2025 (6) TMI 1864 - AT - Income Tax

Validity of reopening of assessment - assumption of jurisdiction on the basis of approval from an authority which was not competent to grant approval u/s 151 - more than three years have lapsed - HELD THAT -Approval is contrary to the provisions of section 151 of the Act as amended/substituted by the Finance Act 2021 because as per section 151 of the Act if more than three years have lapsed from the end of the relevant assessment year approval of Principal Chief Commissioner of Income-tax or Principal Director General or Chief Commissioner or Director General was required to be obtained. In the present assessment years notices u/s 148 have been issued on 28.07.2022 after expiry of three years from the end of relevant assessment years. Accordingly sanction/approval of Principal Chief Commissioner of Income-tax or Principal Director General or Chief Commissioner or Director General was required to be obtained. Reliance in this regard is placed on the decision of the Hon ble Supreme Court in Union of India vs. Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) and various decisions. Thus the approval is not sustainable under law. Assessee appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

(a) Whether the reassessment proceedings initiated under section 147 read with section 144B of the Income Tax Act, 1961, were validly initiated or were without jurisdiction and hence liable to be quashed;

(b) Whether the approval for issuance of notice under section 148 of the Act was obtained from a competent authority as required under the amended provisions of section 151 of the Act post Finance Act, 2021;

(c) Whether the reassessment notices issued beyond three years from the end of the relevant assessment years complied with the procedural safeguards mandated by the amended law;

(d) The correctness of the First Appellate Authority's reliance on the Supreme Court decision in Rajeev Bansal v. Union of India, particularly in the context of approval for reassessment proceedings;

(e) The applicability of the substitution of section 148 by the Finance Act, 2021 with effect from 01.04.2021, and its impact on the validity of reassessment notices issued after that date.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Validity of reassessment proceedings and Competency of Approving Authority under section 151

Relevant Legal Framework and Precedents: The reassessment proceedings under section 147 require prior issuance of notice under section 148, which in turn requires approval under section 151. The Finance Act, 2021 amended section 151, prescribing that where more than three years have elapsed from the end of the relevant assessment year, approval must be obtained from higher authorities such as Principal Chief Commissioner of Income-tax, Principal Director General, Chief Commissioner, or Director General. The Supreme Court's ruling in Union of India v. Rajeev Bansal clarified the strict adherence to this procedural safeguard.

Court's Interpretation and Reasoning: The Tribunal found that the reassessment notices under section 148 were issued on 28.07.2022, which is beyond three years from the end of the relevant assessment years (AY 2016-17 and AY 2017-18). Therefore, the approval for issuance of such notices must have been obtained from the authorities specified under the amended section 151.

However, the approval was obtained from the Principal Commissioner of Income-tax, Noida, who is not among the authorities empowered under the amended section 151 for sanctioning notices beyond three years. This procedural irregularity rendered the reassessment proceedings without jurisdiction.

Key Evidence and Findings: The reassessment notices and approval letters were examined, revealing the approval was granted by an unauthorized officer. The Tribunal relied on the Supreme Court's decision in Rajeev Bansal, which held that such approval is mandatory and non-compliance invalidates the proceedings.

Application of Law to Facts: Since the reassessment notices were issued after the three-year period and approval was not obtained from the competent authority, the reassessment proceedings were initiated without jurisdiction and are therefore bad in law.

Treatment of Competing Arguments: The Revenue argued that the reassessment proceedings were valid and relied on the First Appellate Authority's order which upheld the initiation of reassessment relying on Rajeev Bansal. However, the Tribunal distinguished the facts, emphasizing that the approval in the present case was not from the competent authority as mandated by the amended section 151.

Conclusions: The reassessment proceedings are quashed for lack of jurisdiction due to invalid approval.

Issue (c) & (e): Applicability of the amended section 148 and timing of issuance of reassessment notices

Relevant Legal Framework and Precedents: The Finance Act, 2021 substituted section 148, effective from 01.04.2021, prescribing procedural safeguards for issuance of reassessment notices. The Supreme Court in Union of India v. Ashish Agarwal held that notices under the old section 148 provisions should not be issued after 31.03.2021.

Court's Interpretation and Reasoning: The Tribunal noted that notices under section 148 were issued on 28.07.2022, well after the substitution date. Therefore, the issuance must comply with the amended provisions. The notices issued were under the new regime but failed to meet the approval requirements under section 151.

Key Evidence and Findings: The dates of issuance of notices and orders under section 148A were scrutinized. The Tribunal observed that the notices were issued post 01.04.2021, invoking the amended section 148 and section 151.

Application of Law to Facts: The reassessment notices issued after the substitution date must comply with the new procedural requirements, including approval from competent authorities. The failure to obtain such approval invalidates the notices.

Treatment of Competing Arguments: The Revenue contended that the reassessment proceedings were valid under the transitional provisions and prior approvals. The Tribunal rejected this, emphasizing strict compliance with the amended provisions.

Conclusions: The reassessment notices issued after 01.04.2021 without proper approval are invalid.

Issue (d): Reliance on Supreme Court decision in Rajeev Bansal

Relevant Legal Framework and Precedents: The Supreme Court in Rajeev Bansal clarified the mandatory nature of approval under section 151 for reassessment notices issued beyond three years.

Court's Interpretation and Reasoning: The Tribunal held that the First Appellate Authority erred in upholding the reassessment proceedings based on Rajeev Bansal, as the approval in the present case was not from the competent authority as required. The Tribunal distinguished the facts and applied the principle strictly.

Key Evidence and Findings: The approval letter's authority level was examined and found deficient.

Application of Law to Facts: The principle in Rajeev Bansal mandates strict compliance with approval requirements, which was not met.

Treatment of Competing Arguments: The Revenue's reliance on Rajeev Bansal was misplaced as the facts did not align with the requirements laid down by the Supreme Court.

Conclusions: The reassessment proceedings are liable to be quashed notwithstanding the prior appellate order.

3. SIGNIFICANT HOLDINGS

"The approval is not sustainable under law. The grounds as raised deserves to be sustained. Consequently, the appeals of the asses