Somil Exim LLP Vs ITO (ITAT Mumbai)
WRONG SANCTION, WRONG JURISDICTION—APPROVAL OF PCIT CANNOT SUBSTITUTE HIGHER AUTHORITY MANDATED U/S 151(ii)
Facts
The assessee, Somil Exim LLP, challenged an appellate order dated 11 March 2026 passed by the NFAC, Delhi, for AY 2017-18. The appeal raised several grounds questioning both the validity of the reassessment proceedings & the addition made by the AO.
The reassessment proceedings had been initiated after the statutory changes introduced by the Finance Act, 2021 & the Supreme Court’s decision in Union of India v. Ashish Agarwal. The AO passed an order u/s 148A(d) on 29 July 2022 & issued the consequential notice u/s 148 on the very same date.
Before passing the order u/s 148A(d), the AO obtained approval from the Principal Commissioner of Income Tax. The reassessment was thereafter completed u/s 147 r.w.s. 144B, making an addition of ₹1,68,63,300. The CIT(A) upheld the action of the AO.
Before the Tribunal, the assessee requested that Ground No. 5, challenging the validity of the sanction obtained u/s 151, be taken up first since it went to the very root of the AO’s jurisdiction.
Assessee’s Contention
The assessee argued that the relevant assessment year was AY 2017-18, while the order u/s 148A(d) & notice u/s 148 were issued on 29 July 2022. Thus, more than three years had elapsed from the end of the relevant assessment year when the reassessment proceedings were initiated.
In such circumstances, the applicable provision was section 151(ii). Approval was therefore required from the Principal Chief Commissioner, Principal Director General, Chief Commissioner or Director General, as applicable.
Instead, approval had been obtained from the Principal Commissioner. The Principal Commissioner is one of the specified authorities under section 151(i), applicable where three years or less have elapsed from the end of the relevant assessment year. The assessee contended that an authority competent under section 151(i) could not exercise the statutory power specifically entrusted to the higher authority under section 151(ii).
Reliance was placed on the jurisdictional Bombay High Court’s judgment in Alag Property Construction Private Limited v. ACIT & the Mumbai Tribunal’s decision in Sudhir Motiram Patil.
The Department supported the orders of the lower authorities & maintained that the reassessment proceedings were valid.
The Statutory Divide U/s 151
The Tribunal examined the amended provisions of section 151, which prescribe two distinct levels of approving authority depending upon the time elapsed from the end of the relevant assessment year.
Where three years or less have elapsed, approval may be granted by the Principal Commissioner, Principal Director, Commissioner or Director under section 151(i).
However, where more than three years have elapsed, section 151(ii) requires approval from the Principal Chief Commissioner or Principal Director General or, where such authority does not exist, the Chief Commissioner or Director General.
The Tribunal observed that this was not merely an internal administrative arrangement. The Legislature had consciously prescribed a higher approving authority for reassessment proceedings commenced beyond three years. Compliance with this requirement was therefore a jurisdictional precondition for issuing notice u/s 148.
ITAT’s Findings
For AY 2017-18, three years from the end of the relevant assessment year expired on 31 March 2021. The order u/s 148A(d) & notice u/s 148 were issued on 29 July 2022, well beyond that period. Consequently, approval was mandatorily required from the authority specified u/s 151(ii).
Admittedly, the approval was granted only by the Principal Commissioner. The Tribunal held that such approval did not satisfy the statutory requirement.
The issue was directly covered by Alag Property Construction Private Limited v. ACIT, where the Bombay High Court considered reassessment proceedings for AY 2017-18 initiated beyond three years. The High Court held that approval from the Principal Commissioner, who was an authority contemplated under section 151(i), could not substitute approval from the higher authority prescribed u/s 151(ii). Non-compliance with the statutory sanction requirement vitiated the jurisdiction to issue notice u/s 148.
The same principle was followed by the Mumbai Tribunal in Sudhir Motiram Patil, where a notice u/s 148 issued for AY 2017-18 with the approval of the Principal Commissioner was declared void ab initio because the proceedings had been initiated after more than three years.
Applying these binding precedents, the Tribunal held that the defect in the present case went to the root of the AO’s jurisdiction. It could not be regarded as a minor procedural irregularity or cured merely because some approval had, in fact, been obtained.
Decision
The approval granted by the Principal Commissioner was held to be invalid for the purposes of section 151(ii). Consequently, the order u/s 148A(d) & the notice u/s 148, both dated 29 July 2022, were quashed.
As the jurisdictional foundation itself failed, the consequential reassessment order passed u/s 147 r.w.s. 144B also could not survive. The other grounds challenging the addition of ₹1,68,63,300 became academic & were not adjudicated.
The assessee’s appeal was allowed.
Key Takeaway
When reassessment is initiated after three years, sanction must come from the higher authority expressly named u/s 151(ii). Approval by the PCIT is not “substantial compliance.” A sanction from the wrong authority is no sanction in law—and when the statutory gatekeeper is wrong, the entire reassessment must fall.
Cases Discussed
- Alag Property Construction Private Limited v. ACIT [2025] 179 taxmann.com 578 (Bombay)
- Sudhir Motiram Patil, ITA No.6190/Mum/2025, dated 30.01.2026
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order dated 11.03.2026, passed by the National Faceless Appeal Centre, Delhi [“NFAC (Delhi)”], under section 250 read with section 254 of the Income-tax Act, 1961 (“the Act”), for assessment year 2017-18.
2. The assessee has raised various grounds of appeal challenging the validity of the reassessment proceedings as well as the additions made by the Assessing Officer. However, at the time of hearing, the learned Authorised Representative (“ld.AR”) submitted that ground No. 5, which challenges the validity of the approval/sanction granted under section 151 of the Income-tax Act, 1961, goes to the root of the jurisdiction assumed by the Assessing Officer and, therefore, the same may be adjudicated first. Accordingly, we proceed to adjudicate ground No. 5.
3. Briefly stated, the assessee is a firm and the assessment year involved is A.Y. 2017-18. The original reassessment proceedings were initiated pursuant to the notice issued under section 148 of the Act. The relevant factual position, as emerging from the assessment order and the material placed on record, is that the reassessment proceedings in respect of A.Y. 2017-18 were initiated after the statutory changes brought about by the Finance Act, 2021 and after the decision of the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal. The order under section 148A(d) was passed on 29.07.2022 and the consequential notice under section 148 was also issued on 29.07.2022. The approval for passing the order under section 148A(d) was obtained from the Principal Commissioner of Income Tax. Subsequently, the Assessing Officer completed the reassessment under section 147 read with section 144B of the Act and made an addition of Rs.1,68,63,300/-. The assessee carried the matter in appeal before the learned Commissioner of Income Tax (Appeals), who upheld the action of the Assessing Officer. Aggrieved thereby, the assessee is in appeal before the Tribunal.
4. During the course of hearing before us, the ld.AR submitted that the assessment year involved is A.Y. 2017-18 and the order under section 148A(d) as well as the consequential notice under section 148 were issued on 29.07.2022, i.e. after expiry of three years from the end of the relevant assessment year. He submitted that, in such circumstances, the approval required under section 151(ii) of the Act was required to be obtained from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, as the case may be, whereas in the present case the approval was obtained from the Principal Commissioner of Income Tax. It was therefore submitted that the approval was not granted by the authority specified under section 151(ii) of the Act and consequently the order passed under section 148A(d) and the notice issued under section 148 were without valid jurisdiction. The ld.AR relied upon the judgment of the Hon’ble jurisdictional High Court in the case of Alag Property Construction Private Limited v. ACIT, reported in [2025] 179 taxmann.com 578 (Bombay), and also relied upon the decision of the coordinate Bench of the Tribunal, Mumbai, in the case of Sudhir Motiram Patil, ITA No.6190/Mum/2025, dated 30.01.2026.
5. The learned Departmental Representative (“ld.DR”), on the other hand, relied upon the orders passed by the lower authorities and supported the validity of the reassessment proceedings. It was submitted that the Assessing Officer had proceeded in accordance with the provisions of the Act and that the assessment order passed pursuant to the reopening proceedings was valid. Accordingly, the ld.DR submitted that the order of the learned Commissioner of Income Tax (Appeals) deserved to be upheld.
6. We have heard the rival submissions and perused the material available on record. We have also carefully considered the provisions of section 151 of the Act and the judicial precedents relied upon by the ld.AR. Section 151, as applicable to the reassessment proceedings under the amended regime, specifies the authority competent to grant approval for the purposes of section 148 and section 148A. Where three years or less than three years have elapsed from the end of the relevant assessment year, the specified authority is the Principal Commissioner or Principal Director or Commissioner or Director, whereas where more than three years have elapsed from the end of the relevant assessment year, the specified authority is the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, as the case may be.
7. In the present case, the assessment year involved is A.Y. 2017-18. The period of three years from the end of the relevant assessment year had expired before the order under section 148A(d) was passed on 29.07.2022 and before the consequential notice under section 148 was issued on the same date. Therefore, the applicable provision is section 151(ii) of the Act. The material available on record, however, shows that the approval for the order under section 148A(d) was obtained from the Principal Commissioner of Income Tax and not from the authority specified under section 151(ii).
8. The issue is no longer res integra in the facts before us. The Hon’ble jurisdictional High Court in Alag Property Construction Private Limited v. ACIT, [2025] 179 taxmann.com 578 (Bombay), while considering the reassessment proceedings for A.Y. 2017-18, examined the requirement of approval under section 151 where the order under section 148A(d) and the notice under section 148 were issued after expiry of three years from the end of the relevant assessment year. The Hon’ble High Court held that, in such circumstances, the approval was required to be obtained from the authority specified under section 151(ii) and that approval from the Principal Commissioner, being the authority contemplated under section 151(i), was not sufficient. The Hon’ble High Court further held that non-compliance with the statutory requirement relating to the specified authority vitiated the jurisdiction to issue the notice under section 148 and consequently quashed the order passed under section 148A(d) and the consequential notice under section 148.
9. The aforesaid principle was subsequently followed by the coordinate Bench of the Tribunal, Mumbai, in the case of Sudhir Motiram Patil in ITA No.6190/Mum/2025, order dated 30.01.2026. In that case also, concerning A.Y. 2017-18, the Tribunal examined the requirement of approval under section 151 and noted that where more than three years had elapsed from the end of the relevant assessment year, the specified authority under section 151(ii) was required to grant the approval. Since the approval had been obtained from the Principal Commissioner instead of the authority specified under section 151(ii), the Tribunal held the notice issued under section 148 to be void ab initio and bad in law and consequently quashed the reopening proceedings and the assessment order passed under section 147 read with section 144B.
10. Applying the aforesaid legal position to the facts of the present case, we find that the order under section 148A(d) and the consequential notice under section 148 were issued on 29.07.2022 in respect of A.Y. 2017-18, i.e. after the expiry of three years from the end of the relevant assessment year. Consequently, the approval contemplated under section 151(ii) was required to be obtained from the specified higher authority. Admittedly, the approval in the present case was obtained from the Principal Commissioner of Income Tax. Such approval does not satisfy the requirement of section 151(ii) applicable to the facts of the present case. The defect goes to the root of the jurisdiction of the Assessing Officer to assume jurisdiction under section 148 and cannot be treated as a mere procedural irregularity.
11. In view of the above discussion and respectfully following the judgment of the Hon’ble jurisdictional High Court in Alag Property Construction Private Limited v. ACIT, [2025] 179 taxmann.com 578 (Bombay), as followed by the coordinate Bench of the Tribunal in Sudhir Motiram Patil, ITA No.6190/Mum/2025, dated 30.01.2026, we hold that the approval obtained from the Principal Commissioner of Income Tax was not the approval contemplated under section 151(ii) of the Act for the reassessment proceedings in respect of A.Y. 2017-18. Consequently, the order passed under section 148A(d) dated 29.07.2022 and the consequential notice issued under section 148 dated 29.07.2022 are held to be invalid and are hereby quashed. As a consequence thereof, the reassessment proceedings initiated pursuant to the said notice and the assessment order passed under section 147 read with section 144B of the Act also cannot survive and are accordingly quashed.
12. Since the reassessment proceedings themselves are held to be without valid jurisdiction and the assessment order is quashed on the jurisdictional ground, the other grounds raised by the assessee challenging the addition of Rs.1,68,63,300/- do not require separate adjudication and are rendered academic.
13. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 08.09.2026.
