Reassessment Notice beyond 3 years Requires Mandatory Approval from PCCIT: ITAT Quashes Notice against Barclays [Read Order]
ITAT upheld the CIT(A)’s order quashing the reassessment against Barclays and held that the approval from the PCCIT was mandatory under Section 151(ii) for notices issued beyond three years
ITAT Mumbai, Reassessment Notice, ITAT Quashes
ITAT Mumbai, Reassessment Notice, ITAT Quashes
The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) dismissed the appeal of the Revenue and upheld the order of the Commissioner of Income Tax (Appeals) ( CIT(A) ) which had quashed the reassessment proceedings initiated against Barclays Execution Services Ltd. and held that the Assessing Officer (AO) failed to obtain approval from the correct “specified authority” as mandated under Section 151(ii) of the Income Tax Act, 1961.
The case arose from a reassessment initiated based on information available on the Insight Portal, indicating that the assessee had remitted substantial sums aggregating to ₹1,027.41 crore and ₹1,593.02 crore to non-resident companies during Financial Year (FY) 2016-17, accompanied by the filing of Form 15CA.
The AO formed a prima facie view that remittances represented income chargeable to tax in India without corresponding deduction of Tax Deducted at Source (TDS), and that no return of income had been filed. Hence, the AO recorded reasons to believe that the income chargeable to tax had escaped assessment and initiated proceedings under section 148A.
The assessee replied in detail, explaining the nature of the transactions. The AO passed an order under Section 148A(d) and issued a notice under Section 148 after obtaining approval from the Commissioner of Income Tax (CIT). The assessment was later completed, treating support-service recharges of ₹58.43 crore as fees for technical services (FTS) under the India–UK Double Taxation Avoidance Agreement (DTAA).
On appeal, the CIT(A) held that since more than three years had elapsed from the end of AY 2017–18, the approval for issuance of notice under Section 148 was required from the Principal Chief Commissioner of Income Tax (PCCIT) or Chief Commissioner under the amended Section 151(ii) and not merely from the Commissioner.
The CIT(A) accordingly quashed the reassessment order as void ab initio, rendering the grounds on merits academic.
The Revenue contended before the Tribunal that the approval obtained from the CIT was valid. However, the ITAT observed that the amended provisions of Section 151 draw a clear distinction between cases where a notice is issued within three years and those issued after three years from the end of the relevant assessment year. For the latter, the approval must be from the PCCIT or CCIT.
The Tribunal relied on the Supreme Court’s decision in Union of India v. Rajeev Bansal (2024) and the Bombay High Court’s ruling in Holiday Developers (P) Ltd. v. ITO (2024) and held that non-compliance with the requirement of approval from the specified authority goes to the root of jurisdiction.
The Bench comprising Amit Shukla (Judicial Member) and Prabhash Shankar (Accountant Member) noticed that the AO had obtained approval from the CIT, instead of the PCCIT, under Section 151(ii) and thereby ordered that the reassessment notice and the consequent order were invalid and unsustainable in law.
The Tribunal reaffirmed that under the amended Section 151(ii), where more than three years have elapsed from the end of the assessment year, the AO must obtain prior approval from the PCCIT before issuing a notice under Section 148.
Accordingly, the ITAT dismissed the Revenue’s appeal.
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