ITAT Quashes Reassessment as Section 151 Approval Was Taken from Wrong Authority

Narendra Khimji Savla Vs ITO (ITAT Mumbai)

The assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai, against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) dated 16.10.2025 relating to Assessment Year (AY) 2017-18. The appeal arose from a reassessment order passed under Sections 147, 144, and 144B of the Income-tax Act, 1961.

The assessee raised several legal and merit-based grounds challenging the reassessment proceedings. These included objections regarding the validity of the notice issued under Section 148, the absence of approval from the appropriate authority under Section 151, failure to mention the Document Identification Number (DIN), limitation under Section 149, lack of opportunity for cross-examination, non-issuance of notice under Section 143(2), additions relating to an alleged cash loan of Rs. 35 lakh, issues concerning PAN details, tax credit, charging of interest, and initiation of penalty proceedings.

Before the Tribunal, the assessee primarily pressed Ground No. 2, contending that the reassessment proceedings were invalid because the notice under Section 148 had been issued without obtaining approval from the competent authority prescribed under Section 151 of the Act.

The assessee submitted that the original notice for reopening was issued on 16.04.2021 and a subsequent notice was issued on 29.07.2022. Since the notice dated 29.07.2022 was issued beyond three years from the end of AY 2017-18, approval for reopening was required from the Principal Chief Commissioner of Income Tax (Pr. CCIT) or Chief Commissioner of Income Tax (CCIT). However, the approval had been obtained from the Principal Commissioner of Income Tax (Pr. CIT). According to the assessee, this was contrary to the provisions of Section 151 and rendered the reassessment proceedings invalid. Reliance was placed on the decisions of the Supreme Court, the Bombay High Court, and several coordinate bench decisions involving similar issues.

The Departmental Representative relied upon the orders of the lower authorities and opposed the assessee’s contention.

After considering the submissions and examining the statutory provisions, the Tribunal observed that once a notice under Section 148 is sought to be issued after 31.03.2021, the provisions of the new reassessment regime, including those relating to the specified authority for granting approval, become applicable.

The Tribunal noted that Section 151 provides that where three years or less have elapsed from the end of the relevant assessment year, approval may be granted by the Principal Commissioner, Principal Director, Commissioner, or Director. However, where more than three years have elapsed, the specified authority must be the Principal Chief Commissioner, Principal Director General, Chief Commissioner, or Director General.

In the present case, more than three years had elapsed from the end of AY 2017-18. Therefore, the Tribunal held that the competent authority to grant approval was the Pr. CCIT/CCIT and not the Pr. CIT. Since the reassessment notice was issued based on approval from the Pr. CIT, the mandatory requirement of Section 151 was not complied with.

The Tribunal held that obtaining sanction from the appropriate authority is a precondition for the Assessing Officer to assume jurisdiction for issuing a notice under Section 148. Since the approval had not been obtained from the prescribed authority, the order passed under Section 148A(d) dated 29.07.2022 and the consequential notice issued under Section 148 were in violation of Section 151(ii) of the Act.

Accordingly, the ITAT quashed the notice issued under Section 148 and held the consequential reassessment order to be invalid and void ab initio. Ground No. 2 of the appeal was allowed.

As the reassessment notice itself was quashed, the Tribunal held that the remaining grounds relating to the merits of the additions and other issues had become academic and therefore did not require adjudication.

The appeal of the assessee was allowed.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The present appeal arising from the appellate order dated 16.10.2025 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 147 r.w.s. 144 r.w.s. 144B of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 08.05.2023 for the Assessment Year [A.Y.] 2017-18.

2. The grounds of appeal are as under:

1. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the action of Ld AO of initiating reassessment proceeding under section 148 of Income Tax Act, 1961 which is bad in law and require to be quashed.

2. On the facts and circumstances of the case and law, the Ld CIT(A) erred in confirming the action of Ld AO in issuing notice under section 148 of the Income Tax Act, 1961 not obtaining approval of appropriate authority in accordance with the provisions of section 151 of the Income Tax Act, 1961.

3. On the facts and circumstances of the case and law, the Ld CIT(A) erred in confirming the action of Ld AO in issuing notice under section 148 of the Income Tax Act, 1961 without mentioning the DIN on notice itself which is violation of CBDT Circular No 19 of 2019 dated 14.08.2019.

4. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming reopening of assessment without considering the fact that the proceedings for AY 2017-18 are time barred as per section 149(1)(b) of Income Tax Act, 1961.

5. On the facts and circumstances of the case and law, the Ld CIT(A) failed to consider that order passed without providing an opportunity of cross examination to the appellant which is against the principles of natural justice.

6. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the action of Ld AO of passing assessment order without issuing notice u/s 143(2) of the Income Tax Act, 1961.

7. On the facts and circumstances of the case and law, the Ld CIT(A) erred in not adjudicating the issue where the Ld AO has made addition of Rs. 35,00,000/- on account of borrowing cash loan without providing any material which was relied by the Ld AO.

8. Without Prejudice to Ground No 7, on the facts and circumstances of the case and law, the Ld CIT(A) erred in not adjudicating the issue WHERE the Ld AO failed to consider that borrowing of loan does not fall in the definition of Income and thus it cannot be added to the total income of the appellant.

9. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in not adjudicating the issue WHERE the Ld.AO has passed an assessment order on PAN No DQGPS6936E (for which the appellant has already filed an application for cancellation) as against the PAN No AHEPS9345P which is regularly used by the appellant.

10. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in not adjudicating the issue WHERE the Ld AO has erred in not giving credit of taxes paid on PAN No AHEPS9345P especially when the income offered of such PAN was added to reassessment proceedings.

11. On the facts and circumstances of the case and law, the Ld CIT(A) erred in confirming the action of Ld AO of passing assessment order and making addition without mentioning any provisions of the Income Tax Act, 1961 which itself makes the assessment bad in law.

12. On the facts and circumstances of the case and law, the Ld CIT(A) erred in confirming the action of Ld AO in charging interest under section 234A and 234B of the Income Tax Act, 1961.

13. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the action of Ld AO of initiating penalty provision under section 271AAC of the Income Tax Act, 1961.

3. The assessee in the instant appeal has filed various grounds of appeal on legal aspects as also on merits of the case.The ld.AR before us,has raised the preliminary ground claiming that the notice issued u/s 148 of the Act was invalid as also the consequential assessment order inasmuch as the AO failed to take approval of the appropriate authority before issuing notice for reopening of the case.

4. We take up the legal ground no.2 first in which the assessee has challenged the reopening of the assessment as also the consequential reassessment order on the ground that in this case, approval for issuance of notice u/s 148 of the Act was accorded by the Pr.CIT and not Pr.CCIT. It is submitted that in this case, original notice u/s 148 for reopening notice was issued on 16.04.2021 and the subsequent notice was issued on 29.07.2022 which was beyond three years from the end of the assessment year.However,the sanction for issuing the notice was taken from PCIT and not from the correct authority i.e. PCCIT. It is submitted that in view of the ratio laid down by the hon’ble Apex Court in the case of Rajeev Bansal 469 ITR 46(SC)and followed by the jurisdiction High Court decision in the case of Alagh Property Construction P.Ltd 179 taxmann.com 578(Bom) the entire proceedings are invalid. He also placed reliance on several coordinate bench orders involving identical issue where reopening was beyond three years though the escapement was less than Rs 50 lakh i.e. Sudhir Mortiram Patil in ITA No.6190/Mum/2025, Gamnaram O.Prajapati in ITA No.6791/Mum/2025 ,Jayshree Gada ITA No.5512/Mum/2025 and Iqbal Issa Patel in ITA No.3400/Mum/2025.

5. On the other hand, ld. DR has strongly relied on the orders of lower authorities and also contended that this ground was taken by the assessee before the lower authorities.

6. We have heard the rival submissions and carefully considered the materials placed before us. We are of the considered view that once a notice u/s. 148 is sought to be issued after 31.03.2021, the provisions regarding reopening, including those relating to the ‘specified authority’ for approval come into force.Since first notice in this case was issued on 04.2021 and the order u/s. 148A(d) was passed on 29.07.2022, the limited issue for consideration is that since more than 3 years have elapsed from the end of the relevant assessment year i.e A.Y. 2017-18, whether the specified authority to grant sanction for issue of notice in this case is Pr. CIT or PCCIT/CCIT? In this regard, the relevant provisions of section 151 are as under:

“151. Sanction for issue of notice.

Specified authority for the purposes of section 148 and section 148A shall be,–

(i)Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;

(ii)Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.]”

6.1 In view of the legal provisions, clearly the sanctioning authority in this case is the Pr. CCIT/CCIT and not the Pr. CIT as more than three years have elapsed from the end of the assessment year. Thus, we hold that the notice u/s. 148 in this case was issued without the approval of the prescribed specified authority and hence deserves to be quashed on this ground alone.

6.2 Grant of sanction by the appropriate authority is a precondition for the Assessing Officer to assume jurisdiction under section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non­compliance by the AO with the strict time limits prescribed under Section 151 affects their jurisdiction to issue a notice under section 148.Thus, the order dated 29.07.2022 passed u/s. 148A(d) and consequential notice u/s. 148 were violative of the provisions of section 151(ii) of the Act as sanction could only be accorded by the higher specified authority for notices issued beyond three years from the end of the relevant assessment year. Accordingly, respectfully following the decisions of the coordinate bench referred above and in the light of specific provisions of the Act in this regard, we quash the notice issued u/s 148 of the Act as also the consequential assessment order invalid and ab initio void. Thus, the ground no.2 of the assessee’s appeal is allowed.

7. Since we have quashed the reassessment notice, other grounds on merit are rendered academic and hence are not being adjudicated upon.

8. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 09/03/2026.