Section 148 Notice Issued After 3 Years Requires Mandatory Approval From PCCIT or CCIT, Rules ITAT

The ITAT Mumbai has quashed the reassessment order passed against Bang Overseas Limited, holding that in case a Section 148 reassessment notice is not issued within 3 years of the legal time limit from the end of the relevant AY, prior approval becomes mandatory from PCCIT or CCIT, as per Section 151(ii) of the Income Tax Act. 

The dispute arose when the Income Tax Authorities issued a notice dated April 07, 2022, under Section 148 of the Act, which was issued after the expiry of the legal three-year time limit from the end of the relevant Assessment Year in consideration, i.e., 2018-19, and such notices require prior approval from the Principal Chief Commissioner of Income Tax (PCCIT) or Chief Commissioner of Income Tax (CCIT), as per the provisions of Section 151(ii) of the Income Tax Act. However, in the present case, the approval was taken from the Principal Commissioner of Income Tax (PCIT), who was not the correct competent authority to approach under the law.

In support of its case, the assessee cited earlier judgements of the Bombay High Court in cases titled Prakash Pandurang Patil v. ITO and Agnello Oswin Dias v. ACIT. It was further flagged that the Apex Court of India, i.e., the Supreme Court, had upheld the Bombay High Court’s ruling in Prakash Pandurang Patil by dismissing the department’s Special Leave Petition.

When the tribunal analysed the facts of the case, it noted that the Section 148 notice was indeed issued after the expiry of the statutory time limit of 3 years from the end of the relevant assessment year. Additionally, the approval obtained was from the PCIT, which was not the correct authority to approach; in such cases, approval should be taken from the PCCIT or CCIT, according to Section 151(ii) of the income tax act.

Considering the rulings of the Bombay High Court and the Supreme Court, the tribunal set aside both the Section 148 reassessment notice and the consequent assessment order, holding in favour of the assessee. The tribunal held, “respectfully following the ratio laid down in the judicial presidents cited before us, we hold that the notice issued u/s.148 of the Act is invalid due to lack of proper sanction in terms with section 151(ii) of the Act. That being the case, the assessment order passed in pursuance thereof has to be declared as invalid. Accordingly, we quash the assessment order. The order of ld. First appellate authority is set aside. In view of our decision above, the other grounds having become academic are kept open.”