2025 (4) TMI 397 - AT - Income Tax

Reopening of assessment - notice issued after elapsing of three years from the end of the relevant assessment year - valid approval for issuing the notice u/s 148 - HELD THAT - As notice issued after elapsing of three years from the end of the relevant assessment year and therefore as per sub clause (ii) of section 151 the specified authority for granting the approval for issuing the notice u/s 148 would have been either Principal Chief Commissioner or Principal Director or where there is no such post then the Chief Commissioner or Director General for granting the sanction for issuing of notice u/s 148 of the Act but not the Ld. PCIT-2 Mumbai who has granted the approval in this case and/or authority specified under sub clause (i) of section 151 of the Act. Case of Vodafone India Idea Ltd. 2024 (2) TMI 1408 - BOMBAY HIGH COURT has also clearly held that proviso to section 151 of the Act has been inserted w.e.f. 01.4.2023 and therefore shall not be applicable to the A.Y. 2018-19. In effect the Hon ble High Court has clarified that provisos to section 151 of the Act would be effective from 01.04.2023 onwards and would not be applicable to the prior period. Thus the impugned notice u/s 148 as issued by the AO in the instant case by taking approval from the Ld. Pr. CIT-2 Mumbai but not from the Ld. Pr. CCIT and in pursuance to that the assessment order dated 23.01.2023 u/s 147 r.w.s. 144 144B of the Act is liable to be quashed being void ab-initio - Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the notice issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment was valid, given it was issued beyond three years from the end of the relevant assessment year.
• The applicability of the provisos inserted by the Finance Act, 2023, to the present case and whether the approval for the notice should have been granted by the appropriate authority as per Section 151 of the Act.

ISSUE-WISE DETAILED ANALYSIS

Validity of Notice Issued Under Section 148

• Relevant Legal Framework and Precedents: The legal framework revolves around Sections 147, 148, and 151 of the Income Tax Act, 1961. Section 147 pertains to the reopening of assessments, Section 148 deals with the issuance of notice for such reopening, and Section 151 specifies the authority required for granting approval for such notices. The judgment references the precedent set by the Hon'ble Jurisdictional High Court in the case of Vodafone India Idea Ltd. vs. DCIT.
• Court's Interpretation and Reasoning: The Tribunal considered the timing of the notice issued under Section 148, which was beyond three years from the end of the relevant assessment year. According to the Tribunal, the specified authority for granting approval should have been the Principal Chief Commissioner or Principal Director, as per sub-clause (ii) of Section 151, not the Principal Commissioner of Income Tax (PCIT) who granted the approval in this case.
• Key Evidence and Findings: The Tribunal noted that the notice dated 27.07.2022 was issued after the lapse of three years from the end of the assessment year 2017-18. The Tribunal also considered the timing of the insertion of the provisos by the Finance Act, 2023, which came into effect from 01.04.2023 and therefore were not applicable to the case at hand.
• Application of Law to Facts: The Tribunal applied the law as it stood before the amendments made by the Finance Act, 2023. It concluded that the approval for the notice should have been obtained from the higher authority as specified in Section 151(ii), not the PCIT.
• Treatment of Competing Arguments: The Tribunal considered the Revenue's argument that the time limit could be extended by the provisos inserted by the Finance Act, 2023. However, it rejected this argument, citing that these provisos were not applicable at the time the notice was issued.
• Conclusions: The Tribunal concluded that the notice issued under Section 148 was void ab initio due to the lack of appropriate authority's approval, rendering the subsequent assessment order unsustainable.

SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal reinforced the principle that statutory provisions and amendments apply prospectively unless explicitly stated otherwise. The authority required for granting approval for reopening assessments must be strictly adhered to as per the statutory requirements existing at the time of issuance of notice.
• Final Determinations on Each Issue: The Tribunal quashed the notice issued under Section 148 and the subsequent assessment order, declaring them void ab initio. Consequently, the cross-objection filed by the Assessee was allowed, and the Revenue's appeal was dismissed as infructuous.
• Verbatim Quotes of Crucial Legal Reasoning: The Tribunal quoted the Jurisdictional High Court's decision in Vodafone India Idea Ltd., emphasizing that "the proviso to Section 151 has been inserted only with effect from 1st April 2023 and, therefore, shall not be applicable to the matter at hand."