Atul Kumar Agarwal Vs ITO (ITAT Agra)
Invalid Section 151 Approval: ITAT Quashes Reassessment in ₹7 Lakh Political Donation Case
The Agra Bench of the Income Tax Appellate Tribunal (ITAT) quashed reassessment proceedings after finding the approval obtained under Section 151 of the Income-tax Act, 1961 invalid. The approval proforma classified the proceedings under Section 149(1)(b), covering reopening beyond three years, but approval had been granted by the PCIT. Following the Bombay High Court’s decision in Kartik Sureshchandra Gandhi v. ACIT, the Tribunal set aside the Section 148A(d) order, the Section 148 notice and the consequential assessment.
The case arose from Investigation Wing information alleging that the assessee had made a bogus political donation of ₹7 lakh to Manavadhikar National Party and claimed a deduction. The assessee’s grounds identified the deduction as one claimed under Section 80GGC.
The Assessing Officer issued a notice under Section 148 on 5 April 2023. The reassessment was completed under Section 147 read with Sections 144 and 144B on 27 December 2024, adding ₹7 lakh on account of the alleged bogus donation. The CIT(A) confirmed the addition.
Assessee challenged approval granted on incorrect particulars
Before the Tribunal, the assessee questioned the validity of reopening and the approval under Section 151. He pointed out that Column 9 of the approval proforma described the proceedings as falling under Section 149(1)(b), involving a period exceeding three years but not exceeding ten years.
The assessee argued that the alleged escaped income of ₹7 lakh was below the ₹50 lakh threshold relevant to Section 149(1)(b). He also contended that approval for proceedings beyond three years should have been obtained from the prescribed higher authority rather than the PCIT.
During a clarification hearing, the assessee emphasised that his challenge concerned the validity of the approval granted on incorrect facts and the resulting non-application of mind. The Revenue supported the orders of the lower authorities.
Tribunal examined inconsistency in approval proforma
The Tribunal noted that the approval proforma recorded escaped income of ₹7 lakh and sought approval both for passing the Section 148A(d) order and issuing the Section 148 notice.
It further noted that Column 9 expressly classified the case under Section 149(1)(b) for proceedings beyond three years, while approval had been granted by the PCIT, Agra.
The Tribunal found the circumstances similar to those considered by the Bombay High Court in Kartik Sureshchandra Gandhi v. ACIT, decided on 1 August 2023.
In that case, the High Court had held the sanction invalid, observing that approval granted despite the particulars in the proposal demonstrated non-application of mind. The statutory safeguards governing reassessment and sanction required meaningful examination.
Notice and consequential assessment quashed
Following the High Court’s decision, the Tribunal quashed the Section 148A(d) order and Section 148 notice, both dated 5 April 2023.
It also quashed the consequential assessment order dated 27 December 2024. Having allowed the jurisdictional ground, the Tribunal treated the remaining grounds as academic and left them open without adjudication.
Accordingly, the assessee’s appeal was allowed. The relief arose from the invalid reassessment approval; the Tribunal did not decide the genuineness or deductibility of the political donation on merits.
Cases Discussed:
- Kartik Sureshchandra Gandhi Vs ACIT — Writ Petition No. 1812 of 2023, Bombay High Court, decided 01.08.2023. Followed on invalid Section 151 sanction and non-application of mind.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AGRA
This appeal is directed against the impugned order dated 25.03.2026 passed in appeal No NFAC/2018-19/10424347 by the NFAC (hereinafter referred to as the Commissioner of Income Tax), u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2019-20, wherein ld. CIT (A) has dismissed assessee’s appeal.
2. Brief facts of the case: In this case, the AO had information from the investigation wing regarding bogus donation of Rs. 7,00,000/- to Manavadhikar National Party and had claimed wrong deduction u/s 80G of the Act. The AO issued a notice u/s 148 of the Act dated 05.04.2023. The assessment was completed u/s 147 r.w.s. 144 r.w.s. 144B of the Act on 27.12.2024 making an addition of Rs. 7,00,000/- on account of bogus donation which was confirmed by the Ld. CIT(A).
3. Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT(A), who dismissed the appeal of the assessee.
4. Aggrieved with the said order, the assessee has filed an appeal before us on the following grounds of appeals:
“1. That the Ld. CIT (A) has erred both on facts and in law in rejecting the specific legal grounds, the detailed submission of which was filed during the course of Appellate proceedings that the Order passed u/s 147 r.w.s 144 dated 27.12.2024 is bad in law and without jurisdiction and hence the same deserves to be quashed.
2. That the assessment passed u/s 147 r.w.s 144 deserves to be quashed for the reason that the proceedings initiated vide issue of notice u/s 148A (b), Order u/s 148A(d) and Approval u/s 151 is on wrong facts of the case. The Ld. CIT (A) has erred both on facts and in law in rejecting the appellant’s submission on the legal issues.
3. That the notice issued u/s 148 dated 05.04.2023 is barred by time as according to section 149 the relevant clause applicable is 149 (1)(a) and not 149 (1)(b) as is mentioned in Approval u/s 151. Alternatively, section 149 (1)(b) is not applicable in the present case as the amount of income said to have escaped assessment is far below Rs fifty lakh and further the Approval u/s 151 is of PCIT whereas in case of proceedings u/s 149(1)(b), approval u/s 151 should be of PCCIT.
4. That the Ld. CIT (A) has erred both on facts and in law in confirming the addition of RS 7,00,000/- made by the AO ignoring and rejecting the undisputed factual and legal position that the proceedings in the present case were initiated for the income of Rs 70,000/- chargeable to tax said to have escaped assessment.
5. That the Ld. CIT (A) has erred both on facts and in law in confirming the addition of Rs 7,00,000/- the deduction of which was claimed u/s 80GGC being the amount of donation given to the political party.
6. That the assesse craves leave to alter, add, modify or delete all or any of the ground before or at the time of hearing of appeal.”
5. At the time of hearing, the Ld. AR submitted referring to ground no. 2 of the appeal that reopening in this case has been done vide notice u/s 148 of the Act dated 05.04.2023 (placed at page no. 17 of the paper book) after taking of the approval of the PCIT Agra-1 (placed at page no. 18 to 19 of the paper book). The Ld. AR referring to the provision of sections 149 of the Act submitted that since the alleged escapement of income amounting to Rs. 7,00,000/- was less than Rs. 50,00,000/-, the assessment could not have been reopened in this case of the assessee being beyond 3 years of the relevant assessment year 2019-20, which was reopened vide notice u/s 148 of the Act dated 05.04.2023. Further, referring to the provision of section 151 of the Act, the Ld. AR submitted that since the reopening was beyond 3 years, the approval of the Pr. CCIT should have been taken whereas in the present case the approval of the PCIT Agra-1 was taken. In view of these facts, the Ld. AR submitted that the impugned notice u/s 148 of the Act dated 05.04.2023 was an invalid notice and therefore the impugned assessment order u/s 147 r.w.s. 144 r.w.s. 144B of the Act dated 27.12.2024 should be quashed in this case.
6. The case was fixed up for clarification hearing on 14.10.2026 as per the following noting:
“During dictation it emerged that some more clarifications are required from the Ld. AR regarding the findings of the Ld. CIT (A) in para no. 7.2 to 7.6 of the appellate order dated 25.03.2026 of the Ld. CIT(A) in this case.
2. In view of the above, the registry is directed to fix this case for clarification hearing on 14.10.2026 after informing both the parties.”
7. At the time of clarification hearing, the Ld. AR submitted that in serial no. 9 of the proforma for approval it was mentioned “time limit for current proceedings covered under…. u/s 149(1)(b) for more than 3 years but not more than 10 years.” and since the quantum of escaped income in this case was Rs. 7,00,000/- which is less than Rs. 50,00,000/- and therefore the approval u/s 151 of the Act by the Ld. PCIT 1, Agra in this case was an invalid approval and therefore the notice u/s 148 of the Act dated 05.04.2023 issued in this case is an invalid notice and consequently, the assessment order dated 27.12.2024 passed in this case in consequence of the said invalid notice should be quashed. The Ld. AR in support of the above submission relied upon the decision of the Hon’ble Bombay High Court in the case of Kartik Sureshchandra Gandhi vs. Asst, CIT Circle 4(2)(1), Mumbai and ors. in WP no. 1812 OF 2023. In this regard, the Ld. AR filed a written submission which is reproduced as under:
“As per notice received the clarification has been sought on the finding of Ld. CIT (A) in Para No. 7.2 to 7.6 In this regard, it is most respectfully submitted: –
1. That from Para 7.2 to Para 7.6 the Ld. CIT(A) has discussed the time limitation and the period of extension of notices issued u/s 148A (b), Order u/s 148 A(d) and Notice u/s 148 to hold that the notice issued u/s 148 is well within time.
2. On the issue that in present case, the Approval should be u/s 151 (ii) i.e. the Approval should be from Pr. CCIT the Ld. CIT(A), in Para 7.3 has discussed this issue and gave the finding that the Approval was not required u/s 151 (ii) and Approval u/s 151 (i) would suffice.
3. As per the above discussion and the finding it seems that the Ld. CIT(A) is of the opinion that the present case falls u/s 149 (1)(a) considering the period of extension of the notices and the Approval u/s 151 granted by Ld. PCIT.
4. Our case before the Hon’ble Bench is not on the issue of time limit of notices issued u/s 148 A(b), Order u/s 148 A(d) and notice u/s 148 rather our case before the Hon’ble Bench is that there is no proper and valid Approval u/s 151 as the same has been given on wrong facts.
5. Kind reference is invited to S. No 9 of the Approval obtained u/s 151. (Page 18-19 of the paper-book) It is mentioned at S. No 9 that the “time limit for current proceedings covered under…. u/s 149(1)(b) for more than 3 years but not more than 10 years.”
6. In the present case, the Quantum of Income which has escaped assessment is Rs 7,00,000/- (wrongly mentioned in the Approval Rs 70,000/-). Section 149(1)(b) is applicable where the income said to have escaped assessment is likely to amount Rs 50 lakhs or more.
7. Thus, the Approval obtained u/s 151 in the present case being on wrong facts is mechanical and invalid and hence the entire assessment deserves to be quashed.
8. In the earlier synopsis, the assesse relied upon the case of Kartik Sureshchandra Gandhi (Hon’ble Bombay High Court) (Page 34 to 42 of the paper-book) This case is on identical and similar facts. Kind reference is invited to Para 3, Para 5, Para 6 Para 9, Para 10, Para 13, Para 14 and Para 15 of this Judgment.”
8. On the other hand, the Sr. DR supported the orders of the authorities below.
9. We have heard both the parties and perused the material on record. In this case, the order u/s 148 A(b) of the Act was passed on 05.04.2023 and the notice u/s 148 of the Act was issued on 05.04.2023 for A.Y. 2019-20 after taking the approval u/s 151 of the Act on 05.04.2023 from the PCIT, Agra. We further notice that the escaped income in the column no. 7 of the approval proforma which is part of assessee’s paper book on page no. 9 to 11 shows the escaped income at Rs. 7,00,000/-. In column no. 8 it is further mentioned that the approval is needed for order u/s 148(A)(d) and for issuance of notice u/s 148 of the Act. Further, the column 9 indicates the time limit for current proceedings covered under is stated to the u/s 149(1)(b) for more than 3 years but not more than 10 years. However, the approval was granted by ld. PCIT only. On similar facts, the Hon’ble Bombay High Court in the case of Kartik Sureshchandra Gandhi vs. Asst, CIT Circle 4(2)(1), Mumbai and ors. (supra) vide order dated 01.08.2023 quashed and set aside the order dated 12.04.2023 u/s 148 A(d) of the Act and the notice dated 12.04.2023 u/s 148 of the Act. In this regard, the relevant extract of the order of the Hon’ble Bombay High Court is reproduced as under: “
14 Having considered the approval under Section 151 of the Act, we are satisfied that there is no valid sanction. There is no evidence that PCIT has even granted any valid sanction. If respondents say there was a sanction by respondent no.2, then it is an obvious case of utter non application of mind because he would otherwise have not granted sanction if he had only read and applied his mind to what is stated in box 9, i.e., the time limit for current proceedings covered under is stated to be under Section 149(1)(b), or he would have sent it back to respondent no.1 refusing to grant approval. It also goes to say that even respondent no.1, who has sought approval, has not applied his mind. We are of the opinion that if only respondent no.2 had read the report carefully, he would have never come to the conclusion that there is any material before him to treat it as a fit case to issue notice under Section 148 of the Act or pass order under Section 148A(d) of the Act. The safeguards provided in Sections 148 and 151 were lightly treated by respondent nos.1 and respondent no. 2. Both of them appear to have taken the duty imposed on them under these provisions as of little importance.
On this ground alone, the order passed under Section 148A(d) and notice issued under Section 148 of the Act have to be quashed and set aside.
In view thereof, we do not wish to delve into the other issue of want of digital signature raised by petitioner on the sanction order issued under Section 151 of the Act. That can be considered in an appropriate case.
15 In the circumstances, we hereby quash and set aside order dated 12th April 2023 passed under Section 148A(d) of the Act and notice dated 12th April 2023 issued under Section 148 of the Act.
16 Petition disposed. No order as to costs.” 9.1 As noted above, in the present case also, Column 9 indicates the time limit for current proceedings covered under is stated to the u/s 149(1)(b) for more than 3 years but not more than 10 years. However, the approval was granted by ld. PCIT -1 Agra, wherein similar approval was held to be an invalid approval by the Hon’ble Bombay High Court in the above mentioned case. Respectfully, following the above order of the of the Hon’ble Bombay High Court we quash and set aside the order dated 05.04.2023 u/s 148 A(d) of the Act and the notice dated 05.04.2023 u/s 148 of the Act in this case. Accordingly, we set aside and quash the assessment order dated 27.12.2024 passed in this case in consequence thereof said notice u/s 148 of the Act dated 05.04.2023. Ground no. 2 of the appeal is allowed. In view of ground no. 2 of the appeal is being allowed, the other grounds become academic in nature and, hence, are not being adjudicated and are left open in this case.
10. In the result, the appeal is allowed.
Order pronounced in the Open Court on- 15.10.2026
