ITAT Chennai Quashes Reassessment for Invalid Section 151 Approval After Three Years

Jagadhaeswaran Vivekanandhan Vs Assessing Officer (ITAT Chennai)

After Three Years, PCIT’s Signature Is Not Enough -Notice u/s 148 Requires PCCIT-Level Sanction u/s 151(ii): Chennai ITAT

The Chennai ITAT has held that where a notice u/s 148 is issued after expiry of three years from the end of the relevant assessment year, prior approval must be obtained from the higher authority specified u/s 151(ii), namely the PCCIT, Principal Director General, Chief Commissioner or Director General.

Approval granted merely by the PCIT for such a notice is without jurisdiction. Since the notice for AY 2017-18 was issued on 26.07.2022—well beyond three years—with the sanction of the PCIT instead of the PCCIT-level authority, the Tribunal quashed the reassessment proceedings.

Facts of the Case

The assessee was an individual who had not originally filed his return of income for AY 2017-18.

The AO received information that the assessee had sold immovable property during the relevant year. Since no return had been filed, the AO issued a notice u/s 148 on 21.04.2021 under the erstwhile reassessment regime.

Following the Supreme Court’s decision in Union of India v. Ashish Agarwal, the old notice was treated as a show-cause notice u/s 148A(b) under the substituted reassessment provisions.

After seeking the assessee’s response, the AO passed an order u/s 148A(d) on 22.07.2022 & issued a fresh notice u/s 148 on 26.07.2022.

In response, the assessee filed his return declaring total income of ₹1,36,100.

The AO completed the reassessment by determining long-term capital gain of ₹15,20,127 from the property transaction. The CIT(A) upheld the assessment.

The assessee approached the Chennai ITAT.

Additional Legal Ground Before ITAT

Before the Tribunal, the assessee raised an additional ground challenging the validity of the notice u/s 148 on the basis that approval had not been obtained from the appropriate specified authority u/s 151.

The Revenue objected to admission of this new ground.

The Tribunal observed that the ground involved a pure jurisdictional question of law & did not require any fresh investigation of facts. Following the Supreme Court’s decision in NTPC Ltd. v. CIT [1998] 229 ITR 383, it admitted the additional ground.

Since the jurisdictional ground went to the root of the assessment, the Tribunal considered it before examining the dispute regarding capital gains on merits.

Assessee’s Argument

The assessee contended that more than three years had expired from the end of AY 2017-18 when the fresh notice u/s 148 was issued on 26.07.2022.

Under s.151(ii) of the new reassessment regime, approval in such cases could be granted only by the PCCIT, Principal Director General, Chief Commissioner or Director General.

However, the AO had obtained approval from the PCIT. Since the sanctioning authority lacked statutory competence, the notice itself was invalid & the AO never acquired jurisdiction to reassess the income.

Section 151 Is a Jurisdictional Safeguard

The Tribunal relied upon the Supreme Court’s decision in Union of India v. Rajeev Bansal, which explained the purpose & operation of s.151 under both the old and new regimes.

Section 151 places an important check upon the AO’s power to reopen assessments. The requirement of obtaining prior sanction from a designated senior authority is intended to protect taxpayers against mechanical or casual reopening.

Under the new regime, where three years or less have elapsed, approval may be granted by the Principal Commissioner, Principal Director, Commissioner or Director.

Where more than three years have elapsed, the statute deliberately requires approval from a higher-level authority—the PCCIT, Principal Director General, Chief Commissioner or Director General.

Thus, the appropriate sanctioning authority is directly linked with the time at which the reassessment notice is issued.

TOLA Extension Did Not Save the Approval

For AY 2017-18, the normal three-year period expired on 31.03.2021. This date fell within the period covered by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020—TOLA.

Consequently, the authority competent under s.151(i), including the PCIT, could have granted sanction during the extended period up to 30.06.2021.

However, the impugned notice was issued only on 26.07.2022, long after expiry of the TOLA extension.

For any sanction granted after 30.06.2021, the applicable authority had to be determined under the new regime. Since more than three years had elapsed, the approval necessarily had to come from the higher authority specified u/s 151(ii).

TOLA extended the relevant deadline; it did not permanently elevate or preserve the PCIT’s authority to sanction notices issued after that extended period.

Supreme Court Had Not Waived Section 151 Approval

The Tribunal noted that in Ashish Agarwal, the Supreme Court had treated old notices u/s 148 as show-cause notices u/s 148A(b).

While exercising its power under Article 142, the Supreme Court had waived certain procedural requirements relating to enquiries u/s 148A(a) & issuance of show-cause notices u/s 148A(b).

However, it had not waived the statutory requirement of obtaining prior approval for passing the order u/s 148A(d) or issuing the fresh notice u/s 148.

Therefore, the AO was still required to obtain sanction from the correct authority under the new s.151.

Binding Coordinate Bench Decision

The Tribunal also relied upon its coordinate Bench decision in Jagathesh v. ACIT, concerning AY 2017-18 & an identical notice issued in July 2022.

That decision held that once the notice was issued after 30.06.2021 & beyond three years, sanction from the PCIT was insufficient. Approval had to be secured from the authority specified u/s 151(ii).

ITAT’s Decision

The Tribunal held that the notice dated 26.07.2022 had been issued beyond three years with approval of the PCIT instead of the competent PCCIT-level authority.

Since sanction by the appropriate authority was a precondition for assumption of jurisdiction, non-compliance invalidated the notice itself.

The reassessment was consequently quashed & the assessee’s appeal was allowed. The Tribunal did not find it necessary to adjudicate the merits of the capital-gains addition.

Author’s Comments

The judgment confirms that approval u/s 151 is not an administrative rubber stamp. Parliament has deliberately prescribed a higher sanctioning authority for older years because reopening after a longer interval requires greater scrutiny.

Consent from an officer who is senior—but not the officer statutorily specified—cannot cure the defect. Jurisdiction must come from the precise authority named by law.

In short, after the three-year clock strikes midnight, the PCIT’s key no longer opens the reassessment door—the AO must obtain the higher-level key prescribed u/s 151(ii).

Cases Discussed

• Union of India v. Rajeev Bansal [2024] 469 ITR 46 (SC)
• Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617]
• National Thermal Power Company Ltd. Vs. CIT [(1998) 229 ITR 383 (SC)]
• Jagathesh vs ACIT, ITA No. 1565/Chny/2025 dated 30.12.2025

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, CHENNAI BENCH

This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 25.02.2026 for Assessment Year (AY) 2017-18.

2. The assessee is an individual and did not file the return of income. The Assessing Officer received information that the assessee has sold property during the year under consideration. Since, the assessee did not file the return of income the Assessing Officer issued notice u/s. 148 of the Act on 21.04.2021. Subsequently, pursuant to the directions of the Hon’ble Supreme Court in the case of Union of India vs. Asish Agarwal (Civil Appeal No. 3005/2022 dated 04.05.2022) the said notice was treated as notice u/s. 148A of the Act. The Assessing Officer after calling for the details u/s. 148A(b) of the Act passed an order u/s. 148A(b) of the Act on 22.07.2022. The Assessing Officer also issued a notice u/s. 148 of the Act on 26.07.2022. The assessee in response to notice u/s. 148 of the Act filed a return of income declaring a total income of Rs.1,36,100/- The Assessing Officer called on the assessee to furnish various details pertaining to the sale of property and after considering the various submissions concluded the long term capital gain to be added in the hands of the assessee at Rs.15,20,127/-. Aggrieved the assessee filed further appeal before the CIT(A) to upheld the order of the Assessing Officer. The assessee is in appeal before the Tribunal against the order of the CIT(A).

3. Before us the assessee raised an additional ground contending the legal issue that the notice issued u/s. 148 of the Act is not valid for the reason that it is issued without obtaining approval from the appropriate authority as mentioned in section 151 of the Act. In support of the admission of this additional ground, the Ld A.R. submitted that it involved only adjudication of substantial question of law and no fresh facts were required to be examined. The Ld DR opposed the admission of additional ground. Taking into consideration the entire conspectus of the facts and circumstances of the case and the additional ground raised before us we are convinced that its adjudication does not require any fresh investigation of facts and involves substantial question of law. Respectfully following the judgement of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT [(1998) 229 ITR 383 (SC)] we admit this additional ground for adjudication. The Ld AR submitted that if the additional ground is adjudicated in favour of the assessee, then the grounds raised on merits would become academic. Therefore, we will first consider the additional ground for adjudication.

4. We heard the parties and perused the material available on record. The primary contention of the ld.AR with regard to the legal issue is that the notice u/s. 148 of the Act dated 26.07.2022 is issued beyond three years and therefore, as per the provisions of section 151, the Assessing Officer ought to have obtained approval from the Principle Chief Commissioner (PCCIT) whereas, the notice u/s. 148 of the Act is issued with the approval of PCIT (page 22 & 23 of paper book). We in this regard notice that the Hon’ble Supreme Court in the case of Union of India vs Rajiv Bansal 2024) 167 Taxmann.com 70 (SC) while dealing with the issue of approval of the specified authority in terms of section 151 of the Act has made the following observations:

“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 assessees from harassment resulting from the mechanical reopening of assessments. (Sri Krishna Pvt. Ltd v. ITO [(1996) 221 ITR 538 (SC); (1996) 9 SCC 534.]) A table representing the prescription under the old and new regime is set out below:

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 April 1, 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 Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], after April 1, 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 Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 to ensure that the interests of the Revenue are not defeated because the Assessing Officer could not comply with the preconditions due to the difficulties that arose during the covid-19 pandemic. Section 3(1) of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 relaxes the time limit for compliance with actions that fall for completion from March 20, 2020 to March 31, 2021. The Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 will accordingly extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whether Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 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 March 20, 2020 and March 31, 2021, then the specified authority under section 151(i) has an extended time till June 30, 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 March 20, 2020 and March 31, 2021, then the specified authority under section 151(2) has time till March 31, 2021 to grant approval. The time limit for section 151 of the old regime expires on March 31, 2021 because the new regime comes into effect on April 1, 2021.

78. For example, the three-year time limit for the assessment year 2017-2018 falls for completion on March 31, 2021. It falls during the time period of March 20, 2020 and March 31, 2021, contemplated under section 3(1) of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till June 30, 2021.

79. Under the Finance Act, 2021 ((2021) 432 ITR (Stat) 52), 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 ([2022] 442 ITR (Stat) 91) [ Section 45, Finance Act, 2022.];

(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 Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], this court directed that section 148 notices which were challenged before various High Courts “shall be deemed to have been issued under section 148A of the Income-tax Act as substituted by the Finance Act, 2021 ((2021) 432 ITR (Stat) 52) and construed or treated to be show-cause notices in terms of section 148A(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) notices. 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, Allahabad v. State of Uttar Pradesh [(2024) 6 SCC 267.] )

81. This court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] directed the Assessing Officers to “pass orders in terms of section 148A(d) in respect of each of the assessees 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 148A”. 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 the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, where applicable.

(emphasis supplied)

5. We further notice that the coordinate bench has considered an identical issue in the case of Jagathesh vs ACIT (ITA No. 1565/Chny/2025 dated 30.12.2025) for AY 2017-18 and held that:

35. From the facts of the case it is noted that the AO in the instant case has issued a notice u/s.148 of the Act on 23.04.2021. Pursuant to the decision of the Supreme Court in UOI v Ashish Agarwal [2022] 444 ITR 1 (SC) the said notice issued u/s.148 on 23.04.2021 was treated as a show cause notice u/s.148A(b) and further an opportunity u/s.148A(b) of the Income Tax Act was given to the assessee. Thereafter since no response was received from the assessee in respect of the show cause notice issued u/s.148A(b), a notice u/s.148 was issued on 27.07.2022. From the notice issued u/s.148 it could be seen that the AO has obtained approval from the Principal Commissioner of Income Tax vide Ref No.: C No.882 / PCIT – 8 / 2002-23 dated 22.07.2022.

36. After a careful reading of the decision of the Hon’ble Supreme Court in Ashish Agarwal (supra) and in UOI v Rajeev Bansal [2024] 469 ITR 46 (SC) we note that in the present case the 3 year time limit for A.Y.2017-18 ended on 31.03.2021 which falls during the time between 20.03.2020 and 31.03.2021 as contemplated by section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). Since the 3 year period lapsed only on 31.03.2021 for the A.Y. 2017-18 and since it fell during the TOLA period, the authorities empowered u/s.151(1) of the old regime i.e. the PCIT could have granted sanction to reopen the assessment till the extended period upto 30.06.2021. However in case where the sanction has to be given after 30.06.2021, then the provisions of section 151 of the new regime would apply and that the sanction ought to have been obtained from the authorities empowered u/s.151(ii) of the Act of the new regime i.e. Principal Chief Commissioner or Principal Director General or Chief Commissioner of Director General of Income Tax.

37. In the instant case, admittedly the AO for issue of notice u/s.148 of the Act dated 27.07.2022, beyond the period of 3 years, has obtained approval from the PCIT who is not the specified authority u/s.151(ii) of the Act.

38. Since the AO has not obtained sanction from the specified authority u/s.151(ii) of the Act for issuing the notice u/s.148 of the Act, we therefore are of the view that the assumption of jurisdiction by the AO to issue notice u/s.148 of the Act is bad in law.

6. In the present case, we notice that the notice u/s. 148 of the Act is issued under the approval of Principle Chief Commissioner of Income-tax-1, Coimbatore on 26.07.2022 i.e. beyond three years and therefore, in our considered view the ratio laid down by the above judicial precedents is applicable to the present case. Accordingly, we hold that the notice issued u/s. 148 of the Act dated 26.07.2022 beyond three years with the approval of PCIT instead of PCCIT is bad in law since, it is not accordance with the provisions of section 151 of the Act.

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

Order pronounced on 10th day of September, 2026 at Chennai.