Reassessment Beyond 3 Years Without Proper Sanction Invalid: ITAT sets aside Reassessment Proceedings [Read Order]

The Income Tax AppellateTribunal (ITAT) Hyderabad Bench has quashed reassessment proceedings holding that a notice issued beyond three years without the sanction of the prescribed higher authority is invalid.

The Assessing Officer (AO) commenced proceedings under Section 147 of the Income Tax Act in respect of Assessment Year (AY) 2018-19 on the basis of information received by him from the Risk Management Strategy of the Central Board of Direct Taxes (CBDT) in respect of large amounts of financial transactions.

An order under Section 148A(d) was issued on 08.04.2022 and the notice under Section 148 was issued on 09.04.2022. The assessment was made on 05.03.2024 with addition of ₹3,92,22,536 as unexplained cash deposits. The appeal filed by the assessee against CIT (A)'s order was rejected, and thereafter the case came up for consideration before the Tribunal.

the assessee Prakasam District Police Welfare Association stated that since notice for AY 2018-19 was issued on 09.04.2022 which was beyond three years from the end of the relevant assessment year, the AO had to seek sanction from the authorities mentioned under Section 151(ii) (Principal Chief Commissioner or Chief Commissioner). However, it was issued with sanction from PCIT only.

The Revenue department could not rebut the factual position regarding the date of the notice and the level of approval obtained.

The Bench, comprising Ravish Sood (Judicial Member) and Madhusudan Sawdia (Accountant Member) observed that after the Finance Act, 2021 Section 151 explicitly mandates that for notices issued beyond three years the specified authority for approval must be the Principal Chief Commissioner or Director General.

​The Tribunal noted that the notice in question was issued after three years but with the approval of a lower-ranked official (PCIT) which directly violated the statutory requirement of Section 151(ii).

The Bench held that the failure to obtain sanction from the correctly prescribed authority rendered the entire reassessment proceeding invalid and set aside the orders of the lower authorities and allowed the assessee's appeal.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates