ITO Vs Dipak Devshibhai Jadav (ITAT Rajkot)
Wrong-Clause Sanction Vitiates Reassessment: ₹2 Lakh Escapement Cannot Support Section 149(1)(b)
Background of the Case
The assessee, an individual, filed his return for AY 2019–20 on 12 July 2019, declaring total income of ₹11,23,318. The return was processed under section 143(1).
Subsequently, information received through the Insight Portal indicated that the assessee had claimed a deduction of ₹2,00,000 under section 80GGC for a donation to Rashtriya Samajwadi Party (Secular). According to the departmental information, the political party was engaged in providing accommodation entries through purported donations.
Based on this information, the Assessing Officer issued a notice under section 148 on 13 April 2023. In response, the assessee filed a return declaring income of ₹8,70,240. The reassessment was completed under section 147 read with section 144B on 7 January 2025, disallowing the donation deduction of ₹2,00,000.
The assessee challenged the reassessment before the CIT(A), principally questioning the validity of the sanction obtained for reopening.
The Jurisdictional Defect
The assessee contended that the approval under section 151 had been accorded by referring to section 149(1)(b), although the alleged escaped income was only ₹2,00,000.
Under the statutory framework considered in the order, section 149(1)(b) permitted reopening beyond three years, subject to the prescribed conditions, where the income escaping assessment amounted to or was likely to amount to ₹50 lakh or more, represented in the specified forms.
The assessee argued that invoking this clause for an alleged escapement of ₹2 lakh demonstrated mechanical approval without application of mind. Since valid sanction was a prerequisite for issuing the notice, the defect invalidated both the notice and the consequential reassessment.
CIT(A)’s Decision
The CIT(A) found that the reopening proposal specifically mentioned section 149(1)(b) and that the approval form had also been signed accordingly.
He held that the alleged escaped income of ₹2 lakh did not satisfy the monetary requirement of that clause. The approval had therefore been granted on an incorrect factual and legal premise, affecting the very jurisdiction to reopen the assessment.
The CIT(A) relied on Kartik Sureshchandra Gandhi v. ACIT [2023] 154 taxmann.com 193 (Bombay), as discussed in the appellate order, concerning approval obtained under the wrong clause and the resulting absence of proper application of mind.
Accordingly, the CIT(A) held the notice under section 148 to be void ab initio and annulled the reassessment. Having decided the jurisdictional issue in favour of the assessee, he did not adjudicate the remaining grounds on merits.
Revenue’s Arguments
Before the Tribunal, the Revenue contended that the donation involved an accommodation-entry arrangement and that the CIT(A) ought to have examined the substantive issue rather than granting relief on a technical ground.
In its grounds of appeal, the Revenue also asserted that the proposal had been submitted for proceedings covered by section 149(1)(a), but the online approval on ITBA had inadvertently referred to section 149(1)(b) because of a clerical error.
The assessee supported the CIT(A)’s decision and additionally raised an objection concerning the low tax effect of the departmental appeal.
Tribunal’s Findings
The Tribunal upheld the CIT(A)’s conclusion. It specifically found that the reopening proposal mentioned section 149(1)(b), and the approval form was signed on that basis.
Since the alleged escapement was only ₹2 lakh, the requirements of section 149(1)(b) were not satisfied. Invoking the wrong clause showed mechanical approval and lack of application of mind, thereby vitiating the notice and reassessment proceedings.
The Tribunal emphasised that valid sanction under section 151 is a condition precedent for issuing a notice under section 148. An approval resting on an incorrect factual and legal basis therefore went to the root of jurisdiction.
Finding no infirmity in the CIT(A)’s decision, the Tribunal dismissed the Revenue’s appeal. The alleged bogus nature of the donation was not adjudicated on merits, and the dismissal was founded on the jurisdictional defect rather than a separate determination of the low-tax-effect objection.
Author’s Comments
Sanction for reopening is a statutory safeguard, not a routine endorsement. The approving authority must examine whether the facts satisfy the provision invoked. Where a clause requires alleged escapement of at least ₹50 lakh, approving proceedings involving ₹2 lakh under that clause raises a fundamental question about the scrutiny actually undertaken.
The Revenue described the incorrect reference as a clerical error. However, the Tribunal’s factual finding was that both the proposal and the approval referred to the same incorrect clause. The decision should therefore be understood in that factual setting; it does not establish that every isolated typographical mistake necessarily invalidates a reassessment.
A further qualification is necessary concerning limitation. Although the notice was issued on 13 April 2023 for AY 2019–20, the order does not set out the dates or duration of the section 148A proceedings. The effect of statutory exclusions on the limitation period cannot independently be determined from the dates reproduced in this order alone. The clearest basis of the decision is the defective sanction and the Tribunal’s finding of mechanical approval.
Finally, annulment of the reassessment does not amount to judicial certification that the political donation was genuine. The assessee succeeded because the reopening lacked valid jurisdiction; the merits of the section 80GGC claim remained undecided.
Cases Discussed
- Kartik Sureshchandra Gandhi Vs ACIT (Bombay High Court)– [2023] 154 taxmann.com 193; also reported as (2023) 295 Taxman 442 (Bombay). Relied upon by the CIT(A).
FULL TEXT OF THE ORIGINAL ORDER OF ITAT RAJKOT
Captioned appeal filed by the revenue, pertaining to assessment year (AY) 2019-20, is directed against the order under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the National Faceless Appeal Centre (NAC) Delhi/Commissioner of Income-tax (Appeals) [in short ‘NFAC/Ld.CIT(A)’], dated 07.11.2025, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 of the Act, dated 07.01.2025.
2. The grounds of appeal raised by the revenue are as follows:
“(i). The CIT(A) has erred on the facts and law by not deciding issue on merit as the issue was involved in the activity of providing accommodation entry way of accepting bogus donation which were than routed through various intermediaries and subsequently returned to the donor in the form of cash/RTGS/NEFT or other banking channels, after the charging a commission in the range of 1.5% to 5% of the amount donated. The cases involving organized tax evasion including of bogus capital gain/loss through penny stock and cases of accommodation entries. But CIT(A) failed to decide issue on merit.
(ii). The CIT(A) has erred on the fact and law while deciding that the approval in the present case, recorded under a wrong clause, cannot be treated as valid. The notice u/s 148 issued pursuant to such defective approval is void ab initio, and the reassessment based thereon lacks jurisdiction. The Id. CIT(A) ignored the fact that the A.O. has submitted proposal for approval to the PCIT office, Jamnagar for current proceedings covered under u/s.149(1)(a) but due to clerical error inadvertently online approval on ITBA was given u/s 149(1)(b). It is undisputed that case is duly covered under u/s.149(1)(a) as admitted by the CIT(A).
(iii). That the revenue craves leaves to add, amend, alter or withdraw any ground of appeal.”
3. Succinctly, the factual panorama of the case is that assessee before me is an Individual, and filed his Return of Income (ITR) for assessment year (AY) 2019-20, on 12.07.2019, declaring total income of Rs. 11,23,318/-. The ITR was processed u/s 143(1) of the Act. Subsequently, information was received through the insight portal that the assessee had claimed deduction of Rs. 2,00,000/-, u/s 80GGC of the Act, towards donation to Rashtriya Samajwadi Party (Secular), which was identified as a bogus political party engaged in providing accommodation entries. Based on this information, notice u/s 148 of the Act was issued on 13.04.2023. The assessee, in response, filed ITR on the income of Rs. 8,70,240/-. The reassessment proceedings were completed u/s 147 r.w.s. 144B on 07.01.2025 after disallowing the deduction of Rs. 2,00,000 u/s 80GGC of the Act.
4. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld.CIT(A), who has allowed the appeal of the assessee, observing as follows:
“As per the ground no. 1, the assessee has challenged the validity of the reassessment proceedings u/s 147. He has contended that the approval u/s 151 was accorded u/s149(1)(b), though the escaped income alleged is only Rs. 2,00,000/-, clearly falling within section 149(1)(a). It was submitted that invoking the wrong clause shows mechanical approval without due application of mind, vitiating the notice u/s 148 and the consequential assessment.
5.2. For reference, the relevant portion of the section 149 is quoted below:
“149. (1) No notice under section 148 shall be issued for the relevant assessment year, –
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of- (ii) expenditure in respect of a transaction or in relation to an event or occasion; or
(iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021:
Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:
Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub- section shall be deemed to be extended accordingly.
5.3. As per the records and the assessee’s submissions, it appears that theproposal for reopening specifically mentioned section 149(1)(b), and the approval form was also signed accordingly. However, clause (b) of section 149(1) applies only where the income chargeable to tax that has escaped assessment amounts to or is likely to amount to Rs. 50 lakh or more, represented in the form of an asset, expenditure or entry. Since the alleged escaped income here is only Rs. 2,00,000/-, the reopening could only fall within the ambit of section 149(1)(a), which covers cases within three years from the end of the relevant AY.
5.4. The approval, therefore, was accorded on an incorrect factual and legal premise. This goes to the root of jurisdiction, since valid sanction under section 151 is a condition precedent for issue of notice u/s 148.
5.5. The assessee has relied on the case of Kartik Sureshchandra Gandhi v. ACIT[2023] 154 taxmann.com 193 (Bombay). In this case, the Hon’ble Bombay High Court held that where the AO obtained approval u/s149(1)(b) though the case fell u/s 149(1)(a), the approval was mechanical and without application of mind, rendering the notice u/s 148 and reassessment void.
5.6. Following this principle, the approval in the present case, recorded under a wrong clause, cannot be treated as valid. The notice u/s 148 issued pursuant to such defective approval is void ab initio, and the reassessment based thereon lacks jurisdiction.
5.7. In view of the above, the reassessment proceedings u/s 147 are held to be invalid and hence, the ground no. 1 of the appeal is allowed.
5.8. Since, the assessment has been rendered invalid, the rest of the issues and grounds become academic in nature, hence, they are not being adjudicated.”
5. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.
6. Learned DR for the revenue vehemently argued that ld.CIT(A) allowed the appeal of the assessee based on technical issue. However, the real fact is that the donation paid to political party is bogus therefore, the addition made by the assessing officer should be upheld.
7. On the other hand, Ld. Counsel for the assessee submitted that addition made by the assessing was deleted by the Ld.CIT(A) based on the technical issue of reopening of assessment, therefore, order of Ld.CIT(A) should be upheld. Moreover, appeal filed by the revenue is covered under the tax effect, as per CBT circular, therefore, the revenue authorities, do not have power to file the appeal before the Tribunal, as the tax effect is low, hence, appeal of the revenue may be dismissed.
8. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. I have gone through the findings of the Ld.CIT(A) and noted that Ld.CIT(A) has allowed the appeal of the assessee, on the technical issue, stating that in the assessee’s case under consideration, the escaped amount of income is only Rs.2,00,000/-, which is not more than Rs. 50,00,000/-, therefore, reopening of assessment after three years is not permitted. I note that the approval u/s 151 was accorded u/s149(1)(b) of the Act, though the escaped income alleged is only Rs. 2,00,000/-, which is clearly falling within section 149(1)(a) of the Act. Therefore, invoking the wrong clause shows mechanical approval without due application of mind, vitiating the notice u/s 148 and the consequential re-assessment proceedings.I find that the proposal for reopening specifically mentioned section 149(1)(b), and the approval form was also signed accordingly. However, clause (b) of section 149(1) applies only where the income chargeable to tax that has escaped assessment amounts to or is likely to amount to Rs. 50 lakh or more, represented in the form of an asset, expenditure or entry. Since the alleged escaped income here is only Rs. 2,00,000/-, the reopening could only fall within the ambit of section 149(1)(a) of the Act, which covers cases within three years from the end of the relevant assessment year .The approval, therefore, was accorded on an incorrect factual and legal premise. This goes to the root of jurisdiction, since valid sanction under section 151 is a condition precedent for issue of notice u/s 148 of the Act. Considering these facts, I do not find any infirmity in the conclusion reached by the learned CIT(A). In the wake of above delineation, I see no error in the conclusion drawn by the CIT(A) in this regard therefore, hence, I confirm the findings of Ld.CIT(A) and dismiss the appeal of the revenue.
9. In the result, appeal filed by the revenue is dismissed.
Order is pronounced in the open Court on 09/10/2026.
