2025 (1) TMI 1052 - AT - Income Tax

Validity of reassessment proceeding - non granting approval from the correct authority as mandated by section 151(ii) - HELD THAT - Accordingly the notice issued on 04.04.2022 by the AO is issued beyond three years and therefore the approval should have been obtained by the authorities as specified under section 151(ii) Principle Chief Commission. As already stated the approval in assessee s case is obtained from CIT(IT) and therefore we are inclined to agree with the contention of the assessee that the notice under section 148 has been issued without obtaining the approval from the correct authority as specified under section 151. As relying on Vodafone Idea case 2024 (2) TMI 1408 - BOMBAY HIGH COURT we hold that the notice issued by the AO under section 148 without obtaining approval from correct appropriate authority is invalid and the assessment done under section 147 r.w.s. 144(13) of the Act is liable to be quashed. Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the initiation of reassessment proceedings by the Assessing Officer (AO) was illegal due to the lack of proper approval from the correct authority as mandated by section 151(ii) of the Income Tax Act.
• Whether the notice issued under section 148 was valid, given the timing and the authority from which approval was obtained.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of Reassessment Proceedings

• Relevant Legal Framework and Precedents:
  • The legal framework involves sections 147, 148, 148A, and 151 of the Income Tax Act. Section 151 specifies the required authority for approval of notices under sections 148 and 148A, with different authorities depending on whether the notice is issued within or beyond three years from the end of the relevant assessment year.
  • Precedents include decisions from the Bombay High Court, such as in the cases of Holiday Developers Pvt. Ltd., Siemens Financial Services Pvt. Ltd., Agnello Oswin Dias, and Vodafone Idea Limited, which addressed similar issues of authority and timing for reassessment notices.
• Court's Interpretation and Reasoning:
  • The court interpreted section 151(ii) as requiring approval from the Principal Chief Commissioner of Income Tax (PCCIT) if more than three years have elapsed since the end of the relevant assessment year. The court found that the approval in this case was improperly obtained from the Commissioner of Income Tax (International Tax) (CIT(IT)), rather than the PCCIT.
• Key Evidence and Findings:
  • The AO issued the notice under section 148 on 04.04.2022, which was beyond the three-year period, necessitating approval from the PCCIT. The court found that the approval was instead obtained from the CIT(IT), which was not the correct authority.
• Application of Law to Facts:
  • The court applied the legal requirement for proper authority approval to the facts, determining that the notice was issued without the necessary approval from the PCCIT, rendering it invalid.
• Treatment of Competing Arguments:
  • The revenue argued that the notice was issued within the permissible period by excluding the time allowed for the assessee to respond to the section 148A(b) notice, based on the fifth proviso to section 149. However, the court noted that this proviso was only effective from 01.04.2023 and was not applicable to the assessment year 2018-19.
• Conclusions:
  • The court concluded that the notice under section 148 was invalid due to the lack of approval from the correct authority, as required by section 151(ii).

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning:
  • "Respectfully following the above decisions of the Hon'ble Bombay High Court we hold that the notice issued by the AO under section 148 without obtaining approval from the correct appropriate authority is invalid and the assessment done under section 147 r.w.s. 144(13) of the Act is liable to be quashed."
• Core Principles Established:
  • The requirement for obtaining approval from the correct authority under section 151(ii) is crucial for the validity of notices issued under section 148 when more than three years have elapsed since the end of the relevant assessment year.
  • The timing of the notice and the authority from which approval is obtained are critical factors in determining the legality of reassessment proceedings.
• Final Determinations on Each Issue:
  • The court determined that the reassessment proceedings were invalid due to the improper approval for the notice under section 148, leading to the quashing of the assessment under section 147 r.w.s. 144C(13).

In conclusion, the appeal was partly allowed, with the court quashing the reassessment proceedings based on the legal issue of improper authority approval, rendering the merits of the case academic and not requiring further adjudication.