Section 148 Notice After 3 Years Must Be Approved by Higher Authority: ITAT Delhi

The ITAT Delhi, in a recent case, quashed the entire reassessment proceedings, holding that notices issued under Section 148 after the time limit of three years from the end of the relevant assessment year should be approved by a higher authority such as the Principal Chief Commissioner of Income Tax, Principal Director General, Chief Commissioner, or Director General. However, in the present case, the statutory requirement was not met.

ITAT Delhi has recently delivered its judgement on an appeal filed by Arihant Agrifoods Private Limited against the Income Tax Officer (ITO), challenging an order dated March 27, 2025, passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, under Section 250 of the Income Tax Act, 1961. The case pertains to the Assessment Year 2017-18.

The assessee challenged the reassessment order passed under Section 147 of the Act since the notice issued under Section 148 was approved by an authority that was not legally authorised to approve under Section 151 of the Act, and, therefore, the Section 147 order was legally invalid. The approval had been granted by the Principal Commissioner of Income Tax (Pr. CIT-01), Delhi.

When the tribunal heard the case, it noted that as per the amendment introduced by the Finance Act 2021, if any notice is issued under Section 148, after three years from the end of the relevant assessment year, then it becomes an obligation to take approval from a higher authority like the Principal Chief Commissioner of Income Tax, Principal Director General, Chief Commissioner, or Director General. In the present case, the Section 148 notice was issued for AY 2017-18 on July 28, 2022, after the three-year time limit. Meaning, taking approval from a higher authority was mandatory.

However, the Assessing Officer (AO) only took permission from the lower authority, i.e., the Principal Commissioner of Income Tax, meaning the statutory requirement was not met. Considering the same, the tribunal cited an earlier judgement of the Supreme Court of India in a case titled Union of India vs Ashish Agarwal and Union of India v. Rajeev Bansal, and also the Delhi High Court judgement in the case titled Communist Party of India (Marxist) v. CIT (Exemptions); they all ruled, highlighting the same.

In conclusion, the tribunal quashed the impugned notice issued under Section 148 and, consequently, held the entire reassessment proceedings invalid, ruling in favour of the assessee company.