Case Law Details
Soft Zone Vs DCIT (ITAT Pune)
The assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Pune, against the order of the Commissioner of Income Tax (Appeals) [NFAC] for Assessment Year (AY) 2017-18. The principal challenge was to the validity of the reassessment proceedings, including the sanction granted under Section 151, the notice issued under Section 148, and the consequential reassessment order passed under Sections 147 read with 144B of the Income Tax Act. The assessee also challenged the addition of ₹1,08,71,550 as unexplained cash credit under Section 68 in respect of cash deposits made during the demonetisation period and the application of Section 115BBE for taxing the addition at a higher rate.
The assessee submitted that the notice under Section 148 dated 15.07.2022 and the order under Section 148A(d) had been approved by the Principal Commissioner of Income Tax (Pr. CIT)-3, Pune. It argued that since more than three years had elapsed from the end of AY 2017-18, Section 151 required the approval to be granted by the Principal Chief Commissioner of Income Tax (PCCIT) or the Chief Commissioner of Income Tax (CCIT), and not by the Pr. CIT. Accordingly, the assessee contended that the sanction, the notice under Section 148, and the order under Section 148A(d) were invalid in law.
The Revenue relied upon the orders of the Assessing Officer and the Commissioner (Appeals).
The Tribunal first considered the legal ground relating to the sanction under Section 151. It noted that both the order under Section 148A(d) and the notice under Section 148 had been issued on 15.07.2022 with the approval of the Principal Commissioner of Income Tax-3, Pune. The Tribunal observed that it was an admitted fact that more than three years had elapsed from the end of the relevant assessment year. Under Section 151(ii), where more than three years have elapsed, the specified authority for granting approval is the Principal Chief Commissioner, Principal Director General, Chief Commissioner, or Director General, and not the Principal Commissioner.
The Tribunal relied on the decisions of the Bombay High Court in Holiday Developers (P.) Ltd. v. ITO, Pradeep Himatlal Shah v. ITO, and Agnello Oswin Dias v. ACIT. In these cases, the High Court held that where reassessment proceedings were initiated beyond three years from the end of the relevant assessment year, approval granted by the Principal Commissioner instead of the Principal Chief Commissioner was not in accordance with Section 151(ii). Consequently, the orders passed under Section 148A(d) and the notices issued under Section 148 were quashed. The Tribunal also noted that the Bombay High Court had clarified that the proviso inserted in Section 151 with effect from 01.04.2023 was prospective and did not apply to reassessment proceedings initiated prior to that date.
The Tribunal further referred to its own earlier decision in Hareshkumar Dungarmal Jain v. DCIT, where a notice issued under Section 148 for AY 2018-19 had been quashed on similar grounds. It observed that the facts of the present case were substantially identical, as the reassessment related to AY 2017-18 and the order under Section 148A(d) had been passed on 15.07.2022, before the amendment effective from 01.04.2023.
Following the binding decisions of the Bombay High Court and its own earlier ruling, the Tribunal held that the approval granted by the Principal Commissioner was not by the competent authority prescribed under Section 151(ii). Accordingly, it quashed the order passed under Section 148A(d) and the notice issued under Section 148. Since the legal ground succeeded, the Tribunal held that the remaining grounds relating to the addition under Section 68 and the application of Section 115BBE had become academic. As both parties had argued only the legal issue, those grounds were left unadjudicated. The appeal of the assessee was therefore partly allowed.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the Assessee is against the order of ld.Commssioner of Income Tax(Appeal)[NFAC] passed under section 250 of the Act, 1961, for the A.Y.2017-18, dated 16.01.2025. The Assessee has raised the following grounds of appeal :
“1. The re-opening of the assessment in this case is invalid and bad in law. The notice u/s 148 and consequentially, the impugned re- assessment order dated 17.05.2023 passed u/s. 147 r.w.s 144B of the Income Tax Act are also invalid and bad-in-law, as the sanction u/s 151 of the Income Tax Act, to issue the notice u/s 148 of the Income Tax Act has been obtained from the Authority who did not have jurisdiction over the case of the assessee.
The sanction u/s 151 of the Income Tax Act, the notice u/s 148 of the Income Tax Act and the consequential impugned re-assessment order may kindly be quashed/cancelled.
2. The Ld. Commissioner of Income Tax (Appeals) has erred in holding that, the sanction u/s 151 of the Income Tax Act, to issue the notice u/s 148 is in accordance with the Income Tax Act.
3. The notice issued in this case u/s. 148 of the Income Tax Act is invalid and bad in law.
The said notice has been issued by the Jurisdictional Assessing Officer in violation of the provisions of section 151A of the Income Tax Act r.w. the e-assessment scheme 2022, specifying a legal requirement of law that the notice u/s 148 has to be issued by the Faceless Assessing Officer in the faceless manner.
4. The notice u/s 148 and the consequential impugned reassessment order may kindly be quashed/cancelled.
The Ld. Commissioner of Income Tax (Appeals) has erred in upholding the addition of Rs. 1,08,71,550/-, made by the Assessing officer to the income of the assessee by treating the cash of Rs. 1,08,71,550/-deposited in ICICI Bank account during the demonetization period as unexplained cash credit u/s 68 of the Income Tax Act. The addition of Rs. 1,08.71.550/- may kindly be deleted.
5. The Ld. Commissioner of Income Tax (Appeals) has erred in upholding the action of the Assessing Officer in invoking the provisions of Section 115BBE of the Income Tax Act to charge the higher rate of tax in respect of the amount of Rs.1,08,71,550/- added to the income u/s. 68 of the Income Tax Act. The Action of the Assessing Officer in invoking the provisions of Section 115BBE of the Income Tax Act to charge the higher rate of tax in respect of the amount of Rs.1,08,71,550/- may be vacated/cancelled.
6. The appellant craves leave to add to or amend/modify or delete any or all of the above grounds of appeal.”
Submission of ld.AR :
2. Ld.AR for the Assessee filed written submission. Ld.AR invited our attention to page no.41 – 42 of the paper book which is a notice u/s.148 of the Income Tax Act, 1961 for A.Y.2017-18 dated 15.07.2022. ld.AR submitted that said notice has been approved by ld.Pr.CIT-3, Pune on 14.07.2022. Ld.AR submitted that for A.Y.2017-18 as per section 151 of the Act, approval should have been of Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax. In this case, notice has been approved by Principal Commissioner of Income Tax-3, hence, the notice is invalid. Ld.AR submitted that the order u/s.148A(d) was approved by Pr.CIT-3, Pune, whereas as per section 151 of the Act, it should have been approved by Pr.CCIT or CCIT. Hence, the order u/s.148A(d) is bad in law.
Submission of ld.DR :
3. The ld.DR for the Revenue relied on the order of the Assessing Officer and ld.CIT(A).
Findings & Analysis :
4. We have heard both the parties and perused the records. We take up the Legal Ground first regarding approval u/s.151 of the Act.
4.1 Both the parties have pleaded only the legal ground. In this case, order u/s.148A(d) was passed on 15.07.2022 for A.Y.2017-18. It is noted that said order has been passed with the approval of Pr.Commissioner of Income Tax-3, Pune vide the Pr.CIT-3, Pune’s letter No.PN/Pr.CIT-3/148/approval/2022-23/1034 dated 12/07/2022. Copy of the same is at page 41 & 42 of the paper book.
4.1 The notice u/s.148 for A.Y.2017-18 was issued on 15.07.2022 with the approval of Pr.Commissioner of Income Tax-3, Pune vide the vide the Pr.CIT-3, Pune’s letter No.PN/Pr.CIT-3/148/approval/2022-23/1034 dated 12/07/2022.
4.2 Thus, it is an admitted fact that notice u/s.148 and order u/s.148A(d) of the Act was passed with the approval of Pr.Commissioner of Income Tax.
4.3 Section 151 of the I.T.Act is reproduced here as under :
[Sanction for issue of notice.
-
- 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.]
5. In this case, it is an admitted fact that more than three years have been lapsed from the end of the Assessment Year. Therefore, as per Section 151 of the Act, the Competent Authority to approve the notice u/s.148 and order u/s.148A(d) of the Act, is the ld.Principal Chief Commissioner of Income or ld.Chief Commissioner of Income Tax. However, in this case, notice has been approved by ld.Principal Commissioner of Income Tax.
5.1 The Hon’ble Jurisdictional High Court in the decision of Holiday Developers (P.) Ltd, Vs. ITO [2024] 159 taxmann.com 178 (Bombay) dated 29.01.2024 has held as under :
Quote “1. Petitioner is impugning a order under section 148A(d) and the notice, both dated 7th April 2022 passed under section 148 of the Income Tax Act, 1961 (“Act”). Of-course Petitioner has also impugned the notice dated 17th March 2022 issued under section 148A(b) of the Act. Various grounds have been raised but one of the primary grounds for challenging the notice under section 148A(d) and the notice under section 148 of the Act both dated 7th April 2022 is that order as well as the notice both mention the authority that has granted approval, is the Principal Commissioner of Income Tax (“PCIT”), Mumbai 5 and the approval has been granted on 7th April 2022.
2. Gandhi is correct in saying that the Assessment Year (“AY”) is 2018-19 and, therefore, since more than three years have expired from the end of the assessment year, Sanctioning Authority under section 151(ii) of the Act should be the Principal Chief Commissioner of Income Tax (“PCCIT”) and not the PCIT. Mr. Gandhi says, as held in Siemens Financial Services (P.) Ltd. v. Dy. CIT [2023] 154 taxmann.com 159/457 ITR 647 (Bom.),the sanction is invalid and consequently, the order and the consequent notice under section 148A(d) and section 148, respectively, of the Act should be quashed and set aside.
3. In view of these facts and circumstances, we do not see any reason to just grant Rule and keep the matter pending.
4. As held in Siemens (Supra), the order passed under section 148A(d) and notice issued under section 148 of the Act both are quashed and set aside.” Unquote.
5.2 Similarly, the Hon’ble Bombay High Court in the case of Pradeep Himatlal Shah Vs. ITO [2025] 170 taxmann.com 471(Bombay) has held as under :
“4. The impugned order and the impugned notice both dated 7th April 2022 state that the Authority that has accorded the sanction is the PCIT, Thane-1. The matter pertains to Assessment Year (“AY”) 20182019 and since the impugned order as well as the notice are issued on 7th April 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCCIT as provided under Section151(ii) of the Act. The proviso to Section 151 of the Act has been inserted only with effect from 1st April2023 and, therefore, shall not be applicable to the matter at hand.
5. In the circumstances, as held by this Court in Siemens Financial Services (P) Ltd v. Dy. CIT [2023] com 159/457 ITR 647 (Bombay)., the sanction is invalid and consequently, the impugned order and impugned notice both dated 7th April 2022 under Sections 148A(d) and 148 of the Act are hereby quashed and set aside.”(emphasis supplied)
5.3 The Hon’ble Jurisdictional High Court in the case of Agnello Oswin Dias Vs. ACIT [2024] 161 taxmann.com 16 (Bombay) has held as under :
“4. The impugned order and the impugned notice both dated 22nd April 2022 state that the Authority that has accorded the sanction is the PCIT, Mumbai-5. The matter pertains to Assessment Year (“AY”) 20182019 and since the impugned order as well as the notice are issued on 22nd April 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCCIT as provided under Section151(ii) of the Act. The proviso to Section 151 of the Act has been inserted only with effect from 1st April2023 and, therefore, shall not be applicable to the matter at hand.
5. In the circumstances, as held by this Court in Siemens Financial Services (P.) Ltd. v. Dy. CIT [2023] 154taxmann.com 159/457 ITR 647 (Bom.), the sanction is invalid and consequently, the impugned order and impugned notice both dated 22nd April 2022 under sections 148A(d) and 148 of the Act are hereby quashed and set aside.”
5.4 Thus, Hon’ble Bombay High Court explained the Amendment made in 2023 is applicable w.e.f. 01.04.2023.
5.5 ITAT Pune in the case of Hareshkumar Dungarmal Jain vs. DCIT in ITA No.1933/PUN/2024, quashed the Notice u/s.148 of the Act, dated 13.04.2022 for A.Y.2018-19.
6. In the above referred decision of Hon’ble Bombay High Court, Pradeep Himmatlal Shah vs. ITO(supra) the assessment year involved is A.Y.2018-19 and order under section 148A(d) of the Act, was passed on 07.04.2022. In the case of the assessee, the assessment year is A.Y.2017-18 and order under section 148A(d) of the Act, is dated 15.07.2022. Therefore, the facts are absolutely identical. Hence, respectfully following the decision of Hon’ble Bombay High Court(supra) and ITAT Pune(supra), the order under Section 148A(d) of the Act, and notice under section 148 are quashed. Accordingly, the legal ground raised by the assessee is allowed. Since we have decided the Legal Ground in favour of the assessee, the other grounds becomes academic in nature. We have already mentioned that both parties only argued on the legal ground, hence, the remaining grounds are dismissed as unadjudicated. Accordingly, grounds of appeal raised by the assessee are partly allowed.
7. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open Court on 21st May, 2025.
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