Approval for S. 148 Notice by Incompetent Authority renders Re-assessment Void ab initio: ITAT Quashes Assessment [Read Order]

The Delhi Bench of the Income Tax AppellateTribunal (ITAT) has quashed reassessment proceedings for two assessment years after holding the notices under Section 148 invalid in law. The Bench regarded the authority granting the mandatory sanction to be incompetent.

The appeals were filed by The Hisar Leading Bank Co-op Non-Agri Thrift & Credit Society against the orders passed by the National Faceless Appeal Centre for the assessment years 2016-17 and 2017-18, wherein additions exceeding ₹6.04 crore were made on account of alleged unexplained cash deposits under Section 68 of the Act.

The assessee had not filed original return under Section 139(1), following which reassessment proceedings were initiated. A notice under Section 148 was originally issued on April 16, 2021. Pursuant to the Supreme Court’s decision in Union of India v. Ashish Agarwal, the notice was treated as a show cause notice under Section 148A(b), and a fresh notice under Section 148 was issued on July 29, 2022, after passing an order under Section 148A(d). The final reassessment order dated May 6, 2023 made substantial additions on account of cash deposits in a bank account maintained with J&K Bank.

On appeal, the Tribunal admitted an additional legal ground raised by the assessee challenging the validity of the reassessment. This challenge was made on the ground that the approval for issuing notice under Section 148 was taken from the Principal Commissioner of Income Tax, Rohtak, instead of the competent authority prescribed under Section 151(ii) of the Act. The Tribunal observed that since the notices were issued beyond three years from the end of the relevant assessment years, sanction was mandatorily required from the Principal Chief Commissioner, Principal Director General, Chief Commissioner, or Director General.

The Bench comprising S. Rifaur Rahman (Accountant Member) and Raj Kumar Chauhan (Judicial Member), noted that as per the notice, approval had been obtained from the Principal Commissioner, which was contrary to the statutory mandate. The Tribunal placed reliance on the Delhi High Court’s decision in Communist Party of India (Marxist) v. CIT (Exemptions) and the Coordinate Bench ruling in Sampark Management Consultancy LLP v. DCIT, wherein similar reassessment notices were quashed for want of valid sanction.

As a result, the Tribunal held that the reassessment notices issued on July 29, 2022 were void ab initio due to lack of approval from the competent authority. Consequently, the reassessment orders passed for both assessment years were quashed.

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