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2025 (4) TMI 1027 - AT - Income TaxValidity of reassessment proceedings - specified authority to give sanction u/s 151 - addition u/s 69A - notice u/s 148 issued beyond 3 years from the end of the relevant AY - HELD THAT - Since the issue of sanctioning authority is no more res integra as has been specifically deliberated upon and guided by the Hon ble Apex Court in the case of Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) analyzing the order of Ashish Agrawal 2022 (5) TMI 240 - SUPREME COURT wherein it is categorically held that as per the provisions of new regime the sanctioning authority shall be decided as prescribed amended section 151(new regime). In the present case because the reopening has been initiated after 3 years therefore clause(ii) of section 151 shall apply. We thus find substance in the contention of the Ld. AR that the approval granted u/s 151(ii) (new regime) was not by the Ld. PCIT who do not have jurisdiction to do so in a case wherein the process of reopening has been triggered beyond 3 years from the end of the relevant assessment year. The contention of the revenue placing reliance on the judgment in the case of Ashish Agrawal 2022 (5) TMI 240 - SUPREME COURT that in present case the prescribed authority is Principal CIT-1 Raipur found to be misplaced or misconstrued as the directions by the Hon ble Apex Court are clear which are further clarified that the provisions of amended section 151 shall be applied in the cases in which the revenue has availed the benefit of extended life limit under TOLA and had proceeded for reopening assessment under the provisions of new regime. We thus are unable to persuade and concur with the response of the Ld. AO as per their report dated 12.12.2024. We are of the considered view that the impugned assessment order framed u/s 147 r.w.s. 144 r.w.s. 144B passed by the Ld. AO is liable to be struck down being invalid for the want of valid assumption of jurisdiction on account of sanction u/s 151 by an authority who is not vested with jurisdiction to grant such approval or other than the specified authority under clause (ii) of section 151 (new regime). Consequently the assessment u/s 147 r.w.s. 144 r.w.s. 144B stands quashed. Decided in favour of assessee.
The core legal questions considered by the Tribunal in this appeal are as follows:
1. Whether the approval granted under section 151 of the Income Tax Act, 1961 (the Act), for reopening assessment of AY 2016-17 by the Principal Commissioner of Income Tax (Pr. CIT-1), Raipur, was valid, given that the reopening notice was issued beyond three years from the end of the relevant assessment year and whether the sanctioning authority was the correct specified authority under the amended provisions of section 151. 2. Whether the issuance of the order under section 148A(d) and the notice under section 148 by the Assessing Officer (AO), ACIT Cir-1(1), Raipur, was valid in light of the CBDT Notification dated 29-03-2022 mandating faceless assessment proceedings, and whether the subsequent assessment order passed by the faceless AO was valid. 3. Whether the addition of Rs. 1,22,40,000 as unexplained income under section 69A was justified and sustainable in the absence of any response or evidence from the assessee. Issue 1: Validity of Sanction under Section 151 for Reopening Assessment beyond Three Years The legal framework revolves around section 151 of the Income Tax Act, which specifies the authority competent to grant approval for issuance of notice under sections 148 and 148A. The amended provisions effective from 01-04-2021 distinguish two categories:
The reopening notice in this case was issued on 02-07-2022 for AY 2016-17, which is beyond three years from 31-03-2020, thus invoking clause (ii) of section 151. The assessee challenged the validity of the sanction granted by Pr. CIT-1, Raipur, contending that the approval should have been granted by a higher authority as per clause (ii). The Tribunal examined the Supreme Court's ruling in Union of India vs Ashish Agrawal (2022) and Rajeev Bansal (2024), which clarified the interplay between the amended provisions and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). These judgments establish that the sanctioning authority must be the one specified under the amended section 151 applicable at the time of issuance of the notice, and that the extended timelines under TOLA do not alter the identity of the competent sanctioning authority. Several judicial precedents were relied upon, including ACIT vs Manish Financial, Manoj Rajput vs DCIT, Gigantic Mercantile (P) Ltd vs ACIT, and Cipla Pharma and Life Sciences Ltd. vs DCIT, all of which held that sanction granted by an authority not specified under clause (ii) for notices issued beyond three years is invalid and vitiates the reopening proceedings. The Revenue's contention that the sanction by Pr. CIT-1 was valid based on the old regime and the Ashish Agrawal judgment was examined. The Tribunal noted that the Supreme Court's directions and subsequent clarifications mandate application of the amended section 151 regime for proceedings initiated after 01-04-2021, especially when the reopening notice falls beyond three years. Applying the law to the facts, the Tribunal found that the sanction was granted by Pr. CIT-1, who is not the specified authority under clause (ii) for reopening beyond three years, rendering the approval invalid. This invalid sanction meant that the notice under section 148 and consequent assessment under section 147 lacked jurisdiction and were liable to be quashed. The Tribunal rejected the Revenue's argument that the issue was a new ground not raised earlier, emphasizing that jurisdictional defects can be raised at any stage and cannot be waived. Issue 2: Validity of Issuance of Notice and Order under Section 148A(d) and Faceless Assessment Proceedings The assessee contended that the order under section 148A(d) and notice under section 148 issued by ACIT Cir-1(1), Raipur, were invalid because, after CBDT Notification No. 18 dated 29-03-2022, such proceedings must be conducted by faceless AO in accordance with section 144B of the Act. The Tribunal examined the CBDT Notification and relevant provisions, which mandate that issuance of notice under section 148 and assessment/reassessment under section 147 shall be through automated allocation and faceless manner as per risk management strategy. The Revenue clarified that the initial issuance of order under section 148A(d) and notice under section 148 was rightly made by the jurisdictional AO (ACIT Cir-1(1), Raipur), while the assessment order under section 147 read with section 144B was passed by the faceless AO, consistent with the notification. The Tribunal accepted this explanation, holding that the procedural sequence was in accordance with the CBDT Notification and statutory provisions. The issuance of the notice and order by the jurisdictional AO followed by faceless assessment was valid. Issue 3: Justification of Addition of Rs. 1,22,40,000 as Unexplained Income under Section 69A The addition was made on the basis of information received from the Investigation Wing that the assessee routed funds amounting to Rs. 1,22,40,000 through a concern engaged in entry-provider activities with no real business. The assessee had not filed return of income for AY 2016-17 and failed to respond to notices. The CIT(A) upheld the addition, noting the assessee's failure to cooperate and substantiate claims despite multiple opportunities and communications. The Tribunal noted the principle that an appeal must be effectively prosecuted and that the burden of proof lies on the assessee to substantiate grounds of appeal. The Tribunal observed that the assessee had neither filed submissions nor produced evidence to counter the addition, effectively abandoning the appeal on merits. The CIT(A)'s decision to sustain the addition was thus affirmed. Conclusions and Final Determinations The Tribunal held that:
Significant Holdings: "The sanctioning authority under section 151(ii) of the Income Tax Act for issuance of notice under section 148 beyond three years from the end of the relevant assessment year must be the Principal Chief Commissioner or Principal Director General or, where none exist, Chief Commissioner or Director General. Sanction by any other authority is invalid and vitiates the reopening proceedings." "The Supreme Court's decision in Union of India vs Ashish Agrawal and subsequent clarifications in Rajeev Bansal mandate application of the amended provisions of section 151 for proceedings initiated after 01-04-2021, including the identity of the sanctioning authority." "The procedural compliance with CBDT Notification No. 18 dated 29-03-2022 requiring faceless assessment proceedings does not preclude the jurisdictional AO from issuing notices under section 148A(d) and section 148, provided the assessment order is passed by the faceless AO." "An assessee must effectively prosecute an appeal and discharge the burden of proof. Failure to respond or produce evidence justifies sustaining additions made by the AO." "Jurisdictional defects such as invalid sanction under section 151 can be raised at any stage and cannot be waived by the assessee." The appeal was allowed by quashing the assessment order due to invalid sanction under section 151, with no adjudication on the merits of other grounds.
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