Sheetal Clothing Company Pvt. Ltd. Vs DCIT (ITAT Mumbai)
For AY 2017-18, the Assessing Officer issued notice under section 148 on 29.07.2022 after passing an order under section 148A(d) on the same date, alleging unexplained unsecured loans of about ₹72.97 lakh. This was clearly more than three years after the end of the assessment year (which ended on 31.03.2018, so the three-year period expired on 31.03.2021).
Under the post-2021 reassessment regime, where notice is issued after three years and the alleged escaped income exceeds ₹50 lakh, prior sanction must be obtained from the higher authority specified in section 151(ii), i.e., the Principal Chief Commissioner/Chief Commissioner (Pr. CCIT/CCIT). However, in this case approval was taken only from the Principal Commissioner of Income-tax (Pr. CIT-5, Mumbai).
Relying heavily on the Supreme Court decisions in Ashish Agarwal and especially Rajeev Bansal, the Tribunal held that after 01.04.2021 approvals must strictly comply with section 151 of the new regime, and TOLA only extends time limits, not the level of approving authority. Thus, once three years had elapsed, sanction by Pr. CIT was insufficient and jurisdictionally defective.
Following these binding principles and also the Bombay High Court rulings in Ramesh Bachulal Mehta and Alag Property on identical facts, the Tribunal held that absence of approval from the correct specified authority under section 151(ii) rendered the notice under section 148 void ab initio.
Consequently, the entire reopening and the reassessment order were quashed on this pure jurisdictional defect, and since the reassessment itself failed, issues on merits were left unexamined.
The assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
