Failure to Get Sanction u/s 151(ii) from PCIT for Reopening of Assessment beyond 3 years will Invalidate Reassessment Proceedings: Bombay HC [Read Order]

The Bombay High Court ( HC ) in its recent judgment has held that failure to get Sanction under section 151(ii) of the Income Tax Act, 1961 from PCIT for reopening of assessment beyond 3 years will invalidate the reassessment proceedings.

Mrs Chitra Supeker, the petitioner challenged the notice dated 20th March 2022 issued u/s 148A(b) of the Act  for the AY  2018-19 wherein the case was flagged by the risk management strategy by the Central Board of Direct Taxes (“CBDT”) for non-filing of returns and on having information that the income chargeable to tax has escaped assessment;

Further challenged the impugned order dated 5th April 2022 issued under Section 148A(d) of the Act principally on the ground that the same requires a separate approval from the PCCIT since it was passed after the expiry of three years from the end of the relevant AY 201819 i.e. by 31st March 2022 and the notice dated 13 April 2022 u/s. 148 of the Act seeking to reopen the petitioner’s assessment for AY 2018-19

The petitioner is a housewife, she did not file her return of income as per provisions of section 139 of the Act. She held joint bank accounts with her husband through which investments were made and the income therefrom was considered in her husband’s income tax returns.

On 13th April 2022, the petitioner was issued a reopening notice u/s.148 of the IT Act and a response thereto was submitted on 29 April 2022 disclosing a total income of Rs.5,000/- for A.Y. 2018-19 along with the return of income of the same date.

It was urged that the AO has failed to show that he possessed such information which suggested that income chargeable to tax has escaped assessment and that the information was flagged by the risk management strategy formulated by the CBDT or that any final objection was raised by the Comptroller and Audit General of India to the effect that the assessment has not been made by the provisions of the Act.

Further submitted that since more than 3 years lapsed from the relevant A.Y. 2018-19, the AO could issue a notice u/s. 148 only if he had in his possession, books of account or other documents or evidence which would reveal the income chargeable to tax had escaped assessment. 

In the case of CIT vs Eshaan Holding (P) Ltd. it was held that “if there is no valid service of notice under section 148, the reassessment proceedings are null and void.” In the case of CIT vs Avtar Singh, it was held that service of notice under section 148 is a condition precedent for making reassessment or re-computation under section 147 of the Act.

A two-member bench comprising Justice Dhiraj Singh Thakur and Justice Kamal Khata viewed that before issuing the notice under section 148A (b) the AO needed to have checked if there was a change of address. A condition precedent for any proceeding including a proceeding u/s. 148A, is a valid service of notice, lest it would be a jurisdictional error.

There was no averment or proof of the service of notice dated 20th March 2022 on the petitioner in the respondent’s affidavit in reply dated 14th November 2022.  Further observed that no approval from PCCIT was taken as contemplated u/s 151(ii) as the reopening was caused beyond three years and is therefore vitiated. The impugned order dated 5 April 2022 and the notice are quashed and set aside.

To Read the full text of the Order CLICK HERE

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