ITO Vs Dantaleshwar Gramin Bigarsheti Sahkari Patsanstha (ITAT Pune)
Pune ITAT Quashes AY 2016-17 Reassessment: Beyond 3 Years, Section 151 Approval Must Be From PCCIT/CCIT – PCIT’s Sanction Is Jurisdictionally Invalid
The Pune ITAT dismissed the Revenue’s appeals relating to both quantum assessment and penalty u/s 271(1)(c), holding that the reassessment itself was void ab initio because the Section 148 notice was issued with approval of an incompetent authority. The appeals arose from reassessment under Sections 147/144/144B and consequential penalty proceedings.
The CIT(A) had already deleted an addition of ₹1.90 crore, which represented the entire cash deposits in the bank account of the assessee credit co-operative society treated by the AO as unexplained money under Section 69A. The consequential penalty had also been deleted. Since the assessee had succeeded before CIT(A), it invoked Rule 27 of the ITAT Rules before the Tribunal to support the favourable order on the additional jurisdictional ground that the reassessment itself was invalid.
The crucial fact was that the Section 148 notice dated 20 July 2022 for AY 2016-17 had been approved by the Principal Commissioner of Income Tax-1, Nashik. Since the notice was issued more than three years after the end of AY 2016-17, the Tribunal held that under Section 151(ii) the specified authority competent to grant sanction was the Principal Chief Commissioner/Chief Commissioner or the corresponding Director General authority, and not the PCIT.
The ITAT permitted the assessee to raise this jurisdictional objection for the first time under Rule 27, relying on the Bombay High Court decision in Peter Vaz v. CIT. An assessee who has succeeded before the CIT(A) can support that order before the Tribunal on a fresh legal/jurisdictional ground, even without filing a separate appeal or cross-objection.
The Revenue argued, relying upon Ashish Agarwal and Rajeev Bansal, that the 2022 notice should effectively be regarded as a continuation/substitution of notices issued during the TOLA period and, therefore, sanction by PCIT was sufficient.
The Tribunal rejected this contention by following the binding Bombay High Court judgment in Alag Property Construction (P.) Ltd. v. ACIT. That judgment, after considering Rajeev Bansal, held that where the three-year period had expired and the reassessment notice was issued in 2022, approval under Section 151(ii) was mandatory; approval by PCIT under Section 151(i) could not confer jurisdiction.
Importantly, the ITAT emphasised the doctrine of judicial discipline. Once the jurisdictional Bombay High Court had considered Rajeev Bansal and decided the very issue, the Tribunal was bound to follow that decision where the facts were identical, notwithstanding the Revenue’s alternative interpretation of the Supreme Court judgment.
Accordingly, the ITAT held that the Section 148 notice dated 20.07.2022, having been approved only by the PCIT, was bad in law, and the consequential reassessment was void ab initio. The Revenue’s grounds concerning the merits of the ₹1.90-crore addition therefore became academic and were left unadjudicated.
Since the assessment itself was void ab initio, the Tribunal further held that the Section 271(1)(c) penalty had “no legs to stand”. Both Revenue appeals were consequently dismissed.
Key takeaway: For a Section 148 notice issued beyond three years, sanction must come from the authority specifically prescribed under Section 151(ii). Approval by the PCIT instead of the PCCIT/CCIT is not a mere procedural irregularity—it goes to jurisdiction and renders the reassessment void ab initio. Further, Rajeev Bansal does not rescue such defective approval where the jurisdictional High Court has already ruled otherwise.
Cases Discussed:
- Alag Property Construction (P.) Ltd. (Bombay HC), (2025) 179 taxmann.com 578 (Bombay)
- Bhagwan Sahai Sharma (Delhi HC), (2025) 91VYPCTR 725 (Delhi HC)
- Dhanraj Govindram Kella vs ITO (Gujarat HC), [2025] 177 taxmann.com 194 (Gujarat)
- Mahesh Gokuldas Fulwani Vs. ITO (ITAT Pune), ITA No. 873/PUN/2025
- Chandrakant Viththal Bhopi Vs. ITO (ITAT Pune), ITA No. 2405/PUN/2024
- Saif Ali Mansoor Ali Khan Pataudi v. CIT (ITAT Mumbai), [(2025) 39 1VYPTTJ 1176 (Mumbai)]
- Union of India Vs. Rajeev Bansal (SC), (2024) 469 ITR 46 (SC)
- DCIT(E) v. Mahindra International School Academy (ITAT Pune), [(2024) 38 1VYPTTJ 1690 (Pune)]
- Cipla Pharma & Life Sciences Ltd. v. DCIT (Bombay HC), [(2024) 8 1VYPCTR 867 (Bombay HC)]
- Union of India v. Ashish Agarwal (SC), [2022]444 ITR 1 (SC)
- Peter Vaz v. CIT (Bombay HC), [(2021) 51VYPCTR 548 (Bombay HC)]
- B. R. Bamasi v. CIT (Bombay HC), [(1972) 83 ITR 223 (Bombay HC)]
- Smt. Godavari Saraf Vs. CIT (Bombay HC), 113 ITR 589
- Union of India And Others Vs. Kamlakshi Finance Corporation (SC), AIR 1992 SC 711, dated 24.09.1991
FULL TEXT OF THE ORDER OF ITAT PUNE
In ITA No. 662 the Revenue has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (the Act’) for AY 2016-17 on 08.01.2025, emanating from the Assessment Order u/s 147 r.w.s. 144 r.w.s. 144B of the Act, dated 04.05.2023. Similarly, in ITA No. 661/PUN/2025 the Revenue has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (the Act’) for AY 2016-17 on 10.01.2025, emanating from the Penalty Order u/s 271(1)(c) of the Act dated 19.03.2024.
2. The assessee has filed an application under Rule 27 of the Income Tax Appellate Tribunal Rules challenging the validity of notice u/s 148 of the Act dated 20.07.2022. The assessee filed an application under Rule 27 on 28.08.2025. The Ld. Departmental Representative (DR) had sought time. Accordingly, the case was adjourned. Then there have been various adjournments on various dates. Finally, the case was heard on 11.08.2026.
3. We have heard the Ld. Authorized Representative of the assessee and the Ld. Departmental Representative. The Ld. AR argued on validity of notice u/s 148 of the Act. The written submissions filed under Rule 27 of the ITAT Rules by the assessee are as under :
“1] In this case, the CIT(A) has deleted the entire addition of Rs.1,90,17,000 made by the A.O. in the asst. order u/s 144 r.w.s. 147 by treating entire cash deposits made in bank account by the assessee credit cooperative society as unexplained money u/s 69A. The consequential penalty u/s 271(1)(c) levied by the A.O. in respect of the said addition, has also been deleted by the ld. CIT(A). The Dept. has preferred appeals against the said relief allowed by the CIT(A) in quantum and penalty appellate proceedings for A. Y.2016-17. The assessee submits that although it has not preferred appeal against the CIT(A) Order since the entire addition has been deleted, the assessee wishes to support the Order of the CIT(A) on the following legal grounds which shall go to root of the matter-
“1] The notice u/s 148 dated 20.07.2022 issued for A. Y.2016 – 17 after obtaining the Approval u/s 151 from Pr. CIT Vide Reference No. NSK/Pr. CIT-1/Appr. u/s 148/Range-1, Nsk/ 2022-23/ 1421, without obtaining the requisite approval from Pr. CCIT/ CCIT as mandated u/s 151, is unsustainable in law and therefore, the asst. order u/s 147 r.w.s. 144B passed in consequence to the said invalid notice is also bad in law.
2] The assessee submits that the notice u/s 148 dated 20.07.2022 issued by the Jurisdictional A.O. i.e. ITO, Ward 1(1), Nashik is illegal in view of the law laid down by Hon’ble Bombay High Court in case of Hexaware Technologies Ltd. v. ACIT [WP. Np. 1778//2023] and hence, the said notice u/s 148 may be declared as null and void in law.
3] The assessee submits that the notice u/s 148 dated 20.07.2022 issued without quoting DIN No. in the body of the said notice is illegal in view of the law laid down by Hon’ble Bombay High Court in case of Hexaware Technologies Ltd. v. ACIT [WP. Np. 1778/12023] and hence, the said notice u/s 148 may be declared as null and void in law.”
2] At the outset, the assessee submits that the above grounds are jurisdictional and legal in nature and they go to the root of the matter. Further, the relevant facts are already stated in the Notice u/s 148 and thus, the material facts are already available on record. It is well settled law that even though an assessee is not in appeal, he may support the Order of the CIT(A), even by raising fresh legal grounds before ITAT which were not raised before the lower authorities. The said legal proposition has been propounded in the following decisions
1. Peter Vaz v. CIT [(2021) 51VYPCTR 548 (Bombay HC)]
2. B. R. Bamasi v. CIT [(1972) 83 ITR 223 (Bombay HC)]
3. DCIT(E) v. Mahindra International School Academy [(2024) 38 1VYPTTJ 1690 (Pune)]
3] The appellant further submits that the notice u/s 148 issued on 20.07.2022, after three years from end of Asst. Year 2016 17, by obtaining the Approval u/s 151 from Pr. CIT – 1, Nashik Vide Reference No. NSK/Pr. CIT-1/Appr. u/s 148/Range-1, Nsk/ 202223/ 1421, is bad in law. In this case, the approval u/s 151 ought to have been obtained from the Pr. CCIT who is the designated authority as per the mandate of section 151. Since no such approval u/s 151 has been granted by the Pr. CCIT before issuing the notice u/s 148 dated 20.07.2022 for A.Y.2016-17, the said notice u/s 148 is bad in law. In this respect, reliance is placed on the following decisions
1. Cipla Pharma & Life Sciences Ltd. v. DCIT [(2024) 8 1VYPCTR 867 (Bombay HC)] [Notice u/s 148 issued for A.Y.2016-17 on 30.07.2022 by obtaining approval u/s 151 from Pr. CIT was quashed]
2. Bhagwan Sahai Sharma v. DCIT [(2025) 91VYPCTR 725 (Delhi HC)] dated 14.05.2025 [Notice u/s 148 issued for A.Y.2016 17 on 29.07.2022 by obtaining approval u/s 151 from Pr. CIT was quashed]
3. ITO v. Rajaram Ramswarup Jaju [(2025) 39 1VYPTTJ 568 (Pune)] [Notice u/s 148 issued for A.Y.2016 – 17 on 20.07.2022 by obtaining approval u/s 151 from Pr. CIT was quashed]
4. Saif Ali Mansoor Ali Khan Pataudi v. CIT [(2025) 39 1VYPTTJ 1176 (Mumbai)] [Notice u/s 148 issued for A.Y.2016-17 on 24.08.2022 by obtaining approval u/s 151 from Pr. CIT was quashed]
4] In view of the above facts and judicial decisions cited, the respondent submits that the notice u/s 148 dated 20.07.2022 issued in the present case for A. Y.2016-17 without obtaining the requisite approval u/s 151 from Pr. CCIT is bad in law. Accordingly, the asst. order u/s 147 is also not sustainable and hence, the Revenue’s Appeal against the CIT(A) Order may be dismissed on this ground.
5] Without prejudice to the above contentions, it is submitted that the notice u/s 148 dated 20.07.2022 issued by the Jurisdictional A.O. after 29.03.2022, without quoting the DIN in the body of the notice is also unsustainable in view of the law laid down by Hon’ble Bombay High Court in case of Hexaware Technologies Ltd. v. ACIT [WP. Np. I 778// 2023]. Therefore, it is prayed that the Revenue’s Appeal against the CIT(A) Order may please be dismissed on these grounds.”
4. The Ld. DR also filed written submission. The same is reproduced as under :
“2. One of the grounds of the assessee as per application under section 27 of the ITAT Rules is that the approval for issuing notice under section 148 of the Act was given by PCIT whereas it should have been given by Pr.CCIT/ CCIT.
Contention of the Revenue
3. In this regard, it is pertinent to mention here that the Ld.AR has completely misinterpreted the decision of Hon. Supreme Court in Rajeev Bansal case (supra). Ld.AR had completely failed to understand the factual and legal matrix of Supreme Court decisions in Union of India v. Ashish Agarwal [2022]444 ITR 1 (SC) and Union of India vs Rajeev Bansal [2024] 469 ITR 46. On the conjoint reading of the above decisions of Hon. Supreme Court, it is evident that all notices issued u/s 148 between July, 2022 and September, 2022 are nothing but substitution of the notices which were issued under TOLA between 1st April, 2021 and 30th June, 2021. Therefore, these notices deemed to have been issued before 30th June, 2021, within the extended and excluded time. Hence the sanctioning authority as prescribed u/s 151 of the Act is determined as if the approval is being sought before 30th June. This is apparent from the discussion in paras 73 to para 81 of the Rajeev Bansal case. Particularly, the example given in para 78 makes it clear that as far as notices u/s 148 for AY 2016-17 & AY 2017- 18 issued in pursuance of the Ashish Agarwal case (supra) are considered, since their completion falls for completion during the period 20th March, 2020 to 30th June, 2021, the authority specified u/s 151 is the Commissioner of Income Tax. This view that for notices u/s 148 issued for AY 2016-17 & AY2017-18 in pursuance of Ashish Agarwal case, the specified authority is the authority as per section 151(i) i.e. PCIT/CIT/DIT has been upheld by the Gujarat High Court in Dhanraj Govindram Kella vs ITO [2025] 177 taxmann.com 194 (Gujarat).”
5. In this case, the assessee has filed copy of notice u/s 148 of the Act dated 20.07.2022 for AY 2016-17 in the paper book at page Nos. 4 & 5. It is observed that the said notice was approved by the Pr. Commissioner of Income Tax-1, Nashik. Copy of the said page is reproduced as under :
6. Thus, it can be observed that notice u/s 148 dated 20.07.2022 for AY 2016-17 was approved by the Pr. Commissioner of Income Tax-1, Nashik. Admittedly, notice u/s 148 has been issued for AY 2016-17 after a lapse of 3 years from the end of the assessment year. As per provisions of section 151 of the Act after a lapse of 3 years for issuing notice u/s 148 approval of Pr. Chief Commissioner or Director General of Income Tax or Chief Commissioner of Income Tax was required. In the case of the assessee notice has been approved by the Pr. Commissioner of Income Tax for AY 2016-17 after a lapse of 3 years from the end of the assessment year.
7. The Hon’ble Bombay High Court in the case of Peter Vaz Vs. Commissioner of Income Tax, (2021) 5 NYPCTR 548 (Bom) has held as under :
Quote, “38. In the present case, it is not as if the issue of nonfulfillment of jurisdictional parameters of Section 153C was raised but rejected by the CIT (Appeals). Such an issue was not raised before the CIT (A). Having regard to the provisions of Rule 27 of the Appellate Tribunal Rules, 1963 as also the provisions of Section 260A(7) read with Order XLI Rule 22 of CPC as interpreted by the Hon’ble Supreme Court in S. Nazeer Ahmed (supra) we think that the ITAT should not have precluded the assessees from raising the issue in the appeals instituted by the Revenue, even without the necessity of filing any cross-objections. Accordingly, the additional substantial question of law is required to be answered in favor of the appellants/ assessees and against the Revenue.” Unquote.
7.1 Respectfully following the decision of Hon’ble Bombay High Court (supra), we permit the assessee to raise legal ground under Rule 27 of the Income Tax Appellate Tribunal Rules. Accordingly, we proceed to adjudicate the legal ground hereunder.
8. The Hon’ble Bombay High Court in the case of Alag Property Construction (P.) Ltd. Vs. ACIT, (2025) 179 com 578 (Bombay) has held as under :
Quote, “10. On perusal of the order dated 18.08.2022, passed under Section 148A(d) of the Act we find that the aforesaid order was passed after taking approval from Principal Commissioner of Income Tax (Respondent No.2). Since the aforesaid order was passed, as well as the notice under section 148 was issued, after the expiry of three years from the end of A.Y. 2017-18, as per the substituted provisions of re-assessment, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. Accordingly, we conclude that in the present case, the approval has been obtained from the authority specified under Section 151(i) of the new regime instead of the authority specified under Section 151(ii) of the new regime.
11. The Hon’ble Supreme Court in the above case has drawn an illustration in para 78 of its order in the context of A.Y. 2017-18 (which is also the relevant Assessment year in the present Writ Petition) wherein it is categorically held that the authority specified under section 151(i) can accord sanction only upto 30.06.2021. This illustration makes it absolutely clear that when the period of three years from end of relevant Assessment Year expired between 20.03.2020 and 31.03.2021, the extension by virtue of TOLA was upto 30.06.2021 and not beyond. Thus, it can be said that the period of three years from the end of the relevant Assessment Year (in the present case A.Y. 2017-18) expired on 30.06.2021, whereas Respondent No.1, despite passing order under section 148A(d) on 18.08.2022, and issuing notice under section 148 on 23.08.2022 [in respect of Assessment Year 2017-18], has obtained approval of Respondent No.2 who is not the authority as prescribed under section 151(ii).
12. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of Respondent No.1 to issue a notice under Section 148 of the Act.
13. We are clearly of the view that the present matter stands covered by the decision of Hon’ble Supreme Court in the case of Rajeev Bansal (supra) and we are bound by it. Accordingly, we hold that the order dated 18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated and 23.08.2022 are bad in law, and hence, are required to be quashed and set aside. “Unquote.
9. The ITAT Pune in the case of Mahesh Gokuldas Fulwani Vs. ITO in ITA No. 873/PUN/2025 for AY 2017-18 has held as under:
Quote, “9. We find since the notice has been issued beyond the period of three years from the end of the relevant assessment year, therefore, in view of the provisions of section 151, the competent authority for granting the approval for issue of notice u/ s 148 of the Act is the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Since the approval in the instant case has been granted by the PCIT instead of any of the above authorities, therefore, such approval being not in accordance with law, the re-assessment proceedings are invalid.” Unquote.
10. Similar view has been taken by this Tribunal in the case of Chandrakant Viththal Bhopi Vs. ITO in ITA No. 2405/PUN/2024 for AY 2016-17, order dated 07.05.2025. The relevant paragraph is reproduced here as under :
Quote, “19. Since the facts of the instant case are identical to the facts in the case of Hareshkumar Dungarmal Jain vs. DCIT (supra), therefore, respectfully following the same, we hold that since in the instant case notice u/s 148A(d) of the Act has been issued on 27.07.2022 which is beyond the period of three years from the relevant assessment year and the approval has been granted by the PCIT for reopening of the case instead of Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, therefore, such approval being not in accordance with law, we hold that the entire re-assessment proceedings are vitiated. We, therefore, quash the re-assessment proceedings. Since the assessee succeeds on this legal ground, the other grounds challenging the addition on merit are not being adjudicate being academic in nature.” Unquote.
11. In this case, the Ld. DR has filed an elaborate submission. The Ld. DR has mainly referred to the decision of Hon’ble Supreme Court in the case of Union of India Vs. Rajeev Bansal, (2024) 469 ITR 46 (SC). The Ld. DR also relied on the decision of Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal, (2022) 444 ITR (SC). In this context it is important to refer to the decision of Hon’ble Bombay High Court in the case of Alag Property Construction (P.) Ltd. (supra) which we have already reproduced above, it is observed that the Hon’ble Bombay High Court has considered the decision of Hon’ble Supreme Court in the case of Rajeev Bansal (supra) and following the decision of Hon’ble Supreme Court the Hon’ble Bombay High Court in the case of Alag Property Construction (P.) Ltd. (supra) held that order u/s 148A(d), dated 18.08.2022 for AY 2017-18 was bad in law. Therefore, the arguments of the Ld. DR are unsustainable as Hon’ble Bombay High Court in the case of Alag Property Construction (P.) Ltd. (supra) has already discussed the law laid down by the Hon’ble Supreme Court in the case of Rajeev Bansal (supra).
12. The decision of Hon’ble Bombay High Court is binding on this Tribunal, especially when the Hon’ble Bombay High Court has duly considered the decision of Hon’ble Supreme Court in the case of Rajeev Bansal (supra). The Hon’ble Supreme Court in the case of Union of India And Others Vs. Kamlakshi Finance Corporation, AIR 1992 SC 711, dated 24.09.1991 has already explained the “judicial precedents”. Similarly, the Hon’ble Bombay High Court in the case of Smt. Godavari Saraf Vs. CIT, 113 ITR 589 has explained the law related to judicial precedents. The law regarding judicial precedents is that when the decision of Hon’ble Jurisdictional High Court on a particular issue is available then it is mandatory for the Tribunal to follow the decision of Hon’ble Jurisdictional High Court on a particular issue provided the facts are not distinguishable. In this case, the facts are identical, therefore, the decision of Hon’ble Bombay High Court in the case of Alag Property Construction (P.) Ltd. (supra) is binding on us.
13. Neither Ld. AR nor Ld. DR has argued on merits of addition. Rrespectfully, following the decisions of the Hon’ble Bombay High Court and ITAT (supra), we hold that the notice u/s 148 dated 20.07.2022 for AY 2016-17 approved by the Pr. Commissioner of Income Tax after a lapse of 3 years from the end of the assessment year is bad in law. Accordingly, consequential assessment order is also void-ab-initio. Accordingly, the Legal ground raised by the Assessee is allowed.
13.1 Since we have held that the Notice u/s 148 is bad in law and quashed the consequential assessment order, the Grounds raised by the Revenue becomes academic in nature and dismissed as unadjudicated.
ITA No. 661/PUN/2025
14. Since, we have held in ITA No. 662/PUN/2025 that the assessment order is void-ab-initio, the penalty order u/s 271(1)(c) of the Act has no legs to stand. Accordingly, Revenue’s appeal in ITA No. 661/PUN/2025 is dismissed.
15. In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the open Court on 14th August, 2026
