ITAT Invalidates Section 148 Reassessment Proceedings Over Lack of Valid Section 151 Approval

The ITAT Rajkot, in the case of Jigesh Munvar for Assessment Year 2020-21, highlighted that the tax authorities are compelled to take valid prior approval from specified higher authorities before issuing a notice to reopen an assessment under Section 148, signed either manually or digitally by the competent authority.

In the present case, the assessee’s case was reopened by the tax authorities under Sections 147 and 148 of the Income Tax Act, and reassessment was completed by making an addition amounting to Rs 51.52 lakh on the grounds of unexplained money under Section 69A of the Income Tax Act 1961.

When the aggrieved assessee approached the Commissioner of Income Tax (Appeals) [CIT(A)], it also sustained the aforementioned decision of the tax authorities. Additionally, confirmed the application of Section 115BBE, charged interest amounting to Rs 15.32 lakh and Rs 24.19 lakh under Sections 234A and 234B of the Income Tax Act, respectively, imposed a charging fee of Rs 10,000 for default in filing return of income (ITR) under Section 234F and initiated penalty proceedings under Section 271AAC of the Act.

Challenging the same, the assessee thereafter filed an appeal before the ITAT Rajkot, raising the key ground of mandatory approval under Section 151 of the Income Tax Act 1961. The provisions of the said section mandate tax authorities to obtain prior approval from specified higher authorities (Principal Commissioner/Commissioner/Joint Commissioner) before issuing a notice to reopen an assessment under Section 148. The assessee argued that the Section 151 approval was neither manually signed nor digitally signed by the competent authority, which is an obligatory requirement under the law.

To support this argument, the tribunal cited an earlier ruling of this court in the case of M/s Aditya Plastic, in ITA No. 185/Rjt/2024, for AY 2013-14, where the judges had held in favour of the assessee, holding that a valid approval is necessary before issuing a reassessment notice. When the tribunal examined the furnished documents, it endorsed the arguments served by the assessee. Since, in the present case, the basic requirement was not fulfilled, the tax authorities had no power to issue the Section 148 notice. Which ultimately makes the entire reassessment proceedings invalid.

In conclusion, the tribunal quashed the impugned assessment order and allowed the assessee’s appeal.