Joana Diago Dsouza Vs ITO (ITAT Mumbai)
Summary: The Mumbai Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeal against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for Assessment Year 2017–18. The reassessment had been initiated after information was received from the DIT (Investigation & Criminal Intelligence), Mumbai that the assessee had purchased an immovable property at a value lower than the value adopted by the Stamp Valuation Authority.
The assessee had not filed a return of income for AY 2017–18. After an order under section 148A(d), notice under section 148 was issued on 26 July 2022. The assessee filed a return declaring income of Rs. 3,48,550. During reassessment, the Assessing Officer noted that the assessee had jointly purchased a flat with her granddaughter for Rs. 1,29,10,500, whereas the stamp duty value was Rs. 1,42,90,000. The Assessing Officer applied section 56(2)(vii)(b) and brought to tax Rs. 6,89,750, being 50% of the difference. The reassessment order dated 13 April 2023 determined total income at Rs. 10,38,300.
The CIT(A), by order dated 17 October 2025 under section 250, dismissed the assessee’s appeal ex parte, upheld the reopening under section 147, confirmed the addition of Rs. 6,89,750 under section 56(2)(vii)(b), and upheld initiation of penalty under section 270A.
Before the Tribunal, the assessee challenged the validity of the reopening, contending that the notice under section 148 dated 26 July 2022 had been issued beyond three years from the end of the relevant assessment year and that approval by PCIT-20, Mumbai, instead of the authority specified under section 151(ii), was invalid. The assessee also challenged other aspects of the reopening and the addition, including the value and date relevant for determining the stamp duty value, the purchase consideration, interest and penalty.
The Departmental Representative opposed admission of the jurisdictional ground, submitting that it had been raised for the first time before the Tribunal and that the CIT(A)’s order was ex parte. The Tribunal, however, held that the ground went to the root of jurisdiction and did not require fresh investigation of facts. It therefore admitted the ground for adjudication.
The Tribunal noted that the notice under section 148 had been issued on 26 July 2022 for AY 2017–18, beyond three years from the end of the relevant assessment year. It held that section 151(ii) was therefore applicable and that prior approval of the specified authority, i.e. PCCIT, was mandatory. Since approval in the present case had been granted by PCIT-20, Mumbai, the Tribunal held that the approval was not in accordance with law.
The Tribunal relied upon the Bombay High Court decision in Chitra Supekar, [2023] 149 taxmann.com 26, which, as recorded in the supplied order, held that sanction from PCCIT contemplated under section 151(ii) ought to have been obtained where the order was sought to be passed beyond three years.
The Tribunal also relied upon Prakash Pandurang Patil Vs ITO, [2025] 177 taxmann.com 552, where the Bombay High Court, as reproduced in the supplied order, held that where reassessment proceedings were initiated after expiry of three years from the end of the relevant assessment year, sanction for issuance of notice under section 148 was required from the authority specified under section 151(ii), rather than an authority of a lower rank under section 151(i).
The supplied order further records the High Court’s discussion of Siemens Financial Services Pvt. Ltd. and Vodafone Idea Ltd. v. Dy. CIT. In the reproduced discussion, the High Court considered the effect of section 151, the amendment by the Finance Act, 2021 and TOLA, and stated that approval obtained under section 151(i) where section 151(ii) applied was invalid.
The Tribunal recorded that the Bombay High Court decision in Prakash Pandurang Patil had been carried by the Revenue before the Supreme Court and that the Supreme Court in Income Tax Officer v. Prakash Pandurang Patil, [2025] 178 taxmann.com 8 dismissed the SLP. The Tribunal consequently stated that the High Court’s ratio that sanction under section 151(ii) was mandatory in cases beyond three years, and that approval by PCIT was invalid, stood affirmed by the Supreme Court.
Respectfully following these precedents, the Tribunal held that the approval obtained from PCIT-20, Mumbai was not in accordance with law. It consequently held that the notice issued under section 148 and the reassessment proceedings were liable to be quashed.
Since the reassessment proceedings were quashed on the jurisdictional legal ground, the Tribunal did not adjudicate the remaining grounds on merits, including the challenge to the addition under section 56(2)(vii)(b). The Tribunal accordingly allowed the assessee’s appeal. The order was pronounced in the open court on 18 May 2026.
Cases Discussed
- Chitra Supekar, [2023] 149 taxmann.com 26 — considered on the requirement of sanction from PCCIT under section 151(ii) where reassessment proceedings are initiated beyond three years.
- Prakash Pandurang Patil v. ITO, [2025] 177 taxmann.com 552 — relied upon for the proposition, as recorded by the Tribunal, that sanction under section 151(ii) is required where reassessment proceedings are initiated after expiry of three years.
- Siemens Financial Services Pvt. Ltd. v. Deputy Commissioner of Income Tax & Ors. — referred to in the reproduced Bombay High Court reasoning concerning the requirement of sanction under section 151(ii) and the invalidity of sanction under section 151(i) in the circumstances discussed.
- Vodafone Idea Ltd. v. Dy. CIT, Writ Petition No. 2768 of 2022, dated 6 February 2024 — referred to as a subsequent decision following Siemens Financial Services Pvt. Ltd. on the validity of sanction and consequential reassessment proceedings.
- Income Tax Officer v. Prakash Pandurang Patil, [2025] 178 taxmann.com 8 — the Tribunal recorded that the Supreme Court dismissed the Revenue’s SLP against the Bombay High Court decision.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi[hereinafter referred to as “CIT(A)”], under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]dated 17.10.2025 for Assessment Year 2017–18 arising out of the assessment order passed under section 143(3) read with section 147 read with section 144B of the Act dated 13.04.2023.
Facts of the Case
2. The assessee an individual had not filed return of income for the A.Y. 2017-18. The assessment for the year under consideration was reopened on the basis of information received from DIT (Investigation & Criminal Intelligence), Mumbai indicating that the assessee had purchased an immovable property at a value lower than the value adopted by the Stamp Valuation Authority.
3. Notice under section 148 was issued on 26.07.2022 after passing order under section 148A(d). The assessee filed return of income in response to notice u/s 148 declaring income of Rs. 3,48,550/-. During the assessment proceedings, it was observed that the assessee had purchased a flat jointly with her granddaughter for a consideration of Rs. 1,29,10,500/- whereas the stamp duty value was Rs. 1,42,90,000/-. The Assessing Officer held that the provisions of section 56(2)(vii)(b) were applicable and brought to tax Rs. 6,89,750/- being 50% share of the difference. The reassessment was completed under section 143(3) read with section 147 read with section 144B vide order dated 13.04.2023 determining total income at Rs. 10,38,300/- as against returned income of Rs. 3,48,550/-.
4. The assessee carried the matter in appeal before the CIT(A), NFAC. The CIT(A) vide order dated 17.10.2025 passed under section 250 dismissed the appeal ex-parte. The CIT(A) upheld the validity of reopening under section 147 and confirmed the addition of Rs. 6,89,750/- under section 56(2)(vii)(b). The initiation of penalty under section 270A was also upheld.
5. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal;
1. In the facts and circumstances of the case and in law, the learned AO erred in reopening the assessment u/s 148 dated 26-7-22, even though the
a. Amount below Rs 50 lacs beyond 3 years is impressible
b. Approval by PCIT instead of PCCIT was invalid and the same is without DIN
c. Notice dated 26-7-2022 is without DIN
d. Approval is mechanical
e. No asset is found
f. Same reopened by JAO instead of FAO
g. without granting an opportunity of hearing
2. In the facts and circumstances of the case and in law, the learned AO erred in adding the income of Rs. /- u/s 56(2)(x) which is 50% of Rs. 6,89,750/- by way of difference between the Purchase Consideration for Flat amounting to Rs. 1,29,10,500/- and Stamp Duty Value of the said flat as on 11-8-2016, being agreement date instead of correct date 23-6-2015, viz, the date when the Appellant had made first payment to the developer as per allotment letter.
3. In the facts and circumstances of the case and in law, the AO erred by considering only Rs. 1,29,10,500 /- as Purchase Consideration of full flat instead of Rs. 1,45,73,642 being the actual purchase consideration, stamp duty, registration charges and society charges paid as per the agreement and claimed during the Assessment Proceedings which were ignored by the AO.
4. In the facts and circumstances of the case and in law, the Assessing Officer erred in charging interest u/s 234A, B, C and D and initiating penalty u/s 270A
5. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (A) erred in confirming the same additions without considering the facts filed by the Appellant and without providing an opportunity of personal hearing through video conferencing.
The assessee prayed,
1. To quash the reopening which is null and void
2. To delete addition of Rs. 6,89,750/- u/s 56(2)(x)
3. To adopt correct value of purchase price
4. To delete the interest u/s 234A, B, C and D & initiation of penalty u/s 270A.
6. During the course of hearing before us, the learned Authorised Representative (AR) submitted that Ground No. 1 raised by the assessee is a pure legal ground which goes to the root of the jurisdiction and does not require any fresh investigation of facts. It was contended that the said ground is based on settled judicial precedents and therefore is admissible even if raised for the first time before the Tribunal. The learned AR submitted that in the present case, the order under section 148A(b) and the consequent notice issued under section 148 dated 26.07.2022 have been issued after obtaining approval from PCIT-20, Mumbai. It was argued that such approval is not in accordance with law and judicial precedents governing sanction under section 151, and therefore the reopening is bad in law and liable to be quashed.
7. The learned AR placed reliance on the judgment of the Hon’ble Bombay High Court in the case of Chitra Supekar [2023] 149 taxmann.com 26and the judgement of the Hon’ble Supreme Court in the case of Prakash Pandurang Patil v. ITO [2025] 177 taxmann.com 552
8. Per contra, the learned Departmental Representative submitted that the order of the CIT(A) is ex-parte in nature and the assessee has not participated in the appellate proceedings despite being afforded multiple opportunities. It was further submitted that the legal ground challenging the validity of reopening has been raised for the first time before the Tribunal and was not agitated before the lower authorities. The learned DR, therefore, contended that in the absence of proper factual foundation and participation by the assessee at earlier stages, the order of the CIT(A) deserves to be upheld.
9. We have heard the rival submissions and perused the material available on record. The primary issue for adjudication is whether the reassessment proceedings initiated under section 147 are valid in law.
10. At the outset, it is noted that the legal ground raised by the assessee goes to the root of jurisdiction and does not require any fresh investigation of facts. It is settled law that such a ground can be raised for the first time before the Tribunal. Accordingly, the same is admitted for adjudication.
11. It is an undisputed fact that the notice under section 148 has been issued on 26.07.2022 for Assessment Year 2017–18, which is beyond three years from the end of the relevant assessment year. Therefore, the provisions of section 151(ii) are applicable and prior approval of the specified authority i.e. PCCIT is mandatory. In the present case, the approval has been granted by PCIT-20, Mumbai. This issue is no longer res integra.
12. The Hon’ble Bombay High Court in the case of Chitra Supekar (supra)has held that sanction from PCCIT as contemplated under section 151(ii) ought to have been taken when order was sought to be passed beyond period of three years. Consequently, order was set aside for non-compliance with provisions of Act. Further, the Hon’ble jurisdictional High Court in the case of Prakash Pandurang Patil v. ITO[2025] 177 taxmann.com 552 has categorically held that where the reassessment proceedings are initiated after expiry of three years from the end of the relevant assessment year, the sanction for issuance of notice under section 148 is required to be granted by the authority specified under section 151(ii) and not by an authority of a lower rank under section 151(i). The Hon’ble High Court observed as under:
7.In Siemens Financial Services Pvt. Ltd., this Court held that the sanction as granted by the authority would be rendered invalid in the case it is not issued by the authorities specified in Clause (ii) in the event reassessment proceedings were initiated well after the expiry of three years from the end of the relevant assessment year. The following observations as made in Siemens Financial Services Pvt. Ltd. are required to be noted, which reads thus:
“24. As per section 151 of the Act, the ‘specified authority’ who has to grant his sanction for the purposes of section 148 and section 148A is the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year. The present petition relates to the AY 2016-17, and as the impugned order and impugned notice are issued beyond the period of three years which elapsed on 31 st March, 2020 the approval as contemplated in section 151 (ii) of the Act would have to be obtained which has not been done by the Assessing Officer. The impugned notice mentions that the prior approval has been taken of the ‘Principal Commissioner of Income-tax – 8’ (‘PCIT-8’) which is bad in law as the approval should have been obtained in terms of section 151 (ii) and not section 151 (i) of the Act and the PCIT-8 cannot be the specified authority as per section 151 of the Act. Further, even in the affidavit-in-reply, the department as accepted that the approval obtained is of the ‘Principal Commissioner of Income- tax – 8’ and, hence, such an approval would be bad in law.
25. TOLA, enacted on 29th September 2020 and came into force on 31st March 2020. It inter alia, provided for a relaxation of certain provisions of the Income-tax Act, 1961. Where any time limit for completion or compliance of an action such as completion of any proceedings or passing of any order or issuance of any notice fell between the period 20th March 2020 to 31st December 2020, the time limit for completion of such action stood extended to 31st March 2021. Thus, TOLA only seeks to extend the period of limitation and does not affect the scope of section 151.
26. The Assessing Officer cannot rely on the provisions of TOLA and the notifications issued there under as section 151 has been amended by Finance Act, 2021 and the provisions of the amended section would have to be complied with by the Assessing Officer, w.e.f., 1st April 2021. Hence, the Assessing Officer cannot seek to take the shelter of TOLA as a subordinate legislation cannot override any statute enacted by the Parliament. Further, the notification extending the dates from 31st March 2021 till 30th June 2021cannot apply once the Finance Act, 2021 is in existence. The sanction of the specified authority has to be obtained in accordance with the law existing when the sanction is obtained and, therefore, the sanction is required to be obtained by applying the amended section 151 (ii) of the Act and since the sanction has been obtained in terms of section 151 (i) of the Act, the impugned order and impugned notice are bad in law and should be quashed and set aside.”
8. The decision in Siemens Financial Services (P.) Ltd (supra) was subsequently followed in Vodafone Idea Ltd. v. Dy. CIT [Writ Petition No.2768 of 2022, dated 6-2-2024] where the Court made the following observations:
“3. The impugned order and the impugned notice both dated 7 th April, 2022 state that the Authority has accorded the sanction is the PCIT, Mumbai-5, The matter pertains to Assessment Year (AY) 2018-19 and since the impugned order as well as the notice are issued on 7th April, 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCIT as provided under Section 151 (ii) of the Act. The proviso to Section 151 has been inserted only with effect from 1st April,2023 and therefore, shall not be applicable to the matter at hand.
4. In these circumstances, as held by this Court in Siemens Financial Services Private Ltd. v. Deputy Commissioner of Income Tax & Ors., the sanction is invalid and consequently, the impugned order and impugned notice both dated 7th April, 2022 under section 148A(d) and 148 of the Act are hereby quashed and set aside.”
9. In the light of the above discussion, and when there is no dispute that the Jurisdictional Assessing Officer(JAO) had no jurisdiction to issue the impugned order and the impugned notices, the writ petition is required to be allowed.
13. The aforesaid decision of the Hon’ble jurisdictional High Court has been carried in appeal by the Revenue before the Hon’ble Supreme Court. The Hon’ble Supreme Court in Income Tax Officer v. Prakash Pandurang Patil [2025] 178 taxmann.com 8 has dismissed the SLP.
14. Thus, the ratio laid down by the Hon’ble jurisdictional High Court, to the effect that sanction under section 151(ii) is mandatory in cases beyond three years and approval by PCIT is invalid, stands affirmed by the Hon’ble Supreme Court.
15. Respectfully following the binding judicial precedents, we hold that the approval obtained from PCIT-20, Mumbai in the present case is not in accordance with law. Consequently, the notice issued under section 148 and the reassessment proceedings are liable to be quashed.
16. Since we have quashed the reassessment proceedings on the legal ground, the other grounds raised on merits including addition under section 56(2)(vii)(b) are rendered academic and are not adjudicated.
17. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 18.05.2026.
