Wrong Section 151 Sanction Invalidates Reassessment and Penalty: ITAT Delhi

Amitabh Tayal Vs ITO (ITAT Delhi)

Summary: ITAT Delhi allowed two appeals of the assessee concerning AY 2017-18—ITA No. 636/Del/2026 relating to the quantum assessment and ITA No. 637/Del/2026 relating to penalty under Section 271AAC(1) of the Income-tax Act, 1961. In the quantum proceedings, an investigation concerning Shri Joginder Pal Gupta, described as an entry operator, led to an allegation that the assessee had benefited from bogus entries provided through a shell company controlled by him. The Assessing Officer treated an unsecured loan of Rs.2.25 crore as income under Section 69D. The assessee’s first appeal was dismissed in limine by the CIT(A)-NFAC because a six-month delay in filing the appeal was not condoned. Before the Tribunal, apart from challenging the orders below, the assessee raised a jurisdictional objection that approval under Section 151 had been obtained from the PCIT rather than the statutorily designated higher authority.

The assessee relied upon the Supreme Court decision in Union of India v. Rajeev Bansal, reported in 469 ITR 46 (SC), and contended that for AY 2017-18 the PCIT could grant sanction, even after taking the benefit of TOLA, only up to 30.06.2021. The notice under Section 148 was, however, issued on 18.07.2022 after approval from PCIT-12, Delhi. The Tribunal noted that paragraphs 77-78 of Rajeev Bansal specifically illustrate the position for AY 2017-18: even after the extended TOLA period, the authority specified under Section 151(i), namely the PCIT, could grant sanction only up to 30.06.2021. As a logical corollary, a notice issued thereafter beyond three years required prior approval of the PCCIT under Section 151(ii).