ITAT Quashes Reassessment Over Approval from Wrong Sanctioning Authority

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) on 29 May 2026 held that a reassessment notice issued after the expiry of three years from the end of the relevant assessment year is invalid if the mandatory approval prescribed under Section 151 of the Income Tax Act, 1961, is not obtained from the competent authority.

A Bench comprising Vice President Saktijit Dey and Accountant Member Prabhash Shankar allowed the appeal filed by Neetu Ramesh Bathija and quashed the reassessment proceedings initiated for AY 2017-18.

“Applying the ratio laid down in the judicial precedents cited before us, we have no hesitation in holding that the order passed under Section 148A(d) of the Act and notice issued under Section 148 of the Act are invalid.”

At the outset, the Tribunal condoned a delay of 262 days in filing the appeal after accepting the assessee’s explanation that the delay occurred due to a bona fide misunderstanding regarding the filing of the appeal by her tax consultants and subsequent payment of the appeal fee.

The assessee had not filed a return of income for AY 2017-18. Based on information available with the department regarding cash withdrawals of Rs 39.90 lakh and cash deposits of Rs.1.75 lakh in the assessee’s bank account, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment. Following the procedure laid down after the Supreme Court’s decision in Ashish Agarwal, the Assessing Officer issued a notice under Section 148A(b), passed an order under Section 148A(d), and thereafter issued a notice under Section 148 before completing the reassessment under Sections 147 and 144.

The Tribunal admitted the additional ground, observing that it was a pure legal issue going to the root of the matter and could be decided on the basis of facts already available on record.

Examining the record, the Bench noted that the notice under Section 148 was issued in July 2022, well beyond three years from the end of AY 2017-18. It further found that the approval had admittedly been granted by the Principal Commissioner of Income Tax, Thane, and not by the authorities specified under Section 151(ii) of the Act. “The notice issued under Section 148 of the Act, prima facie, is not in accordance with the conditions of Section 151(ii) of the Act.”

Thus, the ITAT held that both the order passed under Section 148A(d) and the notice issued under Section 148 were invalid in law. Since the reassessment proceedings themselves were void, the consequential assessment order passed under Sections 144 read with 147 was also quashed.

In view of its decision on the jurisdictional issue, the Tribunal treated the remaining grounds raised by the assessee as academic and refrained from adjudicating them.

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