Failure to obtain Mandatory Approval from PCCIT for Notice Issued Beyond Three Years: ITAT quashes reassessment order [Read Order]
The tribunal highlighted that the specified authority for according approval for reassessment changes depending on the time limit prescribed in Section 151 of the Act, and failure to obtain approval from the correct authority renders the proceedings bad in law.
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed a reassessment order and ruled that the Assessing Officer (AO) failed to obtain mandatory prior approval from the Principal Chief Commissioner of Income Tax when issuing a notice beyond the three-year statutory period.
Bansal Industries (assessee) is an entity based in Hisar that filed appeals against orders sustained by the CIT(A) for Assessment Years 2015-16 and 2016-17. For the Assessment Year 2016-17, the AO issued a notice under Section 148 on July 29, 2022, seeking to reopen the assessment.
This notice was issued after obtaining approval from the Principal Commissioner of Income Tax (PCIT). The AO's action was based on the belief that income had escaped assessment, but the notice was issued more than three years after the end of the relevant assessment year.
Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) sustained the AO's order. Aggrieved by the CIT(A)’s order, the assessee filed appeals before ITAT.
The assessee challenged the validity of the reassessment, arguing that for notices issued beyond three years, the competent authority for giving approval under Section 151 is the Principal Chief Commissioner of Income Tax, not the Principal Commissioner.
The Single Member bench comprising C.N. Prasad (Judicial Member), examined the statutory requirements of Section 151 post-Finance Act 2021.
The tribunal observed that as per Section 151(ii), if more than three years have elapsed from the end of the relevant assessment year, the specified authority is the Principal Chief Commissioner or Principal Director General.
The tribunal noted that the approval of the correctly specified authority was mandatory and was embedded in the first provision to Section 148 of the Income Tax Act. The tribunal noted that the notice dated July 29, 2022, for A.Y. 2016-17 was clearly beyond the three-year threshold.
Built for GST appeals—not theory, but what actually works in Tribunal. Click here
The tribunal highlighted that the AO obtained approval from the PCIT, which was only the appropriate authority if the notice is issued within three years or less.
The tribunal relied on the Jurisdictional High Court decision in Twilight Infrastructure Pvt. Ltd. and Others, which held that the issue of limitation is inextricably intertwined with the rank of the authority granting approval.
The tribunal concluded that the assessment framed pursuant to the invalid notice was bad in law. It ruled that since the mandatory approval from the Principal Chief Commissioner of Income Tax was missing, the reassessment order must be set aside. The appeal of the assessee for A.Y. 2016-17 was allowed.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
