Shanti Hardware & Plywood Centre Vs ITO (ITAT Bangalore)
Bangalore ITAT Quashes AY 2016-17 Reassessment: Post-Ashish Agarwal Approval by PCIT Invalid After Three-Year Period
The assessee’s original return for AY 2016-17 declared income of ₹8.82 lakh. A reassessment notice was initially issued under the old regime on 30 June 2021 and was later treated as a show-cause notice under Section 148A(b) pursuant to the Supreme Court’s ruling in Union of India v. Ashish Agarwal. Thereafter, the AO passed the Section 148A(d) order and issued a fresh Section 148 notice on 29 July 2022, based on approval granted by the PCIT, Hubballi.
The Bangalore ITAT held that, after considering the TOLA extension, the three-year period for AY 2016-17 expired on 30 June 2021. Therefore, any approval granted thereafter had to be obtained from the higher authority specified under Section 151(ii)—the PCCIT/PDGIT or, where applicable, the CCIT/DGIT. The PCIT was competent only under Section 151(i) and consequently lacked authority to grant approval in July 2022.
Relying on the Supreme Court’s decision in Union of India v. Rajeev Bansal and the Bombay High Court’s ruling in Ramesh Bachulal Mehta v. ITO, the Tribunal held that approval from the correct specified authority is a jurisdictional precondition, and non-compliance vitiates the entire reassessment.
The Revenue’s reliance on the proviso to Section 151 permitting exclusion of certain periods was rejected because that proviso was inserted by the Finance Act, 2023 with effect from 1 April 2023, whereas the impugned order and notice were issued in July 2022. Their validity had to be tested under the law prevailing on the date of issuance.
Accordingly, the Section 148A(d) order, Section 148 notice and consequential reassessment order were quashed. The remaining grounds became academic.
List of Cases Discussed / Relied Upon
- Union of India v. Ashish Agarwal [2022] 444 ITR 1 (SC)
- Union of India v. Rajeev Bansal [2024] 469 ITR 46 (SC)
- Ramesh Bachulal Mehta Vs. Income Tax Officer (2025) 177 Taxmann.com 606 (Bom)
- Assistant Commissioner of Income-tax v. Godrej Industries Ltd. [2024] 160 taxmann.com 13 (Bombay)
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 30.09.2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1081332252(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2016-17.
2. The assessee has raised the following grounds of appeal:-
1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned CIT[A]/NFAC erred in failing to appreciate and decide that the reopening of the assessment was opposed to law as the mandatory conditions prescribed for reopening of the assessment had not been complied with and thus, the order passed u/s 147 r.w.s 144B of the Act ought to have been cancelled.
3. Without prejudice to the above, the learned CIT[A]/NFAC erred in failing to deal with the contention raised by the appellant that the initiation of proceedings vide notice issued u/s 148 of the Act, dated 29/07/2022 without mentioning a computer generated valid and proper DIN is bad in law and thus, the order of assessment passed u/s 147 of the Act ought to have been cancelled.
4. Without prejudice to the above, the learned CIT[A]/NFAC is not justified in upholding the addition of Rs. 3,71,367/- made u/s 28[iv] of the Act under the facts and in the circumstances of the appellant’s case.
5. Without prejudice to the right to seek waiver with the Hon’ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-A, 234-B and 234-C of the Act, under the facts and in the circumstances of the appellant’s case.
6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.
3. Now, first we proceed to adjudicate the ground No. 2 where the assessee challenged the order passed u/s. 148A(d) of the Act and the notice issued u/s. 148 of the Act both dated 29.07.2022 as not in accordance with the provisions of section 151 of the Act and consequently, the subsequent proceedings are invalid and non-est.
3.1 The brief facts of the case are that the assessee is a partnership firm carrying on the business of wholesale and retail trades of various hardware commodities like paints, adhesives, sanitary and syndicates, plywood and other commodities relating to hardware and wood products. The assessee firm filed its return of income for the assessment year (AY) 2016-17 u/s. 139(1) of the Act on 25/09/2016 by declaring total income of Rs. 8,82,450/-. The AO had reasons to believe that the income of the assessee chargeable to tax for the assessment year 2016-17 had escaped assessment within the meaning of section 147 of the Act and accordingly, the initial notice u/s 148 of the Act for the assessment year 2016-17 was issued on 30/06/2021 after obtaining the necessary satisfaction of the Range, Gulbarga.
3.2 It is worthwhile here to mention that while Finance Act, 2021 was not yet in horizon, due to the onset of Covid-19 pandemic followed by the nationwide lockdown in March, 2020 the Government of India announced various relaxations by way of The Taxation & Other Laws ( Relaxation of certain Provisions) Ordinance, 2020 No.2 of 2020 dated 31/03/2020 in which the Original limitation for issuance of Notice U/s 148 of the I Tax Act, 1961 falling during the Period 20/03/2020 – 29/06/2020 stand extended to the 30/06/2020. On 24/06/2020 the Central Government issued a notification S.O.2033(E) in exercise of its power u/s 3(1) of the Above Ordinance, whereby the original limitation for issuance of Notice U/s 148 of the I. Tax Act,1961 falling during the Period 20/03/2020 – 31/12/2020 stand extended to the 31/03/2021. Further the Relaxation Ordinance, 2020 was replaced by the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (hereinafter to be referred as the Relaxation Act, 2020) introduced with effect from 29/09/2020. As per sub-section (1) of Section 3 of the Relaxation Act, 2020 the time limits specified in the specified Acts which fell during the period from 20/03/2020 to 31/12/2020 or such other date after 31/12/2020 as the central Government may notify, were extended to 31/03/2021 or such other date after 31/03/2021 as the Central Government may by notification specify. Such extension would operate notwithstanding anything contained in the specified Act. On 31/12/2020 the Central Government issued another Notification S.O.4805(E) in exercise of the powers u/s 3(1) Relaxation Act, 2020 whereby the relaxation /extension under the section was extended to all actions that were required to be completed/complied with during the period starting from 20/03/2020 and up to 30/03/2021. The last date for all such action was extended up to 31/03/2021. The Parliament (Legislature) being fully aware of the Fact of Covid, 19 and its related relaxations provided by way of The Taxation & Other Laws ( Relaxation of certain Provisions) Ordinance, 2020 and the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 as well as various Notifications issued there under introduced reformative changes to Section 147 to 151 of the Income Tax Act, 1961 governing the reassessment proceedings by way of the Finance Act, 2021 with the objective of promoting ease of doing business and reducing litigation, which was passed by way of assent of the President on the 28/03/2021. The Parliament specifically enacted that the Substituted Sections 147 to 151 of the Income Tax Act, 1961 coming into force on 01/04/2021.Upon enactment of the Finance Act, 2021, the provisions contained in the Act pertaining to reassessment of income stood substituted by new set of provisions. Upon such substitution the old provisions ceased to exist. Further there is no indication either in express terms or implied in the newly introduced provisions that the legislature desired to retain the old provisions for the past period. In that view of the matter any action of issuance of notice for reassessment which is taken on or after 01/04/2021, must be in accordance with the amended provisions. In spite of clear intention of the Legislature as above, on 31/03/2021 the Central Government in guise of the powers U/s 3(1) of the Relaxation Act, 2020 issued another Notification S.O.1432(E). The Notification inter-alia provided that where the last date for issuance of Notice U/s 148 of the I. Tax Act,1961 fell during the period starting from 20/03/2020 and up to 31/03/2021, the last date for issuance of such notice shall extended to 30/04/2021. The Central Government didn’t stop here and issued yet another Notification on dated 27/04/2021, where the earlier Notification of the Central Government dated 31/03/2021 issued in the guise of the powers U/s 3(1) of the Relaxation Act, 2020 was partially modified, in all cases where the last date for issuance of Notice u/s 148 of the I. Tax Act, stood extended to 30/04/2021 as a result of the Notification dated 31/03/2021, the last date for issuance of such Notice now stood extended to 30/06/2021.
3.3 Therefore, the mute question aroused whether the Central Government by way of issuing Notifications in the guise of the powers U/s 3(1) of the Relaxation Act, 2020 can override the clear intentions of the Legislature (Parliament) by way of Finance Act, 2021. As held by the various High Courts the said notice was unsustainable in law as it was issued in accordance with the statutory regime as existed prior to 31/03/2021. The High courts had set aside such notices that were issued after 31/03/2021 without following the procedure as prescribed under section 148A of the Act. Thus, the High Court struck down notices that were issued under section 148 of the Act after 31/03/2021 but under the unamended provisions relating to the re-assessment of income that had escaped assessment. The Revenue appealed the decisions rendered by the various High Courts to the Supreme Court of India.
3.4 In Union of India v. Ashish Agarwal [2022] 444 ITR 1 (SC) which was one of such appeals arising from the decision of the Hon’ble Allahabad High Court, the Supreme Court delivered its decision on 04/05/2022, whereby it concurred with the view that the amended provisions which came into force after 31/03/2021 would be applicable to notices issued thereafter. However, the Hon’ble Apex Court also issued certain directions in exercise of the powers under Article 142 of the Constitution of India as below-
i) Notice issued u/s 148 under the unamended provision shall be deemed to have been issued u/s 148A of the Act as substituted by the Finance Act, 2021 and construed or treated to be show cause notice in terms of section 148A(b) of the Act.
ii) The assessing officer shall, within 30 days from 04/05/2022 provide to the respective assesses information and material relied upon by the revenue.
iii) The assessee shall reply to the show cause notice within two weeks from the receipt of the information and material from the assessing officer.
iv) The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) of the Act is hereby dispensed with as a one-time measure vis-à-vis those notices which have been issued under section 148 of the unamended Act from 01/04/2024 till date.
v) The assessing office shall thereafter pass orders in terms of section 148A(d) of the Act in respect of each of the concerned assessee; Thereafter, after following the procedure as required under section 148A may issue notice under section 148 of the Act (as substituted).
vi) All defenses which may be available to the assessee including those available u/s 149 of the Act and all rights and contentions which may be available to the concerned assessee and Revenue under the Finance Act, 2021 and in law shall continue to be available.
vii) The Order shall be applicable PAN India and the orders passed by the different High courts on the issue and under which similar notices which were issued after 01/04/2021 u/s 148 of the Act is set aside and shall be governed by the present order and shall modified to the aforesaid extent.
3.5 Thereafter, in compliance of the above directions issued by the Hon’ble Supreme Court of India in Union of India & Ors v. Ashish Agarwal (supra) as well as in accordance with the CBDT’S instruction No. 01/2022 dated 11/05/2022, the said notice u/s 148 of the Act dated 30/06/2021 was treated as show cause notice u/s 148A(b) of the Act and the underlying material and information on which the show cause notice u/s 148A(b) of the Act dated 24/05/2022 is based was provided to the assessee asking to submit his response along with documentary evidences within 2 weeks from the date of receipt of the notice. The assessee responded to the said notice and filed his reply 01/06/2022. The AO however, observed in the assessment order that the assessee did not respond to the show cause notice issued u/s. 148A(b) of the Act within the due date mentioned therein.
3.6 Thereafter, the ld. ITO, ward-1, Raichur, with prior approval of the Pr. Commissioner of Income Tax, Hubbali accorded on 27/07/2022 passed an order u/s 148A(d) of the Act on 29/07/2022 deciding that it is a fit case for issue of notice u/s 148 of the Act. Accordingly, with prior approval of the Pr. Commissioner of Income Tax, Hubbali accorded on 27/07/2022 vide F No. 148A(d)/PR.CIT/HBL/2022-23, a notice u/s. 148 of the Act was also issued to the assessee on the same day i.e. on 29/07/2022.
3.7 Before proceeding further, it is very apposite here to note down the chronological date of event as discussed in the preceding paragraphs for a better appreciation of fact which are detailed below: –
| Sl. No |
Particulars of Event | Date | PB Page |
|---|---|---|---|
| (i) | The assessee for the impugned Assessment Year 2016-17, had filed his original return of income, declaring a total income of Rs. 8,82,450/- | 25/09/2016 | |
| (ii) | A notice under section 148 of the Act for re-opening of assessment for the impugned assessment year 2016-17, was issued by the then Income Tax Officer Ward-1, Raichur | 30/06/2021 | 01 |
| (iii) | Thereafter, as per the directions of the Hon’ble Apex Court in the case of Union of India Vs. Ashish Agarwal (2022) 444 ITR 1 (SC), the ld. AO treated the original notice issued under section 148 of the Act dated 30/06/2021 under the old regime, as deemed to be Show Cause Notice under the new regime and consequently the ld. JAO issued notice under section 148A(b) of the Act, granting 2 weeks time for the assessee to file his response. | 24/05/2022 | 02-03 |
| (iv) | Thereafter, the ld. JAO passed an order under section 148A(d) of the Act, with approval under section 151 of the Act from the ld. Principal Commissioner of Income Tax, Hubbali. | 29/07/2022 | 08-10 |
| (v) | Subsequently, the then ld. AO issued a fresh notice under section 148 of the Act. | 29/07/2022 | 11-13 |
3.8 Now the assessee in this appeal is challenging that the sanction obtained under section 151 of the Act for re-opening of assessment under section 148A(d) and for notice issued under section 148 of the Act, are not in accordance with the provisions of section 151 of the Act of the new regime and consequently the subsequent proceedings are invalid and requires to be annulled.
3.9 Before us, the ld. AR of the assessee vehemently argued that as could be seen from the order passed under section 148A(d) of the Act, dated 29/07/2022 and the notice issued under section 148 of the Act, dated 29/07/2022, the sanction obtained from the Principal Commissioner of Income Tax, Hubbali, is without authority and bad in law. It is submitted that the assessment year which is subject matter of the present appeal is Assessment Year 2016-17. The order under section 148A(d) of the Act and the Notice issued under section 148 of the Act are both dated 29/07/2022 and approval under section 151 was obtained on 27/07/2022, which is beyond the period of 3 years. Further, it is submitted that as the approval is beyond three years ought to have been obtained from the Principal Chief Commissioner of Income Tax/ Principal Director General of Income Tax/ Chief Commissioner of Income Tax/ Director General of Income Tax as per provisions of section 151(ii) of the Act. As the sanction in the instant case has been obtained from the Principal Commissioner of Income Tax, Hubbali on 27/07/2022, which is not in accordance with the provisions of section 151 of the act and consequently the sanction, is required to be quashed.
3.10 Before us, the ld. CIT, DR vehemently submitted that the original notice u/s 148 of the Act dated 30/06/2021 was treated as show cause notice u/s 148A(b) of the Act as per the directions of the Hon’ble supreme Court in the case of Union of India & Ors v. Ashish Agarwal (supra) and accordingly the order u/s 148A(d) of the Act was passed on 29/07/2022 and the notice issued under section 148 of the Act was issued on the same day after obtaining the sanction from the Principal Commissioner of Income Tax, Hubbali. The ld. CIT DR also submitted that the period of three years for the purposes of section 151(i) of the Act shall be computed after taking into account the period of limitation as excluded by the 3rd or 4th or 5th provisos or extended by the 6th proviso to section 149(1) of the Act and accordingly submitted that the time or extended time allowed to the assessee as per the show cause notice issued u/s. 148A(b) of the Act shall be excluded. Lastly the ld. DR submitted that where immediately after the exclusion of the period above, the period of limitation available to the AO for passing an order u/s 148A(d) of the Act does not exceed 7 days, such remaining period shall be extended to 7 days and the period of limitation under this sub-section shall be deemed to be extended accordingly.
4. We have heard the rival submissions and carefully considered the materials available on record. Before proceeding further, the provisions of section 151 of the Act as existed on the date of issuance of order under section 148A(d) of the Act and as on the date of notice issued under section 148 of the Act, are reproduced hereunder for ease of reference & convenience: –
“151. 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.]”
On plain reading of the above, it is very much clear that the specified Authority for the purposes of sanction u/s 148 and section 148A of the Act, if more than three years have elapsed from the end of the relevant assessment year shall be the Principal Chief Commissioner /Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General.
4.1 Further, it is worthwhile here to mention that the Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal [2024] 469 ITR 46 (SC), while dealing with the issue of approval from the specified authority in terms of section 151 of the Act, made the following observations: –
“iii. Sanction of the specified authority
73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments Sri krishna (P.) Ltd. v. ITO [1996] 87 Taxman 315/221 ITR 538 (SC)/[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below:
| Regime | Time limits | Specified authority |
|---|---|---|
| Section 151(2) of the old regime | Before expiry of four years from the end of the relevant assessment year | Joint Commissioner |
| Section 151(1) of the old regime | After expiry of four years from the end of the relevant assessment year | Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner |
| Section 151(i) of the new regime | Three years or less than three years from the end of the relevant assessment year |
Principal Commissioner or Principal Director or Commissioner or Director |
| Section 151(ii) of the new regime | More than three years have elapsed from the end of the relevant assessment year | Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General |
74. The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime:
(i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and
(ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
75. After 1 April 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of Section 151 of the new regime is thus:
(i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and
(ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
76. 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, non-compliance by the assessing officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148.
77. Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will accordingly extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(i) has an extended time till 30 June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021.
78. For example, the three year time limit for assessment year 2017-2018 falls for completion on 31 March 2021. It falls during the time period of 20 March 2020 and 31 March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till 30 June 2021.
79. Under Finance Act 2021, the assessing officer was required to obtain prior approval or sanction of the specified authorities at four stages:
a. Section 148A(a) – to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
b. Section 148A(b) – to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022;33
c. Section 148A(d) – to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and
d. Section 148 – to issue a reassessment notice.
80. In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before various High Courts “shall be deemed to have been issued under section 148-A of the Income-tax Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b).” Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under section 151 for Section 148A(b). It is well established that this Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law High Court Bar Association v. State of U P [2024] 160 taxmann.com 32/299 Taxman 21 (SC)/[2024] 6 SCC 267.
81. This Court in Ashish Agarwal (supra) directed the assessing officers to “pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned.” Further, it directed the assessing officers to issue a notice under Section 148 of the new regime “after following the procedure as required under section 148-A.” Although this Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under section 148A(d) or issuing a notice under section 148. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable.”
4.2 On bare reading of the above extract of the judgement of Hon’ble Supreme Court in the case of Rajeev Bansal (supra), we find that the Hon’ble Supreme Court had clarified as under:
1. Under this substituted provisions of reassessment as introduced by the Finance Act, 2021, the assessing officer is required to obtain prior approval or sanction of the “specified authority” at four stages.
i. At the stage u/s 148A (a);
ii. At the second stage u/s 148A(b);
iii. At the third stage u/s 148A(d); and
iv. At the fourth stage u/s 148
2. In the case of Ashish Agrawal (supra), the Hon’ble Supreme Court waived off the requirement of obtaining prior approval u/s 148A(a) and section 148A(b) of the Act only. Therefore, the assessing officer was required to obtain prior approval of the “specified authority” according to section 151 of the new regime before passing an order u/s 148A(d) or for issuing a notice u/s 148 of the Act.
3. Under the new regime, if income escaping assessment is more than Rs.50 lakhs, a reassessment notice could be issued after the expiry of 3 years from the end of the relevant assessment year only after obtaining the prior approval of the principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
4. Section 151 (ii) of the substituted provisions (the new regime) mandates obtaining approval of a higher authority, if more than 3 years have elapsed from the end of the relevant assessment year. Thus, non-compliance with the provisions of section 151 vitiates the jurisdiction of the assessing officer to issue a notice u/s 148 of the Act.
5. The grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction u/s 148 to issue a reassessment notice.
4.3 Further, the identical facts were involved before the Hon’ble High Court of Bombay in the case of Ramesh Bachulal Mehta Vs. Income Tax Officer (2025) 177 Taxmann.com 606 (Bom), wherein the order u/s 148A(d) of the Act for the assessment year 2016-17 was passed on 13.7.2022 after obtaining prior approval from the Principal Commissioner of Income Tax – 27, Mumbai. The Hon’ble Bombay High Court held that the period of 3 years from the end of the assessment year 2016-17 r.w.s. 3 (1) of the Taxation & Other laws (Relaxation & Amendment of certain provisions) Act, 2020 (for short, “TOLA”) expired on 30.06.2021. The authority specified u/s 151(i) of the Act could have granted sanction till 30.6.2021. However, the aforesaid order u/s 148A (d) of the Act was passed on 13.7.2022 which was after the expiry of 3 years from the end of the assessment year 2016-17. In such a case, the authority specified u/s 151 (ii) of the Act i.e. the Principal Chief Commissioner (PCCIT) or Principal Director General (PDGIT) or where there is no PCCIT or PDGIT, the Chief Commissioner (CCIT) or the Director General (DGIT) was required to grant approval. Since the approval was obtained from the authority specified u/s 151 (i) of the new regime instead of the authority specified u/s 151 (ii) of the Act, non-compliance with the provisions of section 151 of the Act vitiated the jurisdiction of the Income Tax authorities to issue a notice u/s 148 of the Act.
4.4 In the present case, the period of 3 years from the end of the assessment year 2016-17 read with TOLA, fell for completion on 30.6.2021. The authority specified u/s 151(i) of the Act under new regime could have granted sanction only till 30.6.2021. However, on perusal of the order u/s 148A (d) as well as notice u/s 148 of the Act both dated 29.7.2022, we find that the aforesaid order/notice was issued after taking approval from the Principal Commissioner of Income Tax, Hubbali on 27.7.2022 vide letter in F. No. 148A(d)/Pr.CIT/HBL/2022-23. Since the aforesaid order/notice was issued after the expiry of 3 years from the end of the assessment year 2016-17, as per the substituted provisions of reassessment, the authority specified u/s 151(ii) of the Act i.e. the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or the Director General was required to grant approval. Accordingly, we are of the opinion that in the present case, the approval has been obtained from the authority specified u/s 151(i) of the new regime instead of the authority specified u/s 151(ii) of the new regime and accordingly the non-compliance with the provisions contained in section 151(ii) of the Act vitiates the jurisdiction of the assessing officer to issue notice u/s 148 of the Act.
4.5 Before us, the ld. standing counsel vehemently argued that the period of three years for the purposes of section 151(i) of the Act shall be computed after taking into account the period of limitation as excluded by the 3rd or 4th or 5th provisos or extended by the 6th proviso to section 149(1) of the Act and accordingly submitted that the time or extended time allowed to the assessee as per the show cause notice issued u/s 148A(b) of the Act shall be excluded. Further the ld. DR submitted that where immediately after the exclusion of the period above, the period of limitation available to the AO for passing an order u/s 148A(d) of the Act does not exceed 7 days, such remaining period shall be extended to 7 days and the period of limitation under this sub-section shall be deemed to be extended accordingly. We are not inclined to agree with the argument of the ld. counsel as the proviso to section 151 of the Act was inserted by the Finance Act, 2023 w.e.f 01/04/2023 only whereas the Order u/s 148A(d) & notice u/s 148 of the Act were issued on 29/07/2022. We are of the considered opinion that the provisions of section 151 of the Act as existed on the date of issuance of order u/s 148A(d) of the Act as well as issuance of notice u/s 148 of the Act is to be seen. In Assistant Commissioner of Income-tax v. Godrej Industries Ltd. [2024] 160 taxmann.com 13 (Bombay), for AY 2014-15, the High Court held that the validity of a notice must be judged on the law existing on the date of issuance of the Section 148 notice.
4.6 We are clearly of the view that the present matter stands covered by the decision of Hon’ble Supreme Court in the case of Union of India Vs. Rajeev Bansal (supra) and the decision of the Hon’ble Bombay High Court in the case of Ramesh Bachulal Mehta (supra) and accordingly, we held that the order dated 29.7.2022 passed u/s 148A(d) of the Act and the consequential notice issued u/s 148 of the Act both dated 29.7.2022 are bad in law for being violative of the provisions of section 151 (ii) of the Act. Hence, they are required to be quashed and set aside. Accordingly, the consequential reassessment order dated 28.05.2023 passed u/s. 147 of the Act are also set aside and quashed. Since, we have adjudicated one of the legal ground in favour of the assessee, other grounds raised by the assessee becomes academic.
5. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 17thAug, 2026
