Arunava Bhattacharjee Vs DCIT (ITAT Kolkata)
Sections 151 and 143(2): Wrong Sanction and Missing Notice Defeat Reassessment; Later Registration Does Not Shift an Earlier Completed Property Purchase
Background of the Dispute
The assessee challenged the Commissioner (Appeals), NFAC’s order sustaining a reassessment completed under sections 147, 144 and 144B on 30 May 2023, determining income at ₹9,22,33,123.
The appeal involved three significant issues: sanction obtained from the wrong authority under section 151, failure to issue notice under section 143(2), and taxation of a property purchase under section 56(2)(vii)(b) merely because registration occurred in a later year.
The Tribunal granted relief on both jurisdictional grounds and separately adjudicated the disputed property addition.
Approval from PCIT Was Insufficient Beyond Three Years
Following the Supreme Court’s decision in Union of India v. Ashish Agarwal, the Assessing Officer undertook proceedings under section 148A. An order under section 148A(d) and a fresh notice under section 148 were issued on 26 July 2022.
The approval had been obtained from PCIT-1, Kolkata.
The assessee argued that, for assessment year 2017-18, more than three years had elapsed from the end of the relevant assessment year. Approval was therefore required from the authority specified in section 151(ii), rather than the PCIT covered by section 151(i).
The Tribunal accepted this objection. It held that the sanction should have been obtained from the competent higher authority under section 151(ii), identified in the case as the Principal Chief Commissioner.
Relying on Union of India v. Rajeev Bansal, the Tribunal held that approval from the wrong authority rendered the notice and consequential reassessment invalid. It accordingly quashed the approval, the section 148 notice and the reassessment.
Letter Adopting Earlier Return Triggered Section 143(2)
The Tribunal also considered a separate jurisdictional defect.
By a letter dated 24 August 2022, the assessee had informed the Assessing Officer that the return already filed should be treated as the return furnished in response to the section 148 notice.
The Tribunal held that this communication amounted to compliance with the notice under section 148.
Once that communication was on record, issuance of notice under section 143(2) was mandatory. No such notice had been issued.
Following PCIT v. S.G. Portfolio (P.) Ltd. [2023] 151 taxmann.com 307 (Delhi), the Tribunal independently held the assessment invalid on this ground as well.
Property Paid for and Possessed Before Later Registration
The property dispute concerned a flat in Uniworld City Heights, acquired under an agreement dated 10 August 2012 with Creative Residency Pvt. Ltd.
The agreed consideration was ₹2,08,39,101. The records showed payment of ₹2.03 crore to the seller through banking channels and further payment directly to the developer. The Tribunal recorded total payments of ₹2,09,06,695 during financial year 2012-13.
The seller executed a nomination letter and indemnity bond on 18 September 2012, transferring its rights and interest in the property to the assessee.
Physical possession was taken on 13 March 2013, and the assessee began bearing maintenance charges from that month.
However, the conveyance was registered directly by the developer in the assessee’s favour only on 5 May 2016, when the stamp duty value was ₹2,65,09,760.
Section 56 Addition Based on Later Conveyance Rejected
The Assessing Officer questioned the transaction with the intermediate seller and adopted acquisition consideration of ₹1,12,03,913, rather than the consideration claimed by the assessee.
Comparing that figure with the stamp duty value, he added ₹1,53,05,847 under section 56(2)(vii).
The Tribunal examined the agreement, banking records, nomination documents, possession evidence and maintenance payments. It concluded that the purchase transaction had been completed in financial year 2012-13, relevant to assessment year 2013-14.
The provision extending section 56(2)(vii)(b) to immovable property acquired for inadequate consideration applied from assessment year 2014-15. The earlier provision concerned receipt without consideration.
Following Bajrang Lal Naredi v. ITO, the Tribunal held that later registration did not bring the earlier completed purchase within the expanded provision. The ₹1,53,05,847 addition was deleted.
Decision and Author’s Comments
The appeal was allowed. The reassessment was quashed on two independent jurisdictional grounds, and the property addition was separately deleted on merits. Other grounds were left open; the order’s reference to a separate section 50C addition did not culminate in an independent merits ruling on that issue.
The decision demonstrates the importance of examining the applicable sanction requirement and the assessment notice record before addressing computation disputes.
Its property finding is equally fact-specific. The relief rested on full payment, transfer of rights, possession and maintenance obligations in the earlier year—not merely an old agreement date.
The ruling therefore supports distinguishing a substantially completed acquisition from its later formal registration. It should not be extended to every case where an agreement precedes conveyance without comparable evidence of completed obligations.
Cases Discussed
- Union of India vs. Ashish Agarwal, [2022] 444 ITR 1 (SC)
- Union of India vs. Rajeev Bansal, [2024] 469 ITR 46 (SC)
- PCIT v. S.G. Portfolio (P.) Ltd., [2023] 151 taxmann.com 307 (Delhi)
- Bajrang Lal Naredi v. ITO, ITA No.327/Ran/2018, 20.01.2020 (ITAT Ranchi)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 23.01.2026 for the AY 2017-18.
2. In the ground no. 2(i) , the assessee has challenged the assessment order passed by the ld. AO u/s 147/ 144 of the Income-tax Act, 1961 (the Act) read with section 144B of the Act dated 30.05.2023, on the ground that the same is passed consequent to a notice issued u/s 148, which is based on the invalid approval not in accordance with the Provisions of
Section 151(ii) of the Income-tax Act, 1961 (the Act) and therefore, the assessment framed is bad in law and nullity.
3. The facts in brief are that the notice u/s 148 of the Act was issued originally on 31.04.2021. Thereafter, in view of the Supreme Court order in the case of Union of India vs. Ashish Agarwal [2022] 138 taxmann.com 64 (SC)/[2022] 286 Taxman 183 (SC)/[2022] 444 ITR 1 (SC)[04-05-2022], a show cause notice u/s 148A(b) of the Act was issued and thereafter the order u/s 148A(d) of the Act was passed on 26.07.2022, after taking the approval from the competent authority. Finally, the notice u/s 148 of the Act was issued on 26.07.2022, which was not complied with by the assessee. During the assessment proceedings, the ld. assessee complied with the directions of the AO in notice u/s 142(1) and questionnaire and also various show cause notices issued by the AO. Finally, the income was assessed at ₹9,22,33,123/- vide order dated 30.05.2023, passed u/s 147/ 144/144B of the Act, which was confirmed by the ld. Commissioner of Income-tax (Appeals).
4. At the outset, the ld. Counsel for the assessee submitted that the assessment was framing in consequence to notice issued u/s 148 of the Act which is invalid and nullity in the eyes of law as the same has been issued with the prior approval of ld. PCIT-1, Kolkata. The ld. AR submitted that the said approval is not in accordance with the Provisions of Section 151(ii) of the Act as the approval should have been granted by the ld. PCCIT, Kolkata as the reopening was made after a period of three years from the end of the relevant assessment year for which approval is required to be obtained from the competent authority as mentioned in Section 151(ii) of the Act and not from the authority as mentioned u/s 151(i) of the Act. The ld. AR submitted that the approval is obtained from ld. PCIT-1, Kolkata which is wrong and therefore, all the subsequent proceedings including the notice u/s 148 of the Act as well as the assessment framed by the ld. AO are bad in law. The ld. AR relied on the decision of Hon’ble Apex Court in case of Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC)/[2024] 301 Taxman 238 (SC)/[2024] 469 ITR 46 (SC)[03-10-2024].
5. The ld. DR on the other hand heavily relied on the order of the authorities below.
6. After hearing the rival contentions and perusing the materials available on record, we find that the assessment year involved is A.Y. 2017-18. We further note that the notice u/s 148 of the Act was issued by the ld. AO after obtaining approval from the ld. PCIT-1, Kolkata, whereas the reopening has been made after a period of three years from the end of the relevant assessment year. In our opinion in terms of Section 151(ii) of the Act, prior approval/sanction must be taken from the Principal Chief Commissioner of Income Tax (PCCIT), Chief Commissioner (CCIT), or higher specified authority when a reassessment notice under Section 148 is issued beyond three years from the relevant assessment year. Therefore , the approval has to be obtained from ld. Principal Chief Commissioner of Income Tax-1, Kolkata (PCCIT) in terms of Section1 151(ii) of the Act and not from PCIT-1, Kolkata. Consequently, the notice issued by the ld. AO u/s 148 of the Act is invalid as the same is based upon the invalid approval obtained by the ld. AO. Similarly, the consequent assessment framed by the ld. AO is also bad in law and cannot be sustained. The case of the assessee is squarely covered by the decision of Hon’ble Supreme Court in case of Union of India Vs. Rajeev Bansal (supra) wherein it has been held that the approval granted by wrong authority in terms of provisions of section 151 of the Act would render the proceedings as well as the assessment as null and void. Therefore considering the facts of the case and also the ratio laid down in the above decision , we are inclined to quash the approval granted u/s 151 of the Act and also the consequent notice issued u/s 148 of the Act as well as the assessment framed u/s 147/144 of the Act. The ground no. 2(i) is accordingly allowed.
7. The issue raised in ground no. 2(vii) is against the order of ld. CIT(A) upholding the order of AO which is invalid and nullity in the eyes of law as it was passed by the AO sans notice u/s 143(2) of the Act despite the assessee duly complying the notice issued u/s 148 of the Act.
8. We have heard the rival contentions and perused the material on records. As stated above notice u/s 148 of the Act was issued on 26.7.2022 which was complied by the assessee vide letter dated 24.08.2022 intimating the AO that the return of income filed u/s 139(1) on 30.4.2021 may be treated as the return filed in response to the notice u/s 148 of the Act. In our opinion this amounted to filing of return in compliance to notice u/s 148 of the Act. Once that communication is on record, it is mandatory on the part of the AO to issue a notice u/s 143(2) of the Act for the AO, however ,the same has not been issued and therefore the assessment order passed by the AO is invalid and has to be quashed. The issue raised by the appellant is fully covered by the decision of the Hon’ble Delhi High Court in the case of PCIT v. S.G. Portfolio (P.) Ltd.[2023] 151 taxmann.com 307 (Delhi) wherein it held that where notice under section 148 was issued to appellant and there was material on record, indicative of fact that appellant had communicated to Assessing Officer that its original return be treated as a return in response to notice issued under section 148 of the Act , since record showed that appellant’s return was in place, Assessing Officer was required to issue a notice under section 143(2) and upheld the decision of the CIT(A) and the tribunal quashing the assessment order. Therefore respectfully following the above decision, the assessment order passed by the AO is held to be invalid and is hereby quashed. Consequently the ground no. 2(vii) is allowed.
9. The issue raised in ground no. 4, 5 and 6 is against the order of ld. CIT(A) confirming the addition of ₹ 1,53,05,847/- as made by the AO by taking the cost of acquisition of ₹ 1,12,03,913/- instead of 2,08,39,101/- and also by invoking the provisions of section 56(2)(vii)(b) of the Act which are not applicable to A.Y. 2013-14.
10. The facts in brief are that the assessee entered into an agreement to purchase dated 10.8.2012 with M/S Creative Residency Pvt Ltd. for a consideration of 2,08,39,101/- qua Flat No. 2601, 25th Floor, Tower 8, “Uniworld City Heights”. With the signing of the agreement a sum of ₹ 60,00,000/-was paid to the seller and balance of ₹ 1,43,00,000/- was payable to the seller and also ₹ 5,39,101/- to M/S Bengal Unitech Universal Infrastructure Pvt Ltd. The assessee paid the entire outstanding consideration between 13.8.2012 to 12.9.2012. According the seller M/S Creative Residency Pvt Ltd filed a nomination letter and indemnity bond on18.9.2012 to M/S Bengal Unitech Universal Infrastructure Pvt Ltd. thereby transferring the all the rights and interest in the said property in favour of the assessee. The registration of the said property was done during the impugned financial year 2016-17 though the property was acquired in financial year 2012-13. The said flat was originally booked by Bajrang Lal Churiwala and Sarla Churiwalawith from M/s Bengal Unitech Universal Infrastructure Pvt. Ltd. (“BUUIPL”) who was the original allottee and thereafter nominated M/s Creative Residency Pvt. Ltd. (“CRPL”) on 20.07.2006 which is evidenced by promoters communications appearing at PB pages 14-15 of the paper book. The assessee agreed to acquire the flat from CRPL for Rs.2,08,39,101/-, paying Rs.2,03,00,000/- to CRPL through banking channels between 13.08.2012 and 12.09.2012 as evidenced by the Agreement to Sell dated 10.08.2012 attached at PB Page No. 16-19 of the paper book and bank statement appearing at PB Pages 20-21. The assessee paid a further sum of Rs.6,06,695/- directly to BUUIPL the details whereof are appearing at PB Page 498 of the paper. Thus the assessee paid Rs.2,09,06,695/- in all, during the financial year 2012-13. A Nomination Letter and Indemnity Bond dt. 18.09.2012 executed by CRPL are appearing at PB Pages 23- 24 of the paper book. It was submitted before the AO that the appellant took physical possession on 13.03.2013 as is evident from the evidence filed at Page 68 of the paper book. It was also submitted that the assessee has borne the maintenance charges from that month, March 2013 which are available at pages 499-511 of the paper book. It was submitted that the Deed of Conveyance was registered by BUUIPL directly in the appellant’s favour on 05.05.2016, with a stamp duty value of Rs.2,65,09,760/-. Pertinent to mention that during the year no consideration was paid by the assessee as the entire consideration was paid in the financial year 2012-13. The AO held the transaction between the assessee and M/S Creative Residency Pvt Ltd. to be colourable transactions as the latter was not having a valid title and the title still vested in M/S Bengal Unitech Universal Infrastructure Pvt. Ltd. (“BUUIPL)”. The AO ,however, was not convinced with the plea of the assessee and added ₹ 1,53,05,847/- to the income of the assessee by taking the cost of acquisition at ₹ 1,12,03,913/- instead of ₹ 2,08,39,101/- and the stamp duly valuation at ₹ 2,65,09,760/- in the impugned financial year by ignoring the fact that there the transaction was completed in the financial year 2012-13 itself when the entire consideration was paid and possession was also taken thereby making an addition u/s 56(2)(vii) of the Act to the income of the assessee besides adding making addition of capital gain of ₹ 2,70,72,246/- u/s 50C of the Act.
11. The ld. CIT(A) affirmed the order of the AO by ignoring the submissions and contentions raised by the assessee in the appellate proceedings.
12. We have heard the rival contentions and perused the materials on records. We note that a flat was purchased by the assessee vide agreement to purchase dated 10.08.2012 which was apparently before the introduction of section 56(2)(vii)(b) on the statue book which provides for charging difference between consideration received from sale of immovable property and stamp duty value which was inserted by the Finance Act, 2013 w.e.f. 01.04.2014, i.e. from AY 2014-15. We have examined the facts before us in the form of agreement to purchase entered into with M/S Creative Residency Pvt Ltd. the seller, the banks statement evidencing all the payments in financial years 2012-13 and also the nomination letter and indemnity bond dated 18.9.2012 executed by the seller which are all available in the paper book. Therefore in our considered opinion the the transaction of purchase was complete in the assessment year 2013-14 when the assessee made the entire payment and also took the possession of the fat. We also note that the assessee has been incurring the monthly maintenance charges since March 2013. Considering the facts of the case , we are of the considered view that order of the ld. CIT(A) upholding the order of AO is wrong and can not be sustained for the reasons that the provisions of section 56(2)(vii)(b) were effective from assessment year 2014-15 and not from the instant assessment year at hand. The issue is squarely covered by the decision of the Coordinate Bench in the case of Bajrang Lal Naredi v. ITO, Jamshedpur, ITA No.327/Ran/2018 dt. 20.01.2020 (Ranchi Trib.) wherein similar addition was deleted coordinate bench. The operative part of the decision is extracted as under:
“6. We have carefully considered the rival submissions on the issue. In the instant appeal, the applicability of Section 56(2)(vii)(b) of the Act as amended by Finance Act, 2013 and applicable to AY 2014-15 in question. On a perusal of pre-amended provisions of Section 56(2)(vii)(b) of the Act, we gather that where an individual or HUF receives from any person any immovable property without consideration, the provisions of pre-amended Section 56(2)(vii)(b) of the Act would apply. The aforesaid provisions was however substituted by Finance Act, 2013 and made applicable to AY 2014-15 onwards. As per the amended provisions, the scope of substituted provision was expanded to cover purchase of immovable property for inadequate consideration as well. It is alleged on behalf of the Revenue that the amended provision will apply in view of the fact that registration has been carried out during the FY 2013-14 concerning AY 2014-15 where the amended law came into force. The assessee, on the other hand, seeks to claim that his case would be covered by pre-amended provision in view of the fact that agreement for purchase of the property was entered into with the prospective seller in FY 2011-12 relevant to AY 2012-13 at which time the new law did not come into play. It was claimed that the purchase consideration was duly paid at the time of agreement in FY 2011-12 and the purchase was de facto completed except for the formality of registration. It was thus submitted that the transactions entered prior to the FY 2013-14 would be governed by the pre-amended provision which triggers the applicability of such provision only where there is a total lack of consideration and does not cover a case of inadequacy in purchase consideration.
7. We find merit in such plea advanced on behalf of the assessee. It is not in dispute that purchase transactions of immovable property were carried out in FY 2011-12 for which full consideration was also parted with the seller. Mere registration at later date would not cover a transaction already executed in the earlier years and substantial obligations have already been discharged and a substantive right has accrued to the assessee therefrom. The pre- amended provisions will thus apply and therefore the Revenue is debarred to cover the transactions where inadequacy in purchase consideration is alleged. We thus find merit in the issue raised on behalf of the assessee. The order of the CIT(A) is accordingly set aside and the AO is directed to delete the additions made under s. 56(2)(vii)(b) of the Act and restore the position claimed by the assessee. ”
13. Considering the facts and circumstances of the case and respectfully following the decision of the co-ordinate Bench, we set aside the order of CIT (A) on this issue and direct the ld. AO to delete the addition by holding that the purchase of flat has taken place in a financial year 2012-13 relevant to A.Y. 2013-14 and the provisions of Section 56(2)(vii)(b) of the Act are not applicable as the same are effective from A.Y. 2014-15. Ground nos. 4,5 and 6 are allowed.
14. The other grounds are left open to be decided in later stage if need arises for the same.
15. In the result, the appeal of the assessee is allowed.
Order pronounced on 13.10.2026.
