Sara Wines Vs ITO (ITAT Chandigarh)
Chandigarh ITAT: Reassessment Quashed — Approval by Wrong Authority Is a Jurisdictional Defect; TOLA Cannot Cure Non-Compliance With Section 151
The assessee’s original assessment for AY 2017-18 was completed under Section 143(3). Reassessment was subsequently initiated concerning ₹2.19 crore of licence fee, which the AO considered unpaid before the return-filing due date and therefore disallowable under Section 43B. The assessee explained that, due to a dispute with the Excise Department, it had furnished an FDR-backed bank guarantee, which was subsequently encashed after disposal of the dispute.
Before the ITAT, the assessee raised an additional jurisdictional ground challenging the validity of reassessment on the ground that the Section 148 notice dated 28.07.2022 had been issued with approval of the Principal CIT, whereas more than three years had elapsed from the end of AY 2017-18. The Tribunal admitted the legal ground following NTPC Ltd. v. CIT.
The crucial issue was therefore who was competent to grant sanction under Section 151. Since three years from the end of AY 2017-18 had expired on 31.03.2021, and the consequential Section 148 notice was issued on 28.07.2022, the Tribunal held that the competent authority under Section 151(ii) was the Principal Chief Commissioner/Principal Director General or, where applicable, Chief Commissioner/Director General, and not the Principal CIT.
The Revenue argued that the proceedings had originally commenced with the Section 148 notice dated 22.04.2021, which, pursuant to Union of India v. Ashish Agarwal, became a deemed Section 148A(b) notice. It further relied upon TOLA and Rajeev Bansal to contend that limitation and the competent sanctioning authority had to be determined after giving effect to the statutory extensions.
The ITAT rejected this argument. It held that TOLA may affect computation of the period within which sanction can be obtained, but it cannot be used to disregard the identity of the “specified authority” expressly prescribed by Section 151. The fundamental question was not merely whether the time for sanction stood extended, but whether the authority actually granting sanction possessed statutory power to do so. On the admitted facts, it did not.
The Tribunal emphasised that the identity of the sanctioning authority is an integral statutory safeguard and not an inconsequential procedural requirement. Where Parliament requires a particular authority to exercise the supervisory jurisdiction, approval by another authority cannot amount to substantial compliance.
Importantly, the ITAT held that this defect goes to the very root of jurisdiction and cannot be cured under Sections 292B or 292BB. An approval from an authority other than the statutorily prescribed authority cannot confer jurisdiction that the statute itself has withheld.
Accordingly, the Tribunal quashed the Section 148 notice dated 28.07.2022 and the entire reassessment, including the consequential ₹2.19 crore Section 43B addition. The other grounds on merits became academic and the assessee’s appeal was allowed.
Key takeaway: Approval by the correct “specified authority” under Section 151 is a condition precedent to reassessment jurisdiction. TOLA may extend timelines, but it cannot convert an incompetent authority into the statutorily competent sanctioning authority. Approval by the wrong authority is a jurisdictional defect-not a procedural irregularity capable of cure under Sections 292B/292BB.
Cases Discussed:
- Union of India v. Rajeev Bansal
- Union of India v. Ashish Agarwal
- NTPC Ltd. Vs CIT, 229 ITR page 393
- Kamla Properties v. Inspecting Assistant Commissioner of Income-tax, 1994 Tax LR 468 (Cal)
- Nazir Ahmad v. King-Emperor, AIR 1936 PC 253 (2) : (1935–36) 63 IA 372
- Taylor v. Taylor
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is an appeal filed by the assessee feeling aggrieved by the order passed by the ld. Commissioner of Income Tax (Appeals) NFAC [in short ‘the CIT (A)’] dated 13.12.2024 passed for assessment year 2017-18.
2. The facts of the case are that the Assessing Officer, while initiating the reassessment proceedings, recorded that, on the basis of the information available on record, the assessee had debited licence fee of Rs.5,07,09,275/-in the Trading Account, out of which an amount of Rs.2,19,02,893/- was considered to have remained unpaid before the due date of filing of the return under section 139(1). The Assessing Officer, therefore, formed the view that the said amount was not allowable under section 43B of the Act and that income chargeable to tax had escaped assessment. The proceedings ultimately culminated in the issuance of notice under section 148 dated 28.07.2022, stated to have been issued pursuant to the order under section 148A(d) with the approval of the competent authority.
3. The assessee had explained during the proceedings that, on account of a dispute with the Excise Department, instead of making direct payment of the licence fee, an FDR-backed bank guarantee of Rs.2,19,02,893/- was furnished on 23.01.2017 in favour of the Excise Department and that, after disposal of the dispute by the Hon’ble High Court, the Excise Department realised the amount by encashing the bank guarantee. The Assessing Officer did not accept the explanation, principally on the ground that the assessee had not furnished documentary evidence substantiating the alleged dispute, the furnishing of the bank guarantee or compliance with section 43B.
4. Assessee filed the appeal before the Ld. CIT(A), the learned CIT(A), however, did not adjudicate the challenge to the validity of the reassessment proceedings on the basis of any independent examination of the statutory sanction. However, the Ld. CIT(A) had confirmed the order passed by the Assessing Officer, the appeal of the assessee was dismissed.
5. The assessee has filed additional ground before this Tribunal vide application dated 24.04.2026 wherein the assessee seeks the leave of this Tribunal for agitating the legal additional grounds, which read as under :
That on the facts and in the circumstances of the case and in law, the notice u/s 148 issued on or around 28th to 29th July 2022 under Income Tax for asst. Year 2017-18 is bad in Law.
b0 That Ld. ACIT Circle 1/ Ludhiana issued manual notice u/s 148 of Income Tax Act dated 28.07.2022 and thereafter issued notice u/s 148 of Income Tax Act dated 29.07.2022 through ITBA and both the notices barred by limitation.
c. That from the notice dated 28.07.2022 Din No. ITBA/COM/F/17/2022-23/1044245226(1) as issued by the Ld. A.O it is found that Ld. A.O. taken approval from Pr. CIT on 28.07.2022, which is as under:
“6. Therefore, I am satisfied that it is a fit case for issuance of notice u/ 148 of the Act for the A.Y. 2017-18. The order is passed with the prior approval of the Pr. Commissioner of Income Tax-1, Ludhiana vide letter No. 745 dated 28.07.2022.”
6. Since it is a legal issue, it will go to the root of the cause of dispute; therefore, on the strength of the Hon’ble Supreme Court decision in the case of NTPC Ltd. Vs CIT reported in 229 ITR page 393, we admit this additional ground of appeal for adjudication on merit.
7. Having considered and admitted the additional ground of appeal, now we deal with the additional ground raised by the assessee before us.
8. Before us, the assessee had stated that the original assessment under section 143(3) had been completed on 24.12.2019 and that, thereafter, reassessment proceedings under section 147 were initiated, resulting in an addition of Rs. 2,19,02,893/- under section 43B. The assessee also stated that the relevant replies and evidences had been furnished during the reassessment proceedings. The learned AR submitted that the very assumption of jurisdiction under section 147 is liable to be held invalid for want of sanction from the authority prescribed under section 151 of the Act. He submitted that the assessment year involved is AY 2017-18 and, therefore, the period of three years from the end of the relevant assessment year expired on 31.03.2021. The notice under section 148, however, was issued only on 28.07.2022, i.e. much beyond the expiry of three years.
9. It was contended that, by virtue of the substituted provisions of section 151, applicable to the reassessment proceedings under the new regime, where more than three years had elapsed from the end of the relevant assessment year, the specified authority was the Principal Chief Commissioner or Principal Director General or, where there was no such authority, the Chief Commissioner or Director General. The Principal Commissioner of Income Tax was the specified authority only where three years or fewer had elapsed.
10. The learned AR accordingly submitted that approval granted by the Principal Commissioner of Income Tax could not satisfy the mandatory requirement of section 151(ii). The defect was not a mere procedural irregularity but went to the root of the Assessing Officer’s jurisdiction to issue the notice under section 148. Consequently, the notice issued without sanction from the prescribed specified authority, as well as the reassessment proceedings and the consequential assessment order, were contended to be void and liable to be quashed.
11. In support of the contention, reliance was placed upon the judgment of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal, wherein the Hon’ble Supreme Court explained that section 151 constitutes a statutory check upon the power of the Revenue to reopen assessments and that, under the substituted regime, the authority competent to grant sanction depends upon the period elapsed from the end of the relevant assessment year.
12. The learned DR, on the other hand, supported the orders of the authorities below. It was submitted that the reassessment proceedings had been initiated after following the procedure prescribed under the Act and that the order under section 148A(d) as well as the notice under section 148 had been issued with the approval of the competent authority. The Assessing Officer himself has recorded that the notice under section 148 was issued along with the order under section 148A(d) with the approval of the competent authority.
13. The learned DR submitted that the approval obtained from the Principal Commissioner of Income Tax should not invalidate the reassessment proceedings, particularly when the Assessing Officer had acted upon the approval available on record and the reassessment had thereafter been completed under section 147 read with section 144 and section 144B of the Act. It was accordingly submitted that the ground raised by the assessee be rejected. On the last date of hearing, the Revenue was directed to seek the comment of the Assessing Officer in respect of the additional ground raised by the assessee. The ld. DR, today had produced the comments of the Assessing Officer dated 28.07.2026 on the additional grounds which are as under :
Sir.
Subject: Comments on the additional grounds of appeal filed by M/s Sara Wines in ITA No.620/Chd/2026 for A.Y. 2017-18 before the Hon’ble ITAT, Chandigarh.
Kindly refer to your communication seeking comments on the additional grounds of appeal raised by the assessee before the Hon’ble ITAT.
2. The additional grounds challenge the validity of the reassessment proceedings mainly on the issues of limitation under section 149, approval under section 151 and the alleged invalidity of the notice issued under section 148. The comments of the Assessing Officer are as under.
2.1 Brief factual background
The reassessment proceedings in the present case did not originate from the notice issued after passing the order under section 148A(d). Rather, the proceedings commenced with the issuance of notice under section 148 of the Income-tax Act on 22.04.2021 (Copy enclosed) under the unamended provisions after obtaining approval from the competent authority then prescribed under law.
Subsequently, the Hon’ble Supreme Court in Union of India vs. Ashish Agarwal directed that all notices issued between 01.04.2021 and 30.06.2021 under the erstwhile provision”, shall be deemed to be notices issued under section 148A(b) and that the Assessing Officer shall thereafter provide the relied upon material, consider the assessee’s submission, pass an order under section 148A(d), and thereafter issue notice under section 148, wherever required. The order under section 148A(d) in the present case specifically records that the original notice dated 22.04.2021 stood covered by the Supreme Court judgment and that the consequential procedure was undertaken accordingly.
In compliance with the above directions, the information relied upon was furnished to the assessee on 02.06.2022 (copy enclosed). The assessee filed objections which were duly considered. Thereafter, an order under section l48A(d) was passed on 28 07.2022 (copy enclosed) after obtaining prior approval of the Principal Commissioner of lncome- tax-1, Ludhiana, and the consequential notice under I 148 was issued (copy enclosed).
Thus, the reassessment proceedings constitute one continuous statutory proceeding commencing with the notice dated 22.04.2021 and culminating in the issuance of notice under section 148 after compliance with section 148A.
2.2 Legal position after the judgment in Union of India vs. Ashish Agarwal
The entire foundation of the assessee’s additional grounds is based on the assumption that the notice issued on 28.07.2022 constitutes the original notice initiating reassessment proceedings.
This assumption is contrary to the law declared by the Hon’ble Supreme Court.
The Hon’ble Supreme Court expressly held that notices issued between 01.04.2021 and 30.06.2021 under the erstwhile section 148 shall be treated as deemed notices under section 148A(b). Consequently, the original notice continues to remain the foundation of the reassessment proceedings, while the subsequent proceedings under sections 148A(b), 148A(d) and 148 merely represent compliance with the procedure prescribed by the substituted provisions.
The subsequent discussion of the Supreme Court has further clarified that the deemed notice under section 148A(b) takes effect from the date of the original notice, that the period during which the Assessing Officer was prevented from proceeding pursuant to the Supreme Court’s directions is liable to be excluded while computing limitation, and that the statutory period granted to the assessee for filing objections is also liable to be excluded.
Accordingly, the assessee cannot treat 28.07.2022 as the date on which reassessment proceedings commenced.
2.3 Effect of TOLA
The additional grounds completely overlook the legal effect of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
The Hon’ble Supreme Court has now authoritatively held that TOLA continues to operate even after substitution of the reassessment provisions by the Finance Act, 2021. TOLA extends the limitation wherever the prescribed period falls during the TOLA period and has to be read harmoniously with section 149 of the substituted law
The Supreme Court has specifically held that:
-
- TOLA does not become inoperative after 01.04.2021 merely because the reassessment provisions were substituted;
- the limitation under section 149 has to be read together with the extensions granted by TOLA; and
- while computing limitation, the period during which the Assessing Officer was disabled from proceeding pursuant to the judgment in Ashish Agarwal and the period granted to the assessee for filing objections are to be excluded.
Accordingly, the plea of limitation raised by the assessee is contrary to the law declared by the Hon’ble Supreme Court.
2.4 Competent authority under section 151
The assessee has further contended that approval ought to have been obtained from the Principal Chief Commissioner under section 151(ii).
This contention is equally misconceived.
The Supreme Court has now clarified that TOLA extends not only the limitation for issuance of notice but also the statutory timelines relevant for grant of sanction under section 151. The specified authority under section 151 has to be determined after giving effect to the statutory extension available under TOLA.
Therefore, the question regarding the competent approving authority cannot be decided by merely referring to the calendar date on which the consequential notice under section 148 was issued. It has to be determined in the context of the original notice dated 22.04.2021, the legal fiction created by the judgment in Ashish Agarwal. and the statutory extensions granted by TOLA.
In the present case, the order under section 148A(d) itself records that prior approval of the Principal Commissioner of lncome-tax-1, Ludhiana was duly obtained before issuance of notice under section 148.
2.5 Para-wise comments
Ground No.1
The assessee contends that notice under section 148 issued on 28/29.07.2022 is invalid.
The contention deserves to be rejected.
The reassessment proceedings commenced with the notice dated 22.04.2021, which stood protected by the judgment in Ashish Agarwal. The subsequent notice dated 28.07.2022 is merely a consequential notice issued after completion of the statutory procedure mandated by the Hon’ble Supreme Court. It does not constitute a fresh initiation of reassessment proceedings.
Ground No.2
The assessee alleges that two separate notices were issued, namely a manual notice dated 28.07.2022 and another notice dated 29.07.2022.
This allegation is factually incorrect.
The communication dated 29.07.2022 is merely a system-generated Intimation Letter (copy enclosed) informing the assessee that the notice dated 28.07.2022 has been allotted a DIN. The communication itself specifically records that the notice under section ’48 is dated 28.07.2022. Thus, the communication dated 29.07.2022 does not constitute a fresh notice under section 148.
Ground No.3
The assessee contends that the notice is barred by limitation.
The contention ignores both the judgment in Ashish Agarwal and the subsequent interpretation of TOLA by the Hon’ble Supreme Court.
The original notice dated 22.04.2021 stood deemed to be a notice under section 148A(b). The period during which the Assessing Officer was prevented from proceeding pursuant to the directions of the Hon’ble Supreme Court and the period granted to the assessee for filing objections are liable to be excluded while computing limitation. Consequently, the limitation cannot be examined merely with reference to the date of the consequential notice issued after passing the order under section l48A(d).
Ground No.4
The assessee contends that approval ought to have been obtained from the Principal Chief Commissioner.
The contention overlooks the legal effect of TOLA and the judgment in Ashish Agarwal
The Hon’ble Supreme Court has clarified that TOLA also governs the question of sanction under section 151 and that the specified authority has to be determined after giving effect to the statutory extensions granted thereunder. Therefore, the approval obtained from the Principal Commissioner of Income-tax before passing the order under section 148A(d) cannot be held to be invalid merely because the consequential notice was issued after completion of the section 148A procedure.
Ground regarding reliance on the Mumbai ITAT decision
The assessee has relied upon the decision of the Mumbai Bench of the Tribunal in Nickson Morris Rodricks vs. ITO.
The reliance is misplaced.
Firstly, the decision of a coordinate Bench is not binding on the Hon’ble Chandigarh Bench.
Secondly, the said decision is distinguishable on facts.
Thirdly, the legal position now stands clarified by the Hon’ble Supreme Court with regard to the applicability of TOLA to limitation as well as sanction under section 151. The controversy is therefore required to be decided in the light of the law declared by the Hon’ble Supreme Court.
3. In view of the above facts and legal position, it is respectfully submitted that;
i. The reassessment proceedings originated from the notice dated 22.04.2021 issued under the erstwhile provisions of section 148 after obtaining approval from the competent authority.
ii. The said notice stood protected by the judgment of the Hon’ble Supreme Court in Union of India vs. Ashish Agarwal and was deemed to be a notice under section 148A(b).
iii. The Assessing Officer thereafter strictly complied with the procedure prescribed by the Hon’ble Supreme Court by supplying the relied upon material, considering the assessee’s reply, passing the order under section 148A(d), and issuing the consequential notice under section 148.
iv. The issue of limitation as well as the question of sanction under section 151 are governed by the combined operation of TOLA and the law declared by the Hon’ble Supreme Court.
Accordingly, the additional grounds raised by the assessee are devoid of merit and deserve to be rejected.”
14. We have considered the rival submissions and perused the material available on record. The short question which arises for our consideration is whether the approval granted by the Principal Commissioner of Income Tax was sufficient to comply with section 151 of the Act for the issuance of notice under section 148 dated 28.07.2022 /29.7.2022 for AY 2017-18. Before we examine this issues, it is essential to record the list of dates and events of the present case, which are as under :
| Date | Event |
|---|---|
| 24.12.2019 | The original assessment for A.Y. 2017-18 was completed under section 143(3) of the Income-tax Act, 1961. The assessee had originally declared income of Rs.1,46,01,597/-. |
| 31.03.2021 | Three years from the end of A.Y. 2017-18 expired. Thus, as on this date, the period of three years contemplated under section 151 (i) stood expired. |
| 22.04.2021 | The Assessing Officer initially issued a notice under section 148 on the ground that licence fee of Rs.2,19,02,893/- had remained unpaid before the due date of filing the return under section 139(1). |
| 01.04.2021 onwards | Consequent upon the judgment of the Hon’ble
Supreme Court and the substitution of the |
| 02.06.2022 | The information/material relied upon for reopening the assessment was supplied to the assessee, and the assessee was called upon to respond pursuant to the directions of the Hon’ble Supreme Court. |
| 28.07.2022 | After considering the assessee’s explanation, the Assessing Officer recorded that income chargeable to tax had escaped assessment and passed the order under section 148A(d). On the same date, notice under section 148 was issued. The assessment order records that the notice was issued with the approval of the competent authority. |
| 28.07.2022 | The notice under section 148 was accordingly served/issued pursuant to the order under section 148A(d). The assessment record specifically records 28.07.2022 as the date of issue of the notice under section 148. |
| 15.01.2023 | Notice under section 142(1) was issued during reassessment proceedings; compliance was made on 23.01.2023. |
| 20.02.2023 | A further notice under section 142(1) was issued; the assessment record records part compliance thereafter. |
| 30.03.2023 | Show-cause notice was issued proposing the variation relating to the unpaid licence fee of Rs.2,19,02,893/- under section 43B. |
| 03.05.2023 | The reassessment was completed under section 147 read with sections 144 and 144B, determining total income at Rs.3,65,04,493/- after making an addition of Rs.2,19,02,893/-under section 43B. |
| 11.03.2026 | The learned CIT(A), NFAC, passed the order under section 250 dismissing the assessee’s appeal. |
15. From the perusal of the above list, it is clear that the Assessment Year under consideration is AY 2017-18, and the period of three years has expired on 31.03.2021. Admittedly, in the present case, notice under section 148 was issued on 28.07.2022. Thus, on the date on which the notice under section 148 was issued, more than three years had elapsed from the end of the relevant assessment year. The substituted section 151, as brought into force by the Finance Act, 2021, specifically provided that the Principal Commissioner or Principal Director or Commissioner or Director would be the specified authority where three years or less than three years had elapsed from the end of the relevant assessment year; whereas, where more than three years had elapsed, the specified authority was the Principal Chief Commissioner or Principal Director General or, where there was no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General.
16. The Revenue has sought to overcome this position by placing reliance upon the notice originally issued on 22.04.2021. The learned Assessing Officer has specifically submitted that the reassessment proceedings commenced with the said notice and that, pursuant to the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal, the said notice was to be treated as a deemed notice under section 148A(b). It has further been submitted that, thereafter, the information was furnished to the assessee on 02.06.2022, the objections of the assessee were considered, and the order under section 148A(d) was passed on 28.07.2022, after obtaining prior approval of the Principal Commissioner of Income-tax-1, Ludhiana, followed by issuance of the notice under section 148.
17. The significance of section 151 has been explained by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal, wherein the Court recognised that the specified authority under section 151 is directly correlated with the time at which the notice is issued. The statutory distinction between section 151(i) and section 151(ii) is, therefore, not ornamental. Parliament has consciously prescribed a higher level of scrutiny where the Revenue seeks to disturb a completed assessment after the longer period contemplated by the statute.
18. In the present case, more than three years had elapsed from the end of A.Y. 2017-18 by the time the consequential notice under section 148 was issued on 28.07.2022. The Revenue’s own submission establishes that the approval for the order under section 148A(d) and the consequential notice under section 148 was obtained from the Principal Commissioner of Income-tax-1, Ludhiana. Thus, the admitted factual position is that the approval was granted by the Principal Commissioner, whereas the assessee’s case is that, at the relevant stage, the specified authority under section 151(ii) was the Principal Chief Commissioner/Principal Director General or, where applicable, the Chief Commissioner/Director General.
19. We find that the statutory requirement of sanction under section 151 has to be understood in the context of the purpose for which Parliament has incorporated such requirement. The provision is intended to act as a safeguard against an unchecked or mechanical exercise of the power to reopen a completed assessment. It is not merely an internal administrative formality between two officers of the Department. This principle was lucidly explained by the Hon’ble Calcutta High Court nearly three decades ago in Kamla Properties v. Inspecting Assistant Commissioner of Income-tax, 1994 Tax LR 468 (Cal). The Court, while dealing with the requirement of sanction under section 151, observed that once the assessment has attained finality, the assessee acquires an interest against its being disturbed except in accordance with the statutory safeguards. The Court held that the Commissioner was required to grant sanction on a reasonable basis and with due application of mind, since a mechanical grant of sanction could not satisfy the statutory requirement.
20. The principle assumes even greater significance under the present reassessment regime, where Parliament has itself identified different specified authorities depending upon the period elapsed from the end of the relevant assessment year. The identity of the sanctioning authority is, therefore, an integral part of the statutory safeguard and cannot be treated as an inconsequential procedural matter.
21. We find considerable assistance from the article of Dr. Sanjay Bansal and Amit Parsad, “Are Hearing and Communication of Reasons Recorded under Section 151 of the Act Mandatory?”, 419 ITR (Journal) 12. Though the article is, of course, not a judicial authority, it brings together the judicial development concerning section 151 and, particularly, the rationale underlying the requirement of sanction. We refer to this discussion not as an independent source of law, but because it correctly identifies the underlying rationale of section 151: the power to sanction reopening is intended to constitute a meaningful safeguard against arbitrary or mechanical disturbance of a completed assessment.
22. The reasoning of the Hon’ble Calcutta High Court in Kamla Properties is particularly instructive in the present context. The Court rejected the notion that sanction under section 151 was merely a departmental formality. It held that where the decision of the sanctioning authority is likely to affect the assessee and produce adverse civil consequences, the authority must exercise the power with due application of mind.
23. We are conscious that Kamla Properties was rendered under the earlier statutory framework and that the present controversy arises under the substituted reassessment regime. We are not, therefore, applying the decision mechanically. We rely upon it for the fundamental principle concerning the nature and purpose of statutory sanction under section 151. That principle remains relevant irrespective of the changes subsequently made in the statutory language.
24. The same principle also explains why Parliament has prescribed different authorities in section 151 depending upon the period elapsed from the end of the relevant assessment year. The longer the period for which a completed assessment is sought to be disturbed, the greater is the statutory safeguard. The requirement of approval from the higher authority under section 151(ii) is thus a legislative recognition of the heightened prejudice and the need for a correspondingly higher level of scrutiny.
25. Consequently, approval by an authority who is not the authority designated by Parliament cannot be regarded as substantial compliance. The statutory safeguard lies not merely in the existence of an approval, but in the approval being granted by the authority whom Parliament has entrusted with the responsibility of exercising that supervisory jurisdiction. We may fruitfully refer, in this context, to the celebrated decision of the Privy Council in Nazir Ahmad v. King-Emperor, AIR 1936 PC 253 (2) : (1935–36) 63 IA 372, wherein the Privy Council, following the principle enunciated in Taylor v. Taylor, laid down the salutary rule that where a power is conferred by law to do a particular thing in a particular manner, the thing must be done in that manner or not at all, and that other modes of performance are necessarily forbidden. The said principle has consistently been approved and followed by the Hon’ble Supreme Court.
26. The aforesaid principle assumes particular significance in the present case. Section 151 of the Act, as applicable to the proceedings in question, does not merely require that some superior income-tax authority should approve the proposed action. It specifically identifies the “specified authority” competent to grant approval. Where three years or less have elapsed from the end of the relevant assessment year, the specified authority is the Principal Commissioner/Principal Director/Commissioner/Director; whereas, where more than three years have elapsed, the statute prescribes the Principal Chief Commissioner or Principal Director General or, where there is no such Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General.
27. We are also unable to accept the argument of the learned DR that the approval of the Principal Commissioner should nevertheless be regarded as sufficient because the proceedings originated with the notice dated 22.04.2021. Such an approach would effectively render the distinction drawn by Parliament in section 151 between the two classes of cases otiose. If an approval obtained at the stage of the original notice could automatically be carried forward to validate a subsequent notice under section 148, the requirement of obtaining approval from the specified higher authority at the later stage would become meaningless.
28. The Revenue cannot, on the one hand, rely upon Ashish Agarwal to contend that the original notice dated 22.04.2021 was transformed into a deemed notice under section 148A(b), and, on the other hand, contend that the approval obtained from the Principal Commissioner was sufficient for the subsequent exercise under sections 148A(d) and 148. The two stages have distinct statutory consequences and must satisfy the requirements applicable to the respective stages. Both the approaches of the revenue are mutually exclusive.
29. We are conscious of the Revenue’s reliance upon TOLA and the judgment in Rajeev Bansal. We also take note of the position explained by the Hon’ble Supreme Court that TOLA may have an impact upon the computation of the period within which sanction could be obtained. However, that proposition cannot be converted into a licence to disregard the identity of the specified authority prescribed by Section 151. The issue before us is not merely whether the period available for obtaining sanction stood extended. The anterior and more fundamental question is whether the authority which actually granted the sanction was the authority empowered by section 151 to grant such sanction for the relevant statutory stage. On the admitted facts, the answer is in the negative. We may add that this conclusion is consistent with the larger jurisprudential principle underlying section 151. A completed assessment cannot be reopened merely because the Assessing Officer proposes to do so. Parliament has interposed an independent statutory check. The sanctioning authority is required to exercise that jurisdiction meaningfully and in accordance with the statutory prescription. As explained in Kamla Properties, the sanction must be the result of application of mind and cannot be a mechanical act. The article of Dr. Sanjay Bansal and Amit Parsad also correctly emphasises that reasons are an essential component of a decision-making process and that a mere ritualistic or “rubber-stamp” exercise cannot substitute a genuine application of mind. In the present case, the Revenue’s own record and the specific comments of the Assessing Officer establish that the prior approval for passing the order under section 148A(d) and issuing the consequential notice under section 148 dated 28.07.2022 was obtained from the Principal Commissioner of Income-tax-1, Ludhiana. Since the consequential notice was issued after more than three years from the end of A.Y. 2017-18, the approval was required to be granted by the authority specified under section 151(ii). We, therefore, hold that the approval granted by the Principal Commissioner did not constitute the approval contemplated by section 151(ii). The statutory condition precedent for valid assumption of jurisdiction under section 148 was consequently not satisfied.
30. The defect goes to the root of the jurisdiction of the Assessing Officer and cannot be cured by treating the approval as a mere irregularity or by invoking sections 292B or 292BB. Where Parliament has expressly prescribed the authority competent to grant sanction, an approval by an authority other than the prescribed authority cannot confer jurisdiction which the statute itself has withheld.
31. In the result, we hold that the consequential notice issued under section 148 dated 28.07.2022, having been issued pursuant to an approval granted by an authority not competent under section 151(ii), is without valid jurisdiction. The notice under section 148 and the reassessment proceedings initiated in pursuance thereof are accordingly quashed. Consequently, the assessment order passed under section 147 read with section 144/144B is also quashed. The additions made pursuant to such reassessment proceedings do not survive for independent adjudication. The remaining grounds raised by the assessee, therefore, become academic.
32. Accordingly, the additional ground challenging the validity of the sanction under section 151 is allowed.
33. In view of the foregoing discussion, and particularly in view of the admitted position emerging from the Revenue’s own submission that the approval preceding the order under section 148A(d) and the consequential notice under section 148 dated 28.07.2022 was granted by the Principal Commissioner of Income-tax-1, Ludhiana, we hold that such approval was not the approval contemplated under section 151(ii) for the notice issued after more than three years from the end of A.Y. 2017-18. The consequential notice under section 148 dated 28.07.2022 was, therefore, issued without valid sanction of the specified authority prescribed under section 151. The Assessing Officer consequently lacked valid jurisdiction to assume reassessment jurisdiction under section 148. We accordingly allow the additional ground raised by the assessee challenging the validity of the approval under section 151 and, consequently, quash the notice issued under section 148 dated 28.07.2022 and the reassessment order passed in pursuance thereof. Since the reassessment itself is held to be without valid jurisdiction, the additions made pursuant thereto do not survive for independent adjudication and the remaining grounds on the merits are rendered academic.
34. In the result, the additional ground challenging the validity of sanction under Section 151 is allowed.
35. As we allowed the additional ground raised by the assessee which goes to the root of the matter, therefore, we are of the opinion that the appeal of the assessee is allowed as approval taken by the AO from the PCIT was not in accordance with law and therefore, nothing which is based on the said approval and initiation of the re-assessment was bad in law. Accordingly, re-assessment made in the hands of the assessee is quashed.
36. In the result, appeal of the assessee is allowed.
Order pronounced on 14thAugust,2026.
