2025 (4) TMI 1673 - AT - Income Tax

Reopening of assessment u/s 147 - Competent Authority to approve the notice u/s.148 and order u/s.148A(d) - Scope of section u/s 151 - HELD THAT - In this case it is an admitted fact that more than three years have been lapsed from the end of the Assessment Year. Therefore as per Section 151 of the Act the Competent Authority to approve the notice u/s.148 and order u/s.148A(d) of the Act is the Principal Chief Commissioner of Income or ld.Chief Commissioner of Income Tax. However in this case notice has been approved by Principal Commissioner of Income Tax. Thus order u/s 148A(d) of the Act and notice under section 148 are quashed - Decided in favour of assessee.

Summary

ISSUES:

Whether the notice issued under section 148 and order passed under section 148A(d) of the Income Tax Act, 1961, are valid when the approval for issuance is obtained from Principal Commissioner of Income Tax instead of Principal Chief Commissioner of Income Tax, despite more than three years having elapsed from the end of the relevant assessment year.Whether the reassessment order passed under section 147 is valid if the notice under section 148 and order under section 148A(d) are invalid.Whether the addition of alleged commission income under section 56 of the Act is justified when the assessee claims net commission income after passing on commission to others involved in currency exchange transactions.Whether failure to record entire currency exchange transactions in books and inability to furnish confirmations, PAN, or cheque details of persons to whom commission was passed on justifies addition under section 56.

RULINGS / HOLDINGS:

The notice issued under section 148 and order under section 148A(d) are invalid and bad in law because the approval was obtained from the Principal Commissioner of Income Tax instead of the Principal Chief Commissioner of Income Tax, which is mandatory under section 151 when more than three years have elapsed from the end of the relevant assessment year.Consequently, the reassessment order passed under section 147 is declared null and void as it is predicated on the invalid notice and order.The legal ground challenging the validity of the notice and order under sections 148 and 148A(d) is allowed; other grounds relating to commission income additions are dismissed as unadjudicated and academic.

RATIONALE:

The Court applied section 151 of the Income Tax Act, 1961, which specifies that the sanctioning authority for issuing notice under section 148 and passing order under section 148A(d) is the Principal Chief Commissioner or equivalent if more than three years have elapsed from the end of the relevant assessment year.Precedents from the Hon'ble Bombay High Court were relied upon, including rulings that quashed notices and orders where approval was obtained from the Principal Commissioner instead of the Principal Chief Commissioner for assessments beyond three years.The Court noted that amendments to section 151 effective from 1st April 2023 do not apply retrospectively to the assessment year in question, reinforcing the invalidity of the approval obtained from the lower authority.The Court followed recent ITAT Pune and Bombay High Court decisions emphasizing strict compliance with section 151 sanctioning requirements to uphold the validity of notices and reassessment orders.Since the legal ground was decided in favor of the assessee, the Court did not adjudicate on substantive issues related to commission income additions, rendering those grounds academic.