Non-compliance With Amended Provisions of S.148A and S.151: ITAT Invalidates Reassessment Notice Issued After 5 Years [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) invalidated a reassessment notice issued for the Assessment Year (AY) 2014-15, citing non-compliance with the amended provisions of Sections 148A and 151 of the Income Tax Act, 1961.

Vamanrao Ramalingam Arcot (assessee), represented by his legal heir Smt. Sangeetha Vamanrao, faced reassessment proceedings initiated by the Assessing Officer (AO) through a notice under Section 148 dated 31/03/2021, digitally signed on 05/04/2021.

The AO completed the reassessment, adding Rs. 62,58,920 to the income and determining a total income of Rs. 68,19,020, along with a demand of Rs. 23,34,656 and interest of Rs. 2,27,579 under Section 234A of the Income Tax Act.

Aggrieved by the AO’s reassessment order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the AO’s order. Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT.

The assessee challenged the validity of the reassessment proceedings on the grounds that the AO failed to follow the amended procedures under Sections 148A and 151, effective from 01/04/2021, and did not obtain prior approval from the specified authorit

The assessee’s counsel argued that the notice issued on 05/04/2021, post the Finance Act, 2021 amendments, required compliance with Section 148A(b), which mandates considering the assessee’s objections before issuing a notice under Section 148 of the Income Tax Act.

Additionally, the counsel contended that the notice, issued after more than three years from the end of AY 2014-15, required approval from the Principal Chief Commissioner or Principal Director General as per the amended Section 151, which the AO failed to obtain.

The two-member bench, comprising Vijay Pal Rao (Vice President) and Madhusudan Sawdia (Accountant Member), observed that the notice under Section 148, though dated 31/03/2021, was digitally signed and emailed on 05/04/2021, making the latter the effective date as per the notice’s footnote.

The bench noted that post-01/04/2021, the Finance Act, 2021, introduced mandatory procedures under Sections 148A and 151, requiring the AO to issue a show-cause notice under Section 148A(b) and obtain approval from a higher authority for notices issued after three years from the end of the assessment year.

The Tribunal found that the AO neither followed the Section 148A procedure nor obtained approval from the Principal Chief Commissioner or Principal Director General, as required for a notice issued after five years from the end of AY 2014-15.

The bench relied on the Supreme court’s decisions in Union of India vs. Aashish Agarwal and Union of India vs. Rajiv Bhansal held that the notice was invalid due to non-compliance with the amended provisions.

The bench quashed the reassessment notice and set aside the CIT(A)’s order and the AO’s reassessment proceedings. The appeal filed by the assessee was allowed.

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