Reassessment notice issued with sanction from an incorrect, lower

Reassessment notice issued with sanction from an incorrect, lower authority under Section 151 is invalid and void.

Issue

Whether a reassessment notice issued under Section 148 for the Assessment Year (AY) 2016-17 is legally sustainable when the mandatory administrative sanction was obtained from the Principal Commissioner of Income Tax (PCIT) under Section 151(i) instead of the higher authorities specified under Section 151(ii), given that more than three years had elapsed from the end of the relevant assessment year.

Facts

The Timeline: The case involves the Assessment Year (AY) 2016-17. The Revenue initiated reassessment proceedings well after three years had elapsed from the end of that relevant assessment year.
The Sanction Obtained: To issue the reopening notice under Section 148, the Assessing Officer (AO) applied for and obtained administrative approval/sanction from the Principal Commissioner of Income Tax (PCIT).
The Legal Mandate: Under the amended provisions of Section 151 of the Income-tax Act, if a case is reopened within three years from the end of the relevant AY, the PCIT is the competent sanctioning authority under clause (i). However, if the reopening occurs after the expiry of three years, clause (ii) mandates that the sanction must come from a higher tier of management: the Principal Chief Commissioner, Principal Director General, Chief Commissioner, or Director General.

Decision

On Competency of Sanctioning Authority: Decided in favor of the assessee. Since more than three years had passed since the end of AY 2016-17, the power to grant a reopening sanction rested solely with the higher authorities designated under Section 151(ii).
On Validity of Notice and Reassessment: Obtaining a sanction from the PCIT instead of the higher-ranking authorities listed under Section 151(ii) constitutes a fundamental jurisdictional defect. A sanction by an incorrect or lower authority cannot be cured. Consequently, the Section 148 notice was declared invalid in law, and the entire subsequent reassessment order built upon that notice was quashed.

Key Takeaways

Strict Construction of Statutory Sanctions: The provisions governing administrative sanctions for reopening assessments are defensive shields for taxpayers. The tax department must strictly comply with the specific hierarchy of authorities mapped out by the legislature.
Jurisdictional Defects are Fatal: A failure to secure approval from the exact authority specified by law is not a mere procedural error that can be overlooked under saving sections like Section 292B; it is a fatal jurisdictional flaw that invalidates the entire proceeding from inception.
Time-Triggered Approval Levels: The law purposely mandates a higher level of administrative scrutiny (Chief Commissioner/Director General level) for older cases (beyond 3 years) to prevent arbitrary or routine harassment by lower-ranking tax officials.

IN THE ITAT DELHI BENCH ‘E’

Accenture Impex (P.) Ltd.

Deputy Commissioner of Income-tax

Raj Kumar Chauhan, Judicial Member
and BRAJESH KUMAR SINGH, Accountant Member

IT Appeal No. 7436 (Delhi) of 2025
[Assessment year 2016-17]

JUNE 16, 2026

Rohit Kapoor, Adv. for the Appellant. Ravi Kant Choudhary, Sr. DR for the Respondent.

ORDER

Raj Kumar Chauhan, Judicial Member.- The appeal of the assessee is directed against the order dated 17.09.2025 of ld. CIT(A)/NFAC passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) wherein the Assessment Order passed u/s 147 r.w.s. 144 of the Act dated 28.05.2023 was set aside and the matter was restored to the file of the Assessing Officer for making a fresh assessment.

2. The facts in brief as culled out from para 3 of the impugned order are as under:

”The assesse company filed its return of income for the year under consideration on 11.10.2016. As per the information on Insight Portal, assessee maintains a current account with Circular Road branch of Amritsar Zone. The account was opened on 23.07.2014. The account holder occupation is declared to be trader. The turnover in the account during the financial year 2015-16 was Rs. 941.65 lacs debit and Rs. 919.87 lacs credit of which the cash transactions were Rs. 63.50 lacs debit and Rs.18.73 lacs credit. During the current financial year 2016-17 the turnover is Rs. 23.34 lacs debit and Rs.2.24 lacs credit of which cash transactions are Rs. 18.00 lacs debit and credit is nil. The pattern of transactions in the account is that credits are received through RTGS and debits also through RTGS or by cash withdrawals. Cash withdrawals are Rs. 9.00 lacs or less than that thus avoiding reporting in the CTR.RTGS transactions both debit and credit appear like routing transaction without any economic rationale. Moreover we have also received an enquiry about the account from Directorate of Revenue Intelligence (Headquarters) in respect of fraudulent export of Floor Covering in this account.”. It is seen from perusal of the underlying information that the huge suspicious transactions without economic rationale were appearing in the bank account. It is further seen that Directorate of Revenue Intelligence identified the assessee company involvement in fraudulent export activities. The assessee booked huge transactions of sale and purchase during the year. Further, In view of underlying information in possession wherein assessee’s involvement in fraudulent export activities as identified by Directorate of Revenue Intelligence, Notice U/s 148 was issued on 28.05.2021. Order U/s 147 r. w.s. 144 r.w.s. 144B of the Act was passed on 28.05.2023 by making an addition of Rs.91,16,550/-towards unexplained receipts, Rs. 1,00,03,235/- towards unexplained expenditure and Rs.72,92,446/- towards rejection of books of accounts.”

3. Aggrieved by the impugned order, the assessee filed appeal before us and has raised the following grounds of appeal:

“1.

That the CIT(A) has erred in remanding back the matter to the AO without adjudicating the legal grounds of appeal.

That the CIT(A) has erred in not appreciating that the reasons recorded are bad in law, since, information is In respect of fraudulent export while the assessee was not involved in any export activities and as such, there is wrong assumption of facts.

That the CIT(A) has erred in not appreciating that the reasons recorded are bad in law in view of the fact that the reasons state about an enquiry having been received from Directorate of Revenue Intelligence (Headquarters). That mere enquiry cannot be termed as reason for belief of escapement of income which tantamount to borrowed satisfaction.

That the CIT(A) has erred in not appreciating that the notice issued U/S 148 issued on 11.07.2022 is bad in law since the approval has been obtained from PCIT-1, Delhi while the same had to be obtained from principle Chief Commissioner as the notice has been issued after the lapse of 3 years in view of the provisions of section 151.That the subsequent order passed u/s 148A(d) is also bad in law as the same has also been passed by without taking approval of appropriate authority.

That the CIT(A) has erred in not appreciating that the order u/s 148A(d) is bad in law since notice u/s 148A(b) was neither received by the appellant on email nor physically at the registered address.

That the CIT(A) has erred in not appreciating that the Ld. AO has erred in sending the notice u/s 133(6) to M/s HR Impex in Karnataka having PAN: AAHFS5014L while the assessee was involved in business transactions with M/s HR Impex in Panipat having PAN BPMPS1079D.

That the CIT(A) has erred in not appreciating that the addition made by the AO on account of transactions entered into with HR Impex in Panipat (AAHFS5014L) by sending notice u/s 133(6) to incorrect party without considering the replies of the assessee in which the assessee had duly mentioned the PAN and address of the party.

That the appellant craves leave to add, amend and alter the grounds of appeal.”

4. We have heard the ld. AR and the ld. DR. At the very outset, the ld. AR submitted that the ld. CIT(A) vide impugned order dated 17.09.2025 has not decided the legal issue raised in grounds as per Form 35 wherein the assessee has raised the ground that proceeding initiated u/s 148 vide notice dated 01.06.2021 were bad in law since the approval obtained u/s 151 was bad in law and the subsequent notice u/s 148 on 11.07.2022 was also bad in law. It is further argued that the approval was required to be obtained from PCCIT whereas the approval for issuing notice u/s 148 dated 11.07.2022 was obtained from PCIT-1, Delhi as placed at page 24 of the paper book wherein it is mentioned in ‘column 3’, this notice is being issued after obtaining prior approval of PCIT-1, Delhi. It is further argued that the case is covered by the Union of India v. Rajeev Bansal 469 ITR 46 (SC) as well as coordinate bench decision in the case of Dy. CIT v. Rudra Buildwell Homes (P.) Ltd. (Delhi – Trib.) Thus, the only issue to be determined by us is whether the notice u/s 148 is bad in law as the approval of the competent authorities is not obtained before issuing the notice.

5. In that regard, we have also heard the ld. DR who has relied upon the decision of the ld. lower authorities and did not submit anything regarding the approval being issued by incompetent authorities i.e. PCIT in place of PCCIT.

6. We have considered the rival submissions and are examining the record.

7. We have heard the rival submissions and perused the material placed on record. It is an admitted fact that where more than three years had elapsed from end of relevant assessment year, sanction for reopening was to be obtained from Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General as per section 151(ii) of the Act. It is an admitted fact that in the instant case the approval was obtained u/s 151 of the Act from the PCIT-1, Delhi and notice u/s 148 of the Act was issued on 11.07.2022, which demonstrates that notice dated 11.07.2022 u/s. 148 of the Act was issued without validly complying with section 151 of the Act which is not in accordance with law and thus invalid, in view of the Hon’ble Apex Court decision in the case of Rajeev Bansal (supra) wherein it has been laid down as under:

“73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under section 148.The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments Sri krishna (P.) Ltd. v. ITO 221 ITR 538 (SC) /[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below:

Regime	Time limits	Specified outhority
Section 151(2)of the old regime	Before expiry of four years from the end of the relevant assessment year	Joint Commissioner
Section 151(l)of the old regime	After expiry of four years from the end of the relevant assessment year	Principal Chief Commissioner or Chiof Commissioner or Principal Commissioner or Commissineer
Section 151(i)of the new regime	Three years or less than three years from the end of the relevant assessment year	Principal Commissioner or Principal Director or Commiosioner or Director
Section 151(ii)of the new regime	More than three years have elapsed from the end of the relevant assessment year	Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General

74. The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime:

(i)

If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and

(ii)

If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

75. After 1 April 2021, the new regime has specified different authorities for granting sanctions under section151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of Section 151 of the new regime is thus:

(i)

If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and

(ii)

If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be, issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.”

8. In view of above factual matrix and respectfully following the aforesaid decisions, we hold that the notice issued u/s 148 of the Act is bad in law and thus invalid, hence, the same is quashed and accordingly, the consequent assessment order is also quashed.

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