2025 (2) TMI 444 - AT - Income Tax

Reopening of assessment u/s 147 - whether AO has not obtained the approval of the specified authority u/s. 151? - scope of section 151(ii) of the Act under new regime - HELD THAT - According to the notice u/s. 148 of the Act for A.Y. 2017-18 which is available on record was issued on 29.07.2022 after obtaining the prior approval accorded by the of PCIT-27 Mumbai on 27.07.2022 of the said notice vide reference no. pr.CIT-27/148A(d) Approval/2022-23. Three years have elapsed from the end of the relevant assessment year 2017-18 on 31.03.2021. According to section 151(ii) of the Act under new regime the approval should have been obtained either from the Principal Chief Commissioner of Income or Principal Director General or Chief Commissioner or Director General as specified authority which is not so obtained in the case in hand. We accordingly hold that the notice u/s. 148 of the Act is invalid hence the consequent assessment u/s. 147 of the Act is quashed -Assessee s appeal is allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the notice issued under Section 148 of the Income Tax Act, 1961, was valid, given the procedural requirements for obtaining approval from the specified authority under Section 151 of the Act.
• Whether the assessment order passed under Section 147 of the Act was valid, considering the alleged procedural lapses in obtaining the necessary approvals.
• The applicability of the new procedural requirements under the Finance Act, 2021, and the implications of the Supreme Court's decision in Union of India v. Ashish Agarwal on the reassessment proceedings.

ISSUE-WISE DETAILED ANALYSIS

Validity of Notice under Section 148

• Relevant Legal Framework and Precedents: The legal framework involves Section 148, which pertains to the issuance of notices for reassessment, and Section 151, which mandates obtaining approval from a specified authority before issuing such notices. The Supreme Court's decision in Union of India v. Ashish Agarwal and the Finance Act, 2021, significantly influence the procedural requirements.
• Court's Interpretation and Reasoning: The Tribunal interpreted that under the new regime post-Finance Act, 2021, the specified authority for granting approval depends on whether more than three years have elapsed since the end of the relevant assessment year. The Tribunal emphasized the procedural safeguard intended to prevent arbitrary reassessments.
• Key Evidence and Findings: The notice for A.Y. 2017-18 was issued on 29.07.2022 with the approval of the PCIT-27, Mumbai. However, since more than three years had elapsed from the end of the relevant assessment year, approval should have been obtained from a higher authority as per Section 151(ii).
• Application of Law to Facts: The Tribunal applied the procedural requirements of Section 151(ii) and found that the approval obtained was not from the correct specified authority, rendering the notice under Section 148 invalid.
• Treatment of Competing Arguments: The Tribunal considered the arguments of the assessee regarding the lack of proper approval and the revenue's defense of the procedural compliance. The Tribunal found in favor of the assessee, emphasizing adherence to the procedural requirements.
• Conclusions: The Tribunal concluded that the notice under Section 148 was invalid due to the failure to obtain approval from the correct specified authority, thus invalidating the subsequent reassessment proceedings.

Validity of Assessment Order under Section 147

• Relevant Legal Framework and Precedents: Section 147 pertains to the reassessment of income that has escaped assessment. The procedural validity of the notice under Section 148 is a prerequisite for a valid reassessment under Section 147.
• Court's Interpretation and Reasoning: The Tribunal reasoned that since the notice under Section 148 was invalid, any assessment order based on such notice is also invalid.
• Key Evidence and Findings: The assessment order was passed following the invalid notice, which was a critical procedural flaw.
• Application of Law to Facts: Given the invalidity of the notice, the Tribunal found that the assessment order under Section 147 could not stand.
• Treatment of Competing Arguments: The Tribunal did not need to address other arguments concerning the assessment order, as the procedural invalidity of the notice was dispositive.
• Conclusions: The Tribunal quashed the assessment order under Section 147, citing the invalidity of the foundational notice under Section 148.

SIGNIFICANT HOLDINGS

• Verbatim Quotes of Crucial Legal Reasoning: The Tribunal cited the Supreme Court's interpretation of the procedural requirements under the new regime, emphasizing the necessity of obtaining approval from the correct specified authority.
• Core Principles Established: The judgment reinforces the principle that procedural compliance is crucial in reassessment proceedings, and any deviation from mandated procedures, especially concerning specified authority approvals, renders the proceedings invalid.
• Final Determinations on Each Issue: The Tribunal determined that the notice under Section 148 was invalid due to improper approval, and consequently, the assessment order under Section 147 was also invalid. The appeal was allowed in favor of the assessee.