Reassessment Sanction Granted by PCIT Instead of PCCIT

Reassessment Sanction Granted by PCIT Instead of PCCIT After Three Years Is Void Ab Initio

Issue

Whether a reassessment notice issued under Section 148 and an order passed under Section 148A(d) after the expiry of three years from the end of the relevant assessment year are valid when sanction was granted by the Principal Commissioner of Income Tax (PCIT) instead of the prescribed specified authority (Principal Chief Commissioner or Chief Commissioner) under Section 151(ii).

Facts

Non-Filing & Information: For Assessment Year 2018-19, the assessee did not file a return of income. Based on information, the Assessing Officer (AO) noted that the assessee had sold shares and realized capital gains taxable in India.
Timeline of Reassessment: The AO issued a show-cause notice under Section 148A(b), passed an order under Section 148A(d), and issued a reassessment notice under Section 148 after the expiry of three years from the end of the relevant assessment year (AY 2018-19).
Sanctioning Authority: The sanction for passing the order under Section 148A(d) and issuing the Section 148 notice was granted by the Principal Commissioner of Income Tax (PCIT).
Statutory Defect: Under Section 151(ii) as applicable, where more than three years have elapsed from the end of the relevant assessment year, the competent specified authority to accord sanction is the Principal Chief Commissioner or Chief Commissioner (PCCIT/CCIT), not the PCIT.

Decision

Competent Sanctioning Authority: After the lapse of three years from the end of the relevant assessment year, the authority competent to grant sanction under Section 151(ii) is the PCCIT or CCIT, not the PCIT or CIT.
Non-Retrospectivity of Amendment: The proviso to Section 151 inserted by the Finance Act, 2023, has no retrospective application.
Jurisdictional Failure: Obtaining sanction from an incompetent authority (PCIT instead of PCCIT/CCIT) goes to the root of the AO’s jurisdiction, making the assumption of jurisdiction bad in law and invalidating the entire reassessment proceeding.

Key Takeaways

Strict Statutory Compliance for Sanction: The hierarchy of sanctioning authorities under Section 151 is mandatory; obtaining approval from an officer lower than the specified authority invalidates the notice and subsequent proceedings.
Three-Year Cutoff Rule: Once three years from the end of the relevant assessment year have elapsed, sanction must strictly emanate from the PCCIT/CCIT level.
Incurable Jurisdictional Defect: Improper sanction is a fatal jurisdictional flaw that cannot be cured retrospectively or validated under procedural saving provisions.

IN THE ITAT MUMBAI BENCH ‘I’

India Land Ventures Ltd., Mauritius

Deputy Commissioner of Income-tax (International Taxation)

SAKTIJIT DEY, Vice President
and Prabhash Shankar, Accountant Member

IT Appeal No. 1015 (MUM) of 2024
[Assessment year 2018-19]

JUNE 16, 2026

Porus Kaka, Sr. Adv. and Paras Savla, AR for the Appellant. Krishna Kumar, Sr. DR for the Respondent.

ORDER

Prabhash Shankar, Accountant Member.- The present appeal emanating from the assessment order passed u/s 147 r.w.144C(13) order dated 05.01.2024, consequent to the order passed by the CIT (Dispute Resolution Panel-1), Mumbai-2 [hereinafter referred to as “CIT(DRP-1)”] dated 29.03.2023 pertaining to the order passed u/s. 144C(1) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2018-19.

2. The grounds of appeal are as under:

“1 . Based on the facts and circumstances of the case, and in law, the Appellant respectfully wishes to raise the following grounds of appeal against the order of the Deputy Commissioner of income-tax (International Taxation), Circle 2(2)(1), Mumbai (‘the learned DCIT”) issued under section 147 read with section 144C(13) of the Income-tax Act, 1961 (‘the Act’) on the basis of directions of the Dispute Resolution Panel (‘DRP’) for the aforesaid assessment year: Taxability as per India-Mauritius tax treaty

1. The learned DCIT has erred in denying the Appellant access to the Double Taxation Avoidance Agreement (‘DTAA’) between India and Mauritius (‘the India-Mauritius tax treaty’) by not following circular no. 789 dated April 13, 2000 issued by the Central Board of Direct Taxes, the decision of the Hon’ble Supreme Court (‘SC’) in the case of Union of India and Another v Azadi Bachao Andolan (263 ITR 706) and various associated rulings issued by Indian courts in this respect.

2 The learned DCIT has erred in holding that Article 27A: Limitation of Benefits of the India-Mauritius tax treaty is applicable to the Appellant in relation to capital gains realized from the sale of equity shares acquired before April 1, 2017.

3. Without prejudice to above, the learned DCIT has erred in incorrectly processing various facts relating to the Appellant and in making vague statements and allegations for concluding that the Appellant is not eligible for deriving the benefits of the India-Mauritius tax treaty.

4. Without prejudice to above, the learned DCIT has erred in not allowing a set-off of brought forward long-term capital loss of Rs 27,72,03,867 pertaining to AY 2016-17 while computing the Appellant’s total income for AY 2018-19.

Levy of fees under section 234F

5. The learned DCIT has erred in levying fees under section 234F of the Act on the Appellant, despite the Appellant having furnished its income-tax return for AY 201819 within the timeline stipulated under section 139(1) of the Act.

Initiation of penalty proceedings under section 270A

6. The learned DCIT has erred in initiating penalty proceedings under section 270A of the Act against the Appellant for misreporting of income.

Additional Grounds of Appeal –

7. Whether on facts and circumstances of the case and in law, the Impugned reassessment proceedings are palpably perverse, ex-facie illegal and liable to be quashed in limine.

8. Whether on facts and circumstances of the case and in law, the learned AO absent any information which suggests income chargeable to tax has escaped assessment ought not to have initiated the impugned reassessment proceedings.

9. Whether on facts and circumstances of the case and in law, the notice issued under Section 148A(b) of the Act dated 30 March 2022 is bad in law as prior approval of the specified authority per Section 151 of the Act has not been obtained which is evidenced from the fact that neither a copy of such approval has been provided along with the notice nor is there any mention of such approval in the notice. Without prejudice, if an approval has been sought, the same has been granted by the specified authority in a mechanical manner thereby vitiating the entire reassessment proceedings.

10. Whether on facts and circumstances of the case and in law, the order passed under Section i48A(d) of the Act dated 22 April 2022 is bad in law as prior approval of the specified authority per Section 151 of the Act has not been obtained.

11. Whether on facts and circumstances of the case and in law, the order passed under Section 148A(d) of the Act dated 22 April 2022 is bad in law as prior approval of the Commissioner of Income Tax (International Tax), Mumbai – 2, has not been obtained which is evidenced from the fact that no copy of such approval has been provided along with the order passed under Section 148A(d) of the Act. Without prejudice, if an approval has been sought, the same has been granted in a mechanical manner thereby vitiating the entire reassessment proceedings.

12. Whether on facts and circumstances of the case and in law, the notice dated 22 April 2022 issued under Section 148 of the Act being unsigned is non-est and void ab initio.

13. Whether on facts and circumstances of the case and in law, the impugned reassessment proceedings initiated by the jurisdictional Assessing Officer, in violation of provisions of Section 51A of the Act, are without jurisdiction and liable to be quashed in limine.

3. In respect of the additional grounds of appeal, it was submitted that the additional grounds are purely legal grounds and would not require any investigation into fresh or new facts. Further, the facts relevant to adjudicate the additional grounds are on record. The failure to raise the additional grounds at the time of filing of the original appeal was neither deliberate nor contumacious. Reliance is placed on National Thermal Power Co. Ltd. v. CIT 229 ITR 383 (SC),Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688 (SC) etc.

4. On due consideration, we find that the additional grounds are purely legal in nature requiring no further investigation of facts. Accordingly, we admit the same for adjudication. Since these grounds go into the very root of the reopening and the consequent assessment order,we take them first as below.

5. According to the order, the assessee is a non-filer and did not file any return of income for the relevant assessment year. As per information in hand, it was noticed by the DCIT(IT)- 3(1)(1),Mumbai that the assessee had sold shares of M/s. India Land Hotels Mumbai Pvt. Ltd.(ILHMPL) and had capital gains of Rs.28,27,19,809/-.The said AO held that the such capital gains were taxable in India. On the basis of information received, a notice u/s.148A(b) of the Act was issued to the assessee and after considering the facts and the submissions of the assessee, the order u/s.148A(d) of the Act was passed on 22/04/2022.The draft assessment order after hearings was passed determining income of Rs 98.17 cr. and consequent to DRP order ,passed final assessment order retaining the addition proposed in draft order.

6. Before us,the ld.AR has contended that in this case notice u/s 148A(d) of the Act was issued on 22.04.2022 which is beyond three years from the end of the assessment order. Show cause notice u/s 148A(b) of the Act was issued on 30.03.2022. A paper book has been submitted and attention has been drawn to page-187 mentioning that the impugned notice was issued after obtaining prior approval of the CIT(IT),Mumbai-2 accorded on 22.04.2022.Further,it was pointed out that as per Pages-188/189 of the paper book, being response of the assessee to the notice u/s 148 of the Act dated 22.4.2022 stating that in the instant case more than 3 years had lapsed and in such a situation, the approval was required to be obtained from the Pr.CCIT/CCIT. The approving authority in this case was CIT(IT) who was not the specified authority. It was also requested to provide the approval letter from the specified authority, if any in the light of above facts. It is submitted that no such approval order was ever received from the AO.

6.1 The ld.AR therefore, claimed that the impugned notices were invalid as also the consequent assessment order for want of approval of correct specified authority. Reliance was placed on a plethora of judicial decisions i.e. Union of India v. Rajeev Bansal [2024] 1469 ITR 46 (SC), Siemens Financial Services (P.) Ltd. v. Dy. CIT 457 ITR 647 (Bombay) and several decisions of coordinate benches of ITAT wherein on identical deficiency, the notices were quashed alongwith the assessment orders.

7. The ld.DR did not controvert the facts stated by the ld.AR. He relied on the orders of the authorities below.

8. On careful consideration of the above stated facts and on perusal of the records as also the cited decisions, we find sufficient merits in the contentions of the ld.AR. The issue raised here has been adjudicated in several judicial decisions by various courts of law including jurisdictional High Court in the case of Alag Property Construction (P.) Ltd. v. ACIT [2026] 487 ITR 440 (Bombay). Relevant parts of the order in paragraphs 11 to 14 thereof as under:

“11. The Hon’ble Supreme Court in the above case has drawn an illustration in para 78 of its order in the context of A.Y. 2017-18 (which is also the relevant Assessment year in the present Writ Petition) wherein it is categorically held that the authority specified under section 151(1) can accord sanction only up to 30.06.2021. This illustration makes it absolutely clear that when the period of three years from end of relevant Assessment Year expired between 20.03.2020 and 31.03.2021, the extension by virtue of TOLA was upto 30.06.2021 and not beyond. Thus, it can be said that the period of three years from the end of the relevant Assessment Year (in the present case A.Y. 2017-18) expired on 30.06.2021, whereas Respondent No.1, despite passing order under section 148A(d) on 18.08 2022, and issuing notice under section 148 on 23.08.2022 [in respect of Assessment Year 2017-18, has obtained approval of Respondent No.2 who is not the authority as prescribed under section 151(4)]

12. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(i) vitiates the jurisdiction of Respondent No.I to issue a notice under Section 148 of the Act.

13. We are clearly of the view that the present matter stands covered by the decision of Hon’ble Supreme Court in the case of Rajeev Bansal (supra) and we are bound by it. Accordingly, we hold that the order dated 18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated and 23.08.2022 are bad in law, and hence, are required to be quashed and set aside.

14. We accordingly set aside the impugned order dated 18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated 23.08.2022, and all other proceedings/orders emanating therefrom.”

8.1 Reliance is also placed on the decision of the Co-ordinate Bench of the ITAT, Mumbai in the case of Shabbir Taheri v. ITO [IT Appeal No. 1574 (Mum.) of 2025, dated 15-10-2025] in which theHon’ble Vice President of the Mumbai Bench passed a concurrent order therein, and the relevant observations of the Bench are reproduced below:

“6. As could be seen from the provision contained u/s. 151 of the Act reproduced above, as per clause (i), in a case where action u/s. 148 and Section 148A of the Act is initiated before expiry of three years from the end of the relevant assessment year, the specified authority who can grant sanction/approval is the Principal Commissioner or Principal Director General or Commissioner or Director of Income Tax. However, as per clause (ii), if more than three years have elapsed from the end of the relevant assessment year, the specified authority, who can grant sanction is the Principal Chief Commissioner or Principal Director General or where no Principal Chief Commissioner or Principal Director General is available then Chief Commissioner or Director General of Income Tax. It is noteworthy, akin to third and fourth provisos, which were incorporated in Section 149(1) of the Act under the new regime effective from 01.04.2021, no corresponding amendment was made to Section 151 of the Act. By virtue of Finance Act, 2023 effective from 01.04.2023, the following proviso was added to Section 151 of the Act.

“Provided that the period of three years for the purposes of Clause (i) shall be computed after taking into account, the period of limitation as excluded by the third, fourth and fifth provisos or extended by the sixth proviso to sub section (1) of Section 149 of the Act.”

7. Thus, as per Section 151 of the Act as it stood prior to its amendment by Finance Act, 2023, the limitation prescribed under Clause (i) of Section 151 of the Act was prior to expiry of three Sanjay Shantilal Dave years from the end of the relevant assessment year and without benefit of further extension in terms with third, fourth or fifth proviso under sub section (1) of Section 149 of the Act.

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11. Similar view was reiterated by the Coordinate Bench in case of ACIT v. Asha P. Kedia (supra). It is relevant to observe, though the aforesaid decisions of the Coordinate Benches were rendered at a prior point of time and were available when the appeal of Albert Joseph Rozario (supra) v. ITO (supra) was taken up before another Coordinate Bench, however, either knowingly or unknowingly, these decisions of the Coordinate Benches were not brought to the notice of the learned Bench. It appears so, because, there is no reference of these decisions in case of Albert Joseph Rozario v. ITO (supra). Had these decisions of Coordinate Benches been brought to the notice of learned Bench deciding the case of Albert Joseph Rozario (supra), a different view might have been taken. In any case of the matter, the point of time from which the proviso to Section 151 of the Act would be applicable was considered by the Hon’ble Jurisdictional High Court in at least four judgments. Three of these judgments have already been referred to in the decision of my learned brother Accountant Member. Even in case of AgnelloOswin Dias v. ACIT [2014] 161 taxmann.com 16 (Bombay), the Hon’ble Jurisdictional High Court, while reiterating the view that after expiry of three years from the end of the relevant assessment year, the specified authority in terms of Section 151(ii) of the Act is PCCIT, has held that the proviso to Section 151 of the Act having been inserted w.e.f. 01.04.2023 shall not be applicable prior to 01.04.2023. Meaning thereby, the proviso will not have retrospective effect. These decisions of the Hon’ble Jurisdictional High Court, being directly on the issue, constitute binding precedents.

12. In any case of the matter, Sections 149 and 151 of the Act have been enacted for different purposes and operate in different situations. While Section 149 of the Act, prescribes limitation for issuance of notice u/s. 148 and 148A of the Act, Section 151 of the Act prescribes the timeline for the specified authority to grant sanction for Section 148 and 148A of the Act. At the cost of repetition, it needs to be observed that prior to insertion of proviso u/s. 151 of the Act by Finance Act, 2023 w.e.f. 01.04.2023, the specified authority who can grant sanction for initiating proceedings u/s. 148A and issuing notice u/s. 148 of the Act after expiry of three years from the Sanjay Shantilal Dave end of the assessment year is PCCIT/CCIT in terms with Section 151(ii) of the Act. Hence, in absence of any enabling provision u/s. 151 of the Act, the 3rd, 4th and 5th or 6th provisos of Section 149(1) of the Act cannot be read into Section 151 of the Act to extend the time limit u/s. 151(i) of the Act.

13. In view of aforesaid, I fully agree with the decision of my learned brother Accountant Member that, both the order passed u/s. 148A(d) of the Act and notice issued u/s. 148 of the Act are invalid due to lack of sanction by the specified authority as specified u/s. 151(ii) of the Act. As a natural corollary, the assessment order passed in consequence thereof is also invalid. Hence, the ground is allowed.”

8.2 The legal position with regard to the competent authority for granting sanction under section 151 of the Act, prior to its amendment by the Finance Act, 2023, is now well settled. The Hon’ble Bombay High Court in Alag Property Construction Pvt. Ltd. (supra) has categorically held that where the period of three years from the end of the relevant assessment year has expired, sanction under section 151(i) could not have been accorded by the Principal Commissioner, and such sanction renders the reassessment proceedings void ab initio. The said judgment, being rendered by the Jurisdictional High Court, is binding on us. We further find that the Coordinate Bench of the ITAT, Mumbai, in Shabbir Taheri (supra), after an exhaustive analysis of sections 149 and 151 of the Act, has reiterated that prior to 01.04.2023, sanction for issuance of notice under section 148 after expiry of three years could be granted only by the authority specified under section 151(ii) of the Act, namely the Principal Chief Commissioner or Chief Commissioner, and that the proviso inserted by the Finance Act, 2023 has no retrospective application.In the present case, it is undisputed that the sanction for issuance of notice under section 148 and for passing the order under section 148A(d) of the Act was granted by the Pr. CIT, Mumbai, who was not the competent authority prescribed under section 151(ii) of the Act. Consequently, the assumption of jurisdiction by the Assessing Officer is bad in law which vitiates the entire reassessment proceedings.

8.3 In view of the above stated legal position, we hold that the notice issued under section 148 of the Act, the order passed under section 148A(d) of the Act, and all proceedings consequential thereto are invalid and unsustainable in law. Accordingly, the reassessment proceedings are hereby quashed.

9. As the reassessment itself is held to be invalid, the issues raised on merits and other Grounds do not survive for adjudication.

10. In the result, the appeal of the assessee is allowed.