Notice u/s 148 Issued After Expiration of 3 Years Without Permission From Pr. Chief Commissioner: ITAT Rules proceedings Invalid for Statutory Violation [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) has invalidated reassessment proceedings as the Assessing Officer’s (AO) failure to comply with statutory requirements under Section 151, which mandates prior approval from the Principal Chief Commissioner of Income Tax for reassessment actions initiated after three years.

Ankita Loksh Goyal (assessee), was issued with a notice by the AO under Section 148 after obtaining approval from the Principal Commissioner of Income Tax (Pr. CIT) on 15.07.2022. The notice led to an assessment order which included an addition of Rs. 17,87,999/-.

Aggrieved by the AO’s order, the assessee challenged the order before the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee argued that the reassessment was invalid due to multiple procedural lapses.

The assessee argued these lapses included the lack of valid “reasons to believe” under Section 148(2), absence of a proper order under Section 148A(d), and the AO’s failure to obtain sanction from the appropriate authority under Section 151 of the Income Tax Act. The CIT(A upheld the addition and dismissed the assessee’s appeal.

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Aggrieved by the CIT(A)’s decision, the assessee appealed to the ITAT. The assessee’s counsel relied on the jurisdictional High Court’s decision in Rajesh Gupta (HUF) v. ACIT which held that reassessment proceedings initiated after three years require approval from the Principal Chief Commissioner, failing which they are bad in law.

The two-member bench comprising Challa Nagendra Prasad (Judicial Member) and M Balaganesh (Accountant Member), carefully examined the provisions of Section 151 of the Income Tax Act.

The Tribunal observed that for the Assessment Year 2016-17, the notice under Section 148 was issued on 16.07.2022, well beyond the three-year period from the end of the relevant assessment year (31.03.2020).

The Bench observed that as per Section 151(ii), approval for such cases must be obtained from the Principal Chief Commissioner or, in their absence, the Chief Commissioner of Income Tax. The AO’s reliance on approval from the Pr. CIT was deemed non-compliant with the statutory mandate.

The Tribunal observed that the incorrect sanction rendered the reassessment proceedings void ab initio. It also observed that the High Court had clarified that the Principal Chief Commissioner is the competent authority for approvals beyond three years.

The Tribunal further noted that the CIT(A) erred in not quashing the assessment order despite the clear statutory violation. It held that the notice under Section 148 and the subsequent assessment order were bad in law due to the lack of proper sanction.

The Tribunal quashed the reassessment proceedings. The appeal of the assessee was partly allowed.

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