Messrs Siddhi Investments Vs ITO (ITAT Mumbai)
Wrong Sanctioning Authority Under Section 151 Vitiates Reassessment: Mumbai ITAT Quashes Entire Proceedings
The Mumbai ITAT held that a reassessment initiated beyond three years from the end of the relevant assessment year is invalid where the approval under section 151 was granted by the wrong authority. In the present case, the notice under section 148 and the order under section 148A(d) were approved by the Principal Commissioner of Income Tax (Pr. CIT), whereas, under the law as it stood prior to the amendment by the Finance Act, 2023, the competent authority after expiry of three years was the Principal Chief Commissioner/Chief Commissioner under section 151(ii). Since the reassessment was founded on an invalid sanction, the assumption of jurisdiction itself was held to be void.
The Tribunal relied upon the Bombay High Court decision in Alag Property Construction Pvt. Ltd. v. ACIT and the Mumbai ITAT decision in Shabbir Taheri v. ITO, which held that the proviso inserted in section 151 by the Finance Act, 2023 has only prospective effect and cannot cure defects in sanctions granted prior to 1 April 2023. The Tribunal reiterated that sections 149 and 151 operate in different fields—section 149 prescribes the limitation for issuing notice, whereas section 151 specifies the competent sanctioning authority. The extended limitation under section 149 cannot be imported into section 151 in the absence of an express statutory provision. Accordingly, the Tribunal quashed the notice under section 148, the order under section 148A(d), and the consequential reassessment proceedings. Since the reassessment itself was declared invalid, the additions on merits were not examined.
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