Prathamik Krishi Pattin Sahakari Sangha Niyamit Kalagurki Vs ITO (ITAT Bangalore)
Bangalore ITAT Quashes Reassessment: PCIT’s Approval Invalid Where Section 151 Required PCCIT/CCIT’s Sanction
The assessee, a primary agricultural co-operative society, had not filed its return for AY 2018-19. Based on information relating to substantial cash deposits, withdrawals and fixed deposits, the AO initiated reassessment and ultimately assessed income at ₹20.47 lakh, including denial of deduction under Section 80P.
The order under Section 148A(d) dated 6 April 2022 and notice under Section 148 dated 7 April 2022 were issued after obtaining approval from the PCIT, Hubli. The Tribunal observed that three years from the end of AY 2018-19 had expired on 31 March 2022. Therefore, under Section 151(ii), the competent approving authority was the PCCIT/PDGIT or, where applicable, the CCIT/DGIT, and not the PCIT.
The ITAT held that approval by the specified authority is a mandatory jurisdictional prerequisite, intended to protect taxpayers against arbitrary reopening. It is a substantive supervisory safeguard requiring due application of mind and cannot be treated as a mere procedural formality or curable technical irregularity.
Accordingly, approval granted by the incompetent authority could not confer jurisdiction upon the AO. The Section 148A(d) order, Section 148 notice and all consequential proceedings and assessment orders were quashed. Since the reassessment itself was annulled, the Tribunal did not examine the merits of the Section 80P claim or the alternative contention that less than the statutory seven days had been allowed to respond to the Section 148A(b) notice.
List of Cases Discussed / Relied Upon
- Prathamik Krishi Pattin Sahakari Sangha Niyamit Kalagurki Vs ITO (ITAT Bangalore)
- CIT Vs. Sahara India (2012) 347 ITR 331
- CIT Vs Indian Bank (2015) 230 Taxman 635 (Madras)
- Gundathur Thimmappa & Sons vs. CIT, Mysore, reported in (1968) 70 ITR 70
- National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383
- M/s Nileshwar Rangekallu Chetu Thozhilali Vyavasaya Sangham Vs. CIT, Appeal No. 120 of 2019, 11 of 2022 dated 14/03/2023
- Pr. CIT vs. M/s. Wipro Limited, Civil Appeal No. 1449 of 2022 dated 11.07.2022
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 21.08.2025 v ide DIN & Order No. ITBA/NFAC/S/250/2025-26/1079846502(1) pas sed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2018-19.
2. The assessee has raised the following grounds of appeal:-
1. The order passed by Learned Assessing officer is bad in law without considering the fact of the case.
2. The order u/s 148A(d) of the Act for the A.Y 2018-19 dated 06/04/2022 vide DIN ITBA/AST/F/148A/2022-23/1042574030(1) and the consequential notice u/s 148 dated 07.04.2022 vide DIN ITBA/AST/S/148_1/2022-23/1042599928(1) are passed/issued by the jurisdictional Assessing officer instead of the Faceless A.O. which is contrary to the e-assessment of Income Escaping Assessment Scheme, 2022, read with CBDT notification no. 18/2022/F.No. 370142/16/2022-TPL dated 29.03.2022 and thus all the proceedings emanating from such invalid notice and order are bad in law and null & void and are liable to be quashed.
3. Appellant reserve the right to add, to alter, to amend and to delete any other grounds at the time of hearing.
3. The assessee has further submitted an application dated 20.02.2026 praying for admission of additional grounds of appeal, which is reproduced below:-
BEFORE THE HON’BLE INCOME TAX APPELLATE TRIBUNAL,
BANGALORE BENCH, BANGALORE.
NAME OF THE APPELLANT: PRATHAMIK KRISHI PATTINSAHAKARI SANGHANIYAMIT KALAGURKI
ADDRESS: HA Niyamit, at PO Kalagurke Tq BasavanaBagewadi, Bijapur-Karnataka-586001
PAN: AACAP0545L
ASSESSMENT YEAR: 2018-19
APPEAL NO.: 2388/Bang/2025
PRAYER FOR ADMISSION OF ADDITIONAL GROUNDS OF APPEAL.
The appellant begs to submit that the under mentioned grounds of appeal which challenges the authority approving the notice u/s 148 and 148A of the Act. Section 151 of the Income Tax Act states authority sanctioning for issue of notice u/s 148 and 148A which has been reproduced below;
Section 151-Sanction for issue of notice: Specified authority for the purpose of section 148 and section 148A shall be,
(i). Principal Commissioner or Principal Director or Commissioner or Director, if three or less than three years have elapsed from the end of the relevant assessment year,
(ii). Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.
It is prayed that additional ground need be admitted and disposed off on merit and question of law for substantial cause of justice. The reliance is placed on the ratio of decision of Hon’ble Supreme Court National Thermal Power Co. Ltd Vs CIT 229 ITR 383.
In view of the grounds of appeal No. 3, the appellant craves leaves for the admission of below mentioned ground
4. whether approval of notice us 148 by the Ld PCIT, Bangalore is valid, which should have been approved by the Ld PCCIT as prescribed us 151 of the Act.
For the above and other grounds that may be urged at the time of hearing, your appellant humbly praise that additional ground needs to be allowed and admitted and justice be rendered.
Appellant
Further during the course of hearing before us, the ld. AR of the assessee has also raised another additional legal ground as follows:
“Whether by giving less than 7 days time to respond to the notice issued u/s. 148A(B) of the Act is valid in law? ”
3.1 We have heard both the parties on admission of additional grounds. The Lucknow bench of the Hon’ble Allahabad High Court in the case of CIT Vs. Sahara India (2012) 347 ITR 331 held that a legal issue can be raised at any stage but there shall be good reason for admitting the additional ground. In our Opinion all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of the adjudication of above grounds. Further we are also of the opinion that the additional grounds raised in the present case are purely legal in nature & therefore these are critical for a fair adjudication of the matter. The Hon’ble Madras High Court in the case of CIT Vs Indian Bank (2015) 230 Taxman 635 (Madras) held that Rule 11 of the I.T. Rules makes it clear that the assessee has the right to raise additional grounds and if the same is beneficial to the assessee, the same should be considered by the Tribunal.
3.2 Further, the Hon’ble Karnataka High Court in the case of Gundathur Thimmappa & Sons vs. CIT, Mysore, reported in (1968) 70 ITR 70 held that when the point raised by the assessee is a point which went to the root of the matter and affected not merely his liability to pay tax but also jurisdiction of the Tribunals and Authorities themselves to subject the amount concerned to tax, the Appellate Tribunal had the discretion to permit point of law to be raised for the first time in appeal because the question went to the root of the case. The Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs CIT (199 8) 229 ITR 383 held that undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But w here the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Accordingly, we are inclined to admit the additional legal grounds for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and these are critical for a fair adjudication of the matter.
4. The brief facts of the case are that the assessee is a primary agriculture Co-operative society registered under the Karnataka State Co-operative Societies Act, 1959 and as per the byelaws, the society is engaged in the activity of purchase and sale of agriculture equipment, fertilizer and also providing credit facilities to its members. There was information which was flagged in the insight portal in accordance with the risk management strategy (RMS) formulated by the Board under the category “Non-filer cases” wherein the assessee society had not filed its return of income for AY 2018-19, however, made cash deposits (including through bearer’s Cheque) in current account of Rs. 23,79,354/-, made cash withdrawals (including through bearer’s Cheque) in current account of Rs. 1,39,15,425/-, made time deposits of Rs. 2,14,33,981/- in Bijapur Dist. Central Cooperative Bank Limited totaling to Rs. 3,77,28,760/-. The information also confirmed the fact that the income chargeable to tax has escaped assessment.
4.1 Accordingly, a show cause notice u/s. 148A(b) of the Act along with an annexure was issued to the assessee on 20.03.2022 directing the assessee to submit its response with supporting documents on or before 26.03.2022 i.e. by giving less than minimum statutory time of 7 days. As the assessee did not reply to the show cause notice and also did not seek any additional time for replying to the show cause notice, the AO on the basis of material information available on record held that it is a fit case for issue of notice u/s 148 of the Act considering the source of transaction / sum generated out of the above transaction as undisclosed income of the assessee to be brought to tax for the AY 2018-19 by passing order u/s. 148A(d) of the Act on 06.04.2022 with the prior approval of the Pr. Commissioner of Income tax, Hub li vide reference No. 100000029424036 dated 03.04.2022. The AO on the very next day i.e. on 07.04.2022 also issued the notice u/s. 148 of the Act by stating that notice is being issued after obtaining the prior approval of the PCIT, Hubli accorded on 03.04.2022 vide reference No. 100000029424036. In response to the said notice, the assessee filed the return of income on 25.10.2023 declaring the total income of Rs. NIL for the AY 2018-19. The AO thereafter considering the reply of the assessee as well as relying upon the decision of Hon’ble High Court of Kerala in the case of M/s Nileshwar Rangekallu Chetu Thozhilali Vyavasaya Sangham Vs. CIT in Appeal No. 120 of 2019, 11 of 2022 dated 14/03/2023 held that the claim of deduction under 80P of the Act cannot be granted as the society had not fulfilled the conditions laid down under section 80AC of the Act. Further, it was held that the assessee society had failed to justify the deduction claimed u/s. 80P amounting to Rs. 9,01,827/- in the return of income filed in response to notice u/s. 148 of the Act. Further, the interest received from the investments in the banks amounting to Rs. 11,45,540/- has also not been substantiated by the assessee society and accordingly added the same to the total income of the society. Thus, the AO completed the assessment proceedings u/s. 147 of the Act dated 14.03.2024 on a total assessed income of Rs. 20,47,367/-.
5. Aggrieved by the assessment completed u/s. 147 of the Act dated 14.03.2024, the assessee preferred an appeal before the ld. CIT(A)/NFAC.
6. The ld. CIT(A)/NFAC dismissed the appeal of the assessee by relying the judgement of Hon’ble Supreme Court in the case of Pr. CIT vs. M/s. Wipro Limited, Civil Appeal No. 1449 of 2022 dated 11.07.2022 & held that the assessee is not eligible to claim deduction u/s. 80P of the Act as the return of income was not filed within the prescribed time available as per section 139(1) of the Act which is a mandatory condition for any deduction un der section 80P of the Act.
7. Again aggrieved by the order of the ld. CIT(A)/NFA C, the assessee has filed the present appeal before this Tribunal.
8. Before us, the ld. AR of the assessee by pressing the additional legal ground vehemently, submitted that the order u/s. 148A(d) of the Act dated 06.04.2022 is passed with the prior approval of the ld. PCIT, Hubli and also the notice u/s. 148 of the Act dated 07.04.2022 was also issued after obtaining the prior approval of the PCIT, Hubli both accorded on 03.04. 2022 vide reference No. 100000029424036 whereas, in the present case, as more than three years have already elapsed from the end of the relevant AY, the Principal Chief Commissioner of Income Tax / Chief Commissioner should be the approving authority as per the provisions contained in section 151(ii) of the Act and submitted that the entire subsequent proceedings are fatal and accordingly prayed that the reassessment order passed u/s. 147 of the Act on 14.03.2024 is liable to be quashed.
8.1 Further, the ld. AR of the assessee by raising another additional ground which is also legal in nature, vehemently submitted that the AO by issuing show cause notice u/s. 148A(b) of the Act dated 20.03.2022 by granting time only up to 26.03.2022, which is less that the mandatory minimum time period of 7 days, vitiates the entire proceeding as this is a clear gross violation of principles of natural justice. In view of the above, the ld. AR of the assessee prayed that the above illegality renders the entire reassessment proceedings void-ab-initio and liable to be quashed. The ld. AR of the assessee however did not press the ground No. 3 relating to the issue of JAO vs. FAO.
9. The ld. DR on the other hand supported the order o f the authorities below and vehemently submitted that these are mere curable technical irregularities & for such technical irregularities the entire assessment cannot be held to be void-ab-initio. Further, the ld. DR submitted that as the assessee participated in the assessment proceedings and did not raise all these legal grounds before the authorities below, the assessee is now precluded from raising all these legal issues for the first time before this Tribunal.
10. We have heard the rival submissions and perused the material available on record. It is an undisputed fact that the order u/s. 148A(d) of the Act dated 06.04.2022 was passed with prior approval of the ld. PCIT, Hubli and also the notice u/s. 148 of the Act dated 07.04.2022 was also issued after obtaining the prior approval of the PCIT, Hubli both accorded on 03.04.2022 vide reference No. 100000029424036. Now the contention o f the assessee is that as per the provisions contained in section 151(ii) of the Act as amended by the Finance Act, 2021, the specified authority for the purpose of Sec. 148 of the Act are Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than 3 years have elapsed from the end of the relevant assessment year. In the present case, the assessment year involved is AY 2018-19. The 3 years from the end of the relevant assessment year elapsed on 31.3.202 2. Undisputedly, the order u/s 148A(d) of the Act as well as notice issued u/s 148 of the Act are dated 06.04.2022 and 07.04.2022 respectively. Therefore, as on the date of passing the order u/s 148A(d) of the Act & issue of notice u/s 148 of the Act, 3 years have already elapsed in the present case.
10.1 Before proceeding further, it is apposite here to mention the relevant section 151 of the Act, which is reproduced below for ease of reference:
“Sanction for issue of notice.
Section 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.]”
10.2 On the plain reading of above, the specified authority for the purpose of section 148 & 148A of the Act are Principal Chief Commissioner or Chief Commissioner, if more than 3 years have elapsed from the end of the relevant assessment year. Thus, the specified authority changes depending on the time limit prescribed under section 151 of the Act. Therefore, we find force in the argument of the ld. A.R. of the assessee that the order u/s 148A(d) of the Act dated 06/04/2022 and also the notice issued u/s 148 of the Act dated 07/04/2022 were issued after obtaining the prior approval of the Pr. CIT, Hubli, accorded on 03/04/2022 whereas in the present case as more than 3 years have already elapsed from the end of the relevant assessment year, the Principal Chief Commissioner of Income Tax/Chief Commissioner should have accorded the Approval as per the provisions contained in section 151(ii) of the Act. We are of the considered opinion that a satisfaction/approval, to be a valid satisfaction under section 151 of the Act has to be accorded by the Prescribed Authority under the Act on application of mind and not mechanically, as also held by the Hon’ble Supreme Court in the case of Chhugamal Rajpal. Unless the Prescribed Authority under section 151 o f the Act accords his satisfaction on application of mind, there cannot be a valid satisfaction empowering the AO to assume jurisdiction to issue notice under section 148 of the Act. Further, we are of the considered opinion that the approval of the specified authority is mandatory as plainly evident on perusal of the first proviso appended to section 148 of the Act. The said proviso, at the risk of repetition, reads as follows:
Provided that no notice under this section shall be issued unless there is information with the assessing officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the assessing officer has obtained prior approval of the specified authority to issue such notice.
10.3 Thus, in our opinion, for issue of notice u/s 148 of the Act by the AO, sanction is required as provided u/s 151 of the Act. The necessity for such sanction by the prescribed authority was considered by the legislature so as to protect the taxpayers from the arbitrary and reckless reopening of the assessment proceedings. The legislature requires the sanction/approval u/s 151 of the Act from more higher Authority where the substantial time of more than 3 years have elapsed from the end of the relevant assessment year. Further, in our opinion the language of the provision does not confine the duty of the sanctioning authority to merely approve the proposed action of the AO in reopening the assessment but puts some more burdens before granting such sanction/approval. The use of the word “satisfied” cast greater duty on such authority. The sanctioning authority has to satisfy himself that necessary prerequisite of section 147 of the Act that there is an escapement of income stood fulfilled. In the present case, in our opinion the satisfaction of the higher authority was required to protect the taxpayer.
10.4 We are also of the considered opinion that the provisions contained in section 151 of the Act are undoubtedly mandatory in nature. Such sanction is a jurisdictional prerequisite. In the absence of such valid sanction, the proceedings would fall to the ground for want of jurisdiction. This provision pro vides an important procedural safeguard against the arbitrary exercise of power of issuing a notice for reopening of assessment. This additional safe guard not only involves the application of mind on the part of the Chief Commissioner or the Commissioner whose satisfaction, should be based on the reasons recorded by the Assessing Officer, and such satisfaction should be that it is a fit case for issuance of the notice. Section 151 of the Act provides a supervisory check on the functioning of the AO and is not a mere formality. The Sanctioning Authority is required to apply his mind to the proposal put up to him for sanction in the l ight of the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner.
10.5 Thus, in the present case as more than 3 years have already elapsed from the end of the relevant assessment year, the specified authority for the purpose of section 148 & 148A(d) of the Act shall be Principal Chief Commissioner of Income Tax/Chief Commissioner of Income Tax, we accordingly held that the order dated 06.04.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 of the Act dated 07.04.2022 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. We, accordingly, set aside the impugned order dated 06.04.2022 under section 148A(d) of the Act, the No tice dated 07.04.2022 issued under Section 148 of the Act and all other proceedings/orders emanating there from and allow the appeal of the assessee.
11. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 17th Aug, 2026
