] Issue of notice where income has escaped assessment. 148. Be....
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....the case in hand, the relevant assessment year being AY 2018-19, the AO issuing notice dated 25.03.2022 u/s. 148A(b) of the Act, after prior approval of the PCIT, Madurai-I is legally valid. However, the action of the AO obtaining appeal after 31.03.2022, [i.e. after three (3) years from the end of the relevant assessment year] from the PCIT Madurai- I, to issue notice on 14.04.2022 & 20.04.2022 u/s. 148A(d) and issue of notice u/s. 148 on 20.04.2022 is invalid. Undisputedly, the notice u/s. 148 of the Act is dated 20.04.2022, which is an event after three (3) years from the end of the relevant AY 2018-19; hence, the AO ought to have taken prior-approval from the PCCIT and not from the PCIT as taken in this case. Various contentions raised by the Ld.DR justifying the issue of notice u/s. 148 of the Act with the approval of the PCIT-Madurai, is noted to have been dealt with by the Co-ordinate Bench of this Tribunal in the case of Meganapuram Primary Agricultural cooperative Credit Society v. PCIT (ITA No.895/Chny/2025 dated 19.09.2025), and hence, for the sake of brevity it is not repeated. In, Meganapuram Primary Agricultural cooperative Credit Society supra this Tribunal while adj....
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....Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General 44. Now, let us examine the facts of the present case by keeping in mind the above legal position. The Show Cause Notice in terms of Section 148A(b) of the Act came to issue on 23.03.2022 after obtaining prior approval from the office of the PCIT, Madurai - 1 and thereafter the order in terms of Section 148A(d) of the Act came to be passed on 19.04.2022 along with the notice u/s. 148 of the Act being issued on the same day, i.e. 19.04.2022. We find that both the order passed u/s. 148A(d) of the Act as well as the notice u/s. 148 of the Act dated 19.04.2022 was issued after getting approval from the office of the PCIT, Madurai - 1. The assessment year under consideration being A.Y.2018-19, the notice u/s. 148 of the Act / order passed u/s. 148A(d) of the Act being issued / passed on 19.04.2022, it can be said that same were passed / issued after the expiry of 3 years from the end of the A.Y under consideration. 45. Hence, it can be said that the notice u/s. 148 of the Act was issued / order in te....
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....e Act by giving effect to the exclusion of time limit by operation of 3rd to 5th proviso to Section 149(1) of the Act would take effect only from 01.04.2023. 50. Hence, it can be said that the said amendment would not come to the rescue of the revenue on the facts of the present case in view of the fact that the notice u/s. 148 as well the order u/s. 148A(d) of the Act being issued / passed well prior to the introduction of the said amendment, i.e. on 19.04.2022. 51. Before us, the Ld.DR argued that the said amendment introduced by Finance Act, 2023 ought to be reckoned as clarificatory and would have retrospective applicability, thereby validating the sanction accorded by the PCIT, Madurai - 1 on the facts of the present case. He further relied on the judgement of the Hon'ble Calcutta High Court in the case of Giriraj Commercial (P.) Ltd. v. Union of India reported in 169 taxmann.com 168 in support of his contentions. 52. This argument of the ld.DR is unable to be countenanced by us for the simple reason that the said amendment was introduced specifically with effect from 01.04.2023 and the plain reading of the notes on clauses as well as the memorandum ....
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....ssuing notice u/s. 148 of the Act even prior to reply of the assessee to the Show Cause Notice u/s. 148A(b) of the Act and even prior the decision of the AO in reckoning whether it was a fit case or not for issuing notice u/s. 148 of the Act. 57. Furthermore, if the said argument were to be accepted, then the very purpose behind introduction of provisions in Section 148A of the Act by way of Finance Act, 2021 to grant an opportunity to the tax payer to demonstrate his case for dropping the proceedings before issuing notice u/s. 148 of the Act would stand defeated. 58. Thus, on the facts of the present case, we find that although the sanction was granted to the AO for issuing the Show Cause Notice u/s. 148A(b) of the Act, a separate sanction is to be granted for the purpose of issuance notice u/s. 148 of the Act as well as the passing of the order u/s. 148A(d) of the Act, in the event of the AO finding it fit to do so. Hence, we reject this argument of the ld.DR also. 59. We further find that the Hon'ble Madras High Court in the case of Core Logistic Company v. Assistant Commissioner of Income-tax, reported in 175 taxmann.com 453, had proceeded to quash th....
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....ight of the discussion of this Tribunal (supra), we find that separate sanction prior-approval is sine-qua-non before issue of notice u/s. 148 of the Act from the specified authority u/s. 151 of the Act. It is clarified that even if the AO sought prior-approval of the specified Authority before issuance of notice u/s. 148A(b) of the Act, if the time-limit elapses as given in Section 151 of the Act, then it is incumbent upon the AO to obtain the prior-approval from the specified authority as specified u/s. 151 of the Act before issuance of notice u/s. 148A(d) or 148 of the Act. In this regard, we rely on the decision of the Hon'ble Bombay High Court in the case of M/s. Vodafone Idea Limited Vs DCIT (WP No. 2768 of 2022 dated 06.02.2024) wherein it was held that even in cases where the notice u/s. 148A(b) was issued before completion of 3 years, if the notice u/s. 148 is issued beyond three (3) years the approval needs to be obtained from PCCIT as per Section 151(ii) of the Act. 21. In assessee's case though the notice under section 148A(b) was issued on 25.03.2022, the notice u/s. 148 is issued on 20.04.2022. On perusal of the notice u/s. 148 we notice that the prior-appr....