Suresh Bhatia (HUF) Vs DCIT (ITAT Bangalore)
The ITAT Bangalore held that reassessment proceedings initiated under Section 147 were invalid due to improper approval under Section 151, thereby quashing the entire assessment.
In this case, the assessee (HUF) had originally filed a nil return, but the AO reopened the case based on information regarding short-term capital loss on mutual funds (₹2.05 crore). Notice under Section 148 was issued on 26.07.2022, i.e., beyond 3 years from the end of the relevant AY (2016–17).
As per the amended law post Finance Act, 2021, such reopening beyond 3 years mandatorily requires approval from “specified authority” under Section 151(ii)—i.e., Principal Chief Commissioner / Chief Commissioner / DGIT level, and not merely Principal Commissioner. However, in this case, the AO obtained approval only from the Principal Commissioner, which is not a valid authority under the amended regime.
The Tribunal emphasized that this defect goes to the root of jurisdiction and is not curable. Relying on the amended provisions and the framework explained by the Supreme Court in Ashish Agarwal, it held that strict compliance with Section 151 is mandatory. Since the jurisdiction itself was invalidly assumed, the entire reassessment order was quashed without examining merits.
Accordingly, the appeal of the assessee was allowed, and all other grounds were left open.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
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