Invalidation of Reassessment for Lack of Mandatory Approval from Specified Authority
Reference: Sections 151 and 148A of the Income-tax Act, 1961
Assessment Year: 2017-18
Status: In Favor of Assessee (SLP Dismissed)
1. The Core Dispute: Competent Approval Authority under Section 151
In this matter for Assessment Year 2017-18, the Revenue initiated reassessment proceedings by issuing a notice under Section 148A(b). This notice was issued after the expiry of three years from the end of the relevant assessment year.
The Jurisdictional Flaw: The Revenue obtained prior approval from the Principal Commissioner of Income Tax (PCIT).
Assessee’s Stand: The assessee-HUF challenged the jurisdiction, arguing that since more than three years had elapsed, the approval should have been obtained from the Principal Chief Commissioner (PCCIT) or Chief Commissioner, as mandated by Section 151(ii).
Revenue’s Stand: The Revenue relied on approval from the authority specified in Section 151(i) (PCIT/Commissioner), which is only applicable for cases within three years.
2. Legal Analysis: Hierarchy of Sanctioning Authorities
The Court emphasized that the Finance Act, 2021 introduced a strict two-tier approval structure under Section 151 based on the age of the assessment:
| Time Elapsed from End of AY | Specified Approval Authority (Section 151) | Clause |
| 3 Years or Less | Principal Commissioner / Principal Director / Commissioner / Director | (i) |
| More than 3 Years | Principal Chief Commissioner / Principal Director General / Chief Commissioner / Director General | (ii) |
I. Conjoint Reading of Sections 148 and 151
The High Court held that the First Proviso to Section 148 and Section 151 must be read conjointly. Prior approval is a “jurisdictional precondition.” If the approval is granted by an authority lower in the hierarchy than the one specified by law, the entire proceeding is coram non judice (without jurisdiction).
II. TOLA and Limitation
The Revenue often argues that extensions under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) allow for older approval standards. However, the Court clarified that TOLA only extends time limits and does not alter the authority designated by the amended Section 151.
3. Final Ruling: Notices and Orders Quashed
The High Court quashed the notice issued under Section 148A(b) and the subsequent order under Section 148A(d).
Verdict: The Supreme Court found no good ground to interfere with the High Court’s decision and dismissed the Special Leave Petition (SLP).
Outcome: The reassessment proceedings were held to be invalid and void ab initio due to the lack of approval from the competent authority under Section 151(ii).
Key Takeaways for Taxpayers
Check the Timestamp: If you receive a notice for an assessment year ending more than 3 years ago (e.g., for AY 2017-18 received in 2022/2023), immediately verify the designation of the officer who granted the sanction.
Jurisdictional Defense: Lack of proper sanction is a “root-level” defect. It can be raised even if you have already participated in the assessment proceedings.
Approval Wording: Ensure the approval isn’t just a mechanical “Yes.” High Courts have increasingly quashed assessments where the specified authority did not record their independent satisfaction.