Summary: The Bombay High Court in Chandar Mahadev Naik Vs ITO (Bombay High Court) held that for Assessment Year 2016–17, approval for reopening an assessment under Section 148 of the Income Tax Act had to be obtained strictly from the authority prescribed under Section 151(2), and not under Section 151(1). The assessees challenged reassessment proceedings and assessment orders passed under Sections 144 and 147 on the ground that sanction had been granted by an incompetent authority. Relying on the earlier decision in Siemens Financial Services Pvt. Ltd., the Court ruled that such improper sanction amounted to a jurisdictional defect, rendering the Section 148 notice void ab initio. Consequently, the reassessment order dated 27 May 2023, demand notices, and penalty proceedings were quashed. The Supreme Court later dismissed the Revenue’s Special Leave Petition, noting an unexplained delay of 651 days and also finding no merit in the challenge. The ruling reaffirms that reassessment proceedings fail when statutory sanction requirements are violated.
SLP Citation (Supreme Court – Dismissed): Income Tax Officer, Ward 5 and Others v. Chandar Mahadev Naik. No.- Special Leave Petition (Civil) Diary No. 66751/2025 Dated:- May 11, 2026
Core Issue: Whether, for AY 2016–17, sanction for issue of notice under section 148 was required under section 151(2), and whether sanction obtained from an incorrect authority under section 151(1) invalidated the entire reassessment proceedings.
Facts: The assessees challenged the reassessment proceedings for AY 2016–17, including the assessment order dated 27 May 2023 passed under section 144 read with section 147. Their principal contention was that approval under section 151 had been obtained from an authority not competent in law. Reliance was placed on the Bombay High Court judgment in Siemens Financial Services Pvt. Ltd. v. Deputy Commissioner of Income Tax, which held that for AY 2016–17 sanction had to be obtained under section 151(2).
Assessing Officer’s Finding: The Assessing Officer proceeded on the basis that the sanction obtained was valid and completed reassessment under section 144 read with section 147, along with issuance of demand notice and initiation of penalty proceedings.
Bombay High Court Findings: The High Court held that the issue was fully covered by Siemens Financial Services Pvt. Ltd. For AY 2016–17, the competent approval was required under section 151(2) and not under section 151(1). Approval granted by an incorrect authority constituted a jurisdictional defect. Since the notice under section 148 itself was invalid, the assessment order dated 27 May 2023, notice of demand, and penalty proceedings were quashed.
Supreme Court Findings: The Revenue filed Special Leave Petition (Civil) Diary No. 66751 of 2025. The Supreme Court noted a gross delay of 651 days in filing the SLP, which had not been satisfactorily explained. The Court further held that even on merits there was no reason to interfere with the Bombay High Court judgment. Accordingly, the SLP was dismissed on the ground of delay as well as on merits by order dated 11 May 2026.
Final Conclusion: For AY 2016–17, sanction for reopening must be obtained from the authority prescribed under section 151(2). Approval obtained from a wrong authority renders the notice under section 148 void ab initio, and consequently the reassessment order and all consequential proceedings are liable to be quashed. This principle has been affirmed by the Supreme Court by dismissal of the Revenue’s SLP on both delay and merits.
Cases Relied Upon:
1. Siemens Financial Services Pvt. Ltd. v. Deputy Commissioner of Income Tax.
2. Chandar Mahadev Naik, Govind Namdev Naik and Vikas Narayan Naik v. Income Tax Officer, Ward 5 and Others.
3. Income Tax Officer, Ward 5 and Others v. Chandar Mahadev Naik.
Bombay High Court order :-
PC
These petitions relates to A.Y. 2016-2017. Counsel states that in these petitions the issue of improper sanction having been obtained has been raised amongst other grounds. Counsel state that the issue of improper sanction has been decided by this court in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors. (2023) 457 ITR 647 (BOM) wherein the court has held that for A.Y. 2016-2017 the sanction should have been given under Section 151(ii) and not under Section 151(i) of the Income Tax Act 1961 (the Act). Consequently, the sanction is invalid. The court has stated that in view of the invalid sanction, the notice issued itself will be invalid and has to be quashed.
2. Counsel further state that the findings in Siemens Financial Services Pvt Ltd. (Supra) would squarely apply to these petitions as well on the issue of sanction.
3. We would also add, if the notice has to be quashed, if there is an assessment order passed subsequently, those assessment orders having been passed relying on an incorrect sanction will also have to be quashed.
Therefore, impugned Assessment Order dated 27th May 2023 issued under Section 144 read with Section 147 of the Act is hereby quashed and set aside. In view of the above, all consequential proceedings including Notice of Demand, Penalty proceedings also stands quashed and set aside.
4. Petitions disposed.
5. We clarify that all other grounds could be raised by the parties at appropriate stage in any other proceeding.
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