Case Law Details
Dharmaraj Babanrao Dahiwalkar Vs ITO (ITAT Pune)
Wrong Approval, Wrong Reassessment – Pune ITAT Quashes 148 Notice for Taking Sanction From PCIT Instead of PCCIT!
The Pune ITAT quashed reassessment proceedings for AY 2016-17 holding that the notice issued u/s 148 was invalid because the Assessing Officer obtained approval from the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner of Income Tax (PCCIT) as mandated u/s 151.
The reassessment was initiated after information regarding alleged cash payment and cheque payment for purchase of immovable property. Though the AO issued notices u/s 148A(d) and 148 after obtaining approval from the PCIT, the Tribunal observed that since the reopening was beyond three years from the end of AY 2016-17, approval ought to have been taken from the PCCIT in terms of section 151(ii).
Relying on the Bombay High Court ruling in Alag Property Construction Pvt. Ltd. and the Supreme Court judgment in Union of India vs. Rajeev Bansal, the ITAT held that obtaining approval from the wrong authority strikes at the very jurisdiction of reassessment proceedings and renders the notice u/s 148 void ab initio.
Accordingly, the Tribunal quashed the notice issued u/s 148 and all consequential reassessment proceedings, holding the entire reassessment exercise to be bad in law.
FULL TEXT OF THE ORDER OF ITAT PUNE
The captioned appeal at the instance of assessee pertaining to A.Y. 2016-17 is directed against the order dated 26.07.2024 framed by National Faceless Appeal Centre, Delhi (NFAC) arising out of Assessment Order dated 24.05.2023 passed u/s.147 r.w.s.144 r.w.s.144B of the Income Tax Act, 1961 (in short ‘the Act’).
2. Registry has pointed out that there is delay of 317 days in filing of the appeal before this Tribunal. Assessee has filed condonation petition explaining the reason which led to delay. On due consideration of the averments made in the said application, I am satisfied that ‘reasonable cause’ prevented the assessee to file the appeal within the stipulated time. I note that the delay is not intentional and assessee would not have gained from filing the appeal with a delay. I therefore in light of judgments of Hon’ble Apex Court in the case of Collector, Land Acquisition, Anantnag & Anr. Vs. Mst. Katiji & Ors. reported in (1987) 2 SCC 107 and in the case of Inder Singh Vs. State of Madhya Pradesh judgment dated 21.03.2025 (2025 INSC 382) condone the delay of 317 days in filing of the instant appeal before this Tribunal and admit the appeal for adjudication.
3. Though the assessee has raised various grounds on merit, ld. Counsel for the assessee referred to the additional Ground Nos.8 and 9 challenging the addition of Rs.29.00 lakh made by the Assessing Officer and confirmed by the CIT(A). The said additional grounds reads as follows :
“Gr. No. 8: Without prejudice to the other grounds taken earlier and on the facts and in the prevailing circumstances of the case and in Law, Ld. CIT(A) -NFAC erred in confirming the addition made in the assessment order passed by the Ld. Assessing Officer without appreciating the fact that the Assessment Proceedings initiated u/s 147 of the Act are invalid since the requisite approval/sanction u/s 151 (ii) of the Act was not taken. Thus, the entire assessment proceedings become bad in law and hence, the addition made in the impugned order may please be deleted.
Gr. No. 9: Without prejudice to the other grounds and on the facts and in the prevailing circumstances of the case and in Law, Ld. CIT(A) – NFAC erred in confirming the addition made in the assessment order passed by the Ld. Assessing Officer without appreciating the fact that the Assessment Proceedings u/s 147 of the Act are invalid since the same were initiated in violation of provisions of section 149. Thus, the entire assessment proceedings become bad in law and hence, the addition made in the impugned order may please be deleted.
The aforesaid legal grounds of appeal inadvertently remained to be taken at the time of filing of appeal.
It may be mentioned that all the facts necessary to decide the additional grounds are already on record and no new evidence is required to be brought on record.
I most humbly want to submit that my case is fully covered by the decision of the Hon’ble Supreme Court in the case of National Power Company Ltd vs CIT (1998) 229 ITR 383(SC).”
4. However, ld. Counsel for the assessee firstly made submissions for the legal issue challenging the validity of the assessment proceedings on the ground that proper approval as provided u/s.151 of the Act has not been taken by the Assessing Officer prior to issuance of notice u/s.148 of the Act. Referring to the paper book he submitted that notice u/s.148A(d) and 148 of the Act has been issued with the prior approval of Principal Commissioner of Income Tax, Pune whereas per the mandate of section 151 of the Act, for carrying out reassessment proceedings after three years from the end of the assessment year, ld. Assessing Officer is required to take prior approval from Principal Chief Commissioner of Income Tax. He referred and relied on the decision of this Coordinate Bench in the case of Gulamahemad Hamidulla Khan Vs. ITO – ITA No.166/PUN/2025 order dated 29.08.2025.
5. Ld. DR supported the order of ld.CIT(A) and opposed the submissions made by ld. Counsel for the assessee.
6. I have heard the rival contentions and perused the record placed before me. I observe that the assessee is an individual and income of Rs.5,25,970/- declared in the regular return of income u/s.139 of the Act for A.Y. 201617. Thereafter, based on the information about the alleged cash payment of Rs.22.00 lakh and payment of cheque at Rs.23.50 lakh for purchase of immovable property in the form of shop, ld. Assessing Officer decided to carry out the reassessment proceedings. After issuance of notice u/s.148A(b) of the Act on 17.05.2022, assessee filed reply on 31.05.2022. Thereafter, ld. Assessing Officer issued notice u/s.148A(d) of the Act with the prior approval from Principal Commissioner of Income Tax, Pune on 25.07.2022 and thereafter issued final notice u/s.148 of the Act on 25.07.2022. Admittedly, for the issuance of notice u/s.148 of the Act lad. Assessing Officer has taken prior approval from Principal Commissioner of Income Tax, Pune. It has been contended by the ld. Counsel for the assessee that as per section 151 of the Act for the period under consideration, where the reopening is carried out after three years from the end of the assessment year then the ld. Assessing Officer was required to take prior approval from Principal Chief Commissioner of Income Tax. This issue has been dealt by the Coordinate Bench in the case Santosh Jaynarayan Sharma Vs. ITO – ITA No.2324/PUN/2025 order dated 06.01.2026 and in the case of Siddharth Raikumar Nahar vs. DCIT – ITA No.2062/PUN/2025 order dated 29.10.2025 observing as follows :
“5. We have heard the rival contentions and perused the record placed before us. We observe that the assessee is an individual and the return of income for A.Y. 2017-18 filed on 17.03.2018 declaring income of ₹20,31,900. Ld. Assessing Officer based on the information about explained cash credit/investment amounting to ₹45,76,025 had reason to believe that income to this extent has escaped assessment and has issued notice u/s.148 of the Act on 26.07.2022 after taking approval from the Principal Commissioner, Nashik. Now the issue raised by the assessee in Ground No.1 of the Cross Objection that since the escapement of income is less than ₹50.00 lakh and notice has been issued after three years, ld. Assessing Officer ought to have taken approval from Principal Chief Commissioner of Income Tax in place of Principal Commissioner of Income Tax. We observe that similar issue came for adjudication before the Hon’ble Jurisdictional High Court in the case of Alag Property Construction Pvt. Ltd. Vs. ACIT wherein also for A.Y. 2017-18 notice u/s.148A(d) and section 148 of the Act were issued on 18.08.2022 and 23.08.2022 and Hon’ble Court has dealt with the issue of grant of approval u/s.151 of the Act for issuing notice u/s.148 of the Act beyond three years observing as follows :
“10. On perusal of the order dated 18.08.2022, passed under Section 148A(d) of the Act we find that the aforesaid order was passed after taking approval from Principal Commissioner of Income Tax (Respondent No.2). Since the aforesaid order was passed, as well as the notice under section 148 was issued, after the expiry of three years from the end of A.Y. 2017-18, as per the substituted provisions of re-assessment, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. Accordingly, we conclude that in the present case, the approval has been obtained from the authority specified under Section 151(1) of the new regime instead of the authority specified under Section 151(ii) of the new regime.
11. The Hon’ble Supreme Court in the above case has drawn an illustration in para 78 of its order in the context of A.Y. 2017-18 (which is also the relevant Assessment year in the present Writ Petition) wherein it is categorically held that the authority specified under section 151(1) can accord sanction only upto 30.06.2021. This illustration makes it absolutely clear that when the period of three years from end of relevant Assessment Year expired between 20.03.2020 and 31.03.2021, the extension by virtue of TOLA was upto 30.06.2021 and not beyond. Thus, it can be said that the period of three years from the end of the relevant Assessment Year (in the present case A.Y. 201718) expired on 30.06.2021, whereas Respondent No.1, despite passing order under section 148A(d) on 18.08.2022, and issuing notice under section 148 on 23.08.2022 [in respect of Assessment Year 2017-18], has obtained approval of Respondent No.2 who is not the authority as prescribed under section 151(ii).
12. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of Respondent No.1 to issue a notice under Section 148 of the Act.
13. We are clearly of the view that the present matter stands covered by the decision of Hon’ble Supreme Court in the case of UOI vs. Rajeev Bansal (supra) and we are bound by it. Accordingly, we hold that the order dated 18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated and 23.08.2022 are bad in law, and hence, are required to be quashed and set aside.
14. We accordingly set aside the impugned order dated 18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated 23.08.2022, and all other proceedings/orders emanating therefrom.”
6. On examining the facts of the instant case in light of the above judgment, we find that in the assessee’s case also notice u/s.148 of the Act has been issued after three years and the proper course of action for issuing valid notice u/s.148 of the Act was to get approval from the Principal Chief Commissioner of Income Tax. However, in the instant case, the approval has been taken from the Principal Commissioner of Income Tax. Respectfully following the above judicial binding precedent, we are inclined to hold that proper approval u/s.151 of the Act has not been taken and therefore the notice u/s.148 of the Act is invalid and liable to be quashed. Accordingly, Ground No.1 raised by the assessee in the Cross Objection is allowed.”
7. In light of above decision, I hold that the notice u/s.148 of the Act is invalid and deserves to be quashed as in the instant case on hand also, ld. Assessing Officer had issued notice u/s.148 of the Act after three years from the end of A.Y. 2016-17 by obtaining the approval from the Principal Commissioner of Income Tax rather than from the Principal Chief Commissioner of Income Tax as mandated u/s.151 of the Act. The additional legal grounds raised by the assessee challenging the validity of notice issued u/s.148 of the Act and subsequent reassessment proceedings are allowed.
8. Since I have quashed the reassessment order due to invalid notice issued u/s.148 of the Act, dealing with other grounds on merit would be merely academic in nature and are dismissed as Infructuous.
In the result, the appeal of the assessee is allowed.
Order pronounced on this 12th day of May, 2026.
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