Reassessment issued beyond three years with Principal Commissioner approval is void ab initio.

By | August 3, 2026
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Reassessment issued beyond three years with Principal Commissioner approval is void ab initio.

Issue

Whether an order under Section 148A(d) and a notice under Section 148 issued after more than three years from the end of the relevant assessment year are valid when approved by the Principal Commissioner instead of the specified higher authority under Section 151(ii).

Facts

  • Assessment Year: The matter pertains to Assessment Year 2016-17.

  • Timeline of Reassessment: The order under Section 148A(d) and the consequential notice under Section 148 were issued after the expiry of three years from the end of the relevant assessment year.

  • Sanctioning Authority: The Assessing Officer obtained prior approval for issuing the order under Section 148A(d) and notice under Section 148 from the Principal Commissioner of Income Tax.

  • Statutory Requirement: As per Section 151(ii), any reassessment initiated beyond the three-year time limit requires the prior sanction of the Principal Chief Commissioner or Chief Commissioner (or equivalent higher authority).

Decision

  • Mandatory Higher Sanction: Since the reassessment notice was issued beyond three years, prior approval under Section 151(ii) was mandatorily required from the Principal Chief Commissioner or Chief Commissioner.

  • Incompetent Approval: The approval granted by the Principal Commissioner was incompetent and legally unsustainable for cases exceeding the three-year threshold.

  • Assessment Void Ab Initio: Consequently, the order passed under Section 148A(d), the notice under Section 148, and the ultimate reassessment order framed under Section 147 were held to be void ab initio.

  • Outcome: The reassessment proceedings were quashed, deciding the issue in favor of the assessee.

Key Takeaways

  • Strict Time-Bound Approval Hierarchy: For reassessments initiated within 3 years, approval of the Principal Commissioner (PCIT) suffices; beyond 3 years, approval must strictly come from the Principal Chief Commissioner or Chief Commissioner (PCCIT/CCIT).

  • Jurisdictional Defect Cannot Be Cured: Obtaining approval from an officer lower in rank than the statutory authority prescribed under Section 151(ii) is a jurisdictional flaw that invalidates all subsequent reassessment steps.

  • Void Ab Initio: Any assessment completed pursuant to an invalid sanction under Section 151 is null and void from inception, rendering the final Section 147 order completely unenforceable.

IN THE ITAT RAIPUR BENCH ‘DB’
Damanjeet Singh Oberoi
v.
Deputy Commissioner of Income-tax-1(1)*
Partha Sarathi Chaudhury, Judicial Member
and DR. DIPAK P. RIPOTE, Accountant Member
IT Appeal No. 319 & 409 (RPR) of 2025
[Assessment years and 2016-17]
JUNE  19, 2026
Sunil Kumar Agrawal, CA for the Appellant. CH. Rajeswara Reddy, Sr. DR for the Respondent.
ORDER
1. These two appeals i.e. ITA No. 319/RPR/2025 and 409/RPR/2025 for assessment year 2016-17 were heard together for the sake of convenience and are being disposed off by this common order.
2. ITA No. 319/RPR/2025 for AY 2016-17 is the appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], (NFAC) for AY 2016-17 passed on 25.04.2025, emanating from assessment order under section 147 r.w.s. 144B of the Income Tax Act, 1961, (‘the Act’) for AY 2016-17 dated 26.05.2023.
2.1 Revenue has also filed appeal being ITA No. 409/RPR/2025 for AY 2016-17 against the order of the Commissioner of income Tax (Appeal) [CIT(A)] (NFAC) dated 25.04.2025 emanating from assessment order under section 147 r.w.s. 144B of the Income Tax Act, 1961, (‘the Act’) for AY 2016-17 dated 26.05.2023.
3. The grounds of appeal raised by the assessee are as under:
” Gr.No.1 “On the facts and circumstances of the case and in law, notice u/s148 dt.30-6-21 (under old regime) for AY16-17 is barred by limitation as it is uploaded on 1-7-21 (i.e., DIN generated by issuing intimation letter on 1-7-21) which is beyond the time allowed/extended up to 30-6-21 by applying Ashish Agarwal (SC) dL4-5-22; all further action thereafter, i.e., notice u/s148A(b) dt.23-5-22, order u/s148A(d) dt.15-7-22 & notice u/s148 dt.18-7-22 (under new regime) would also be invalid and therefore, assessment made u/s147 dt.26-5-23 would be invalid and is liable to be quashed.”
Gr.No.2 “On the facts and circumstances of the case and in law, approval granted u/s151 by Pr.CIT-1, Raipur dt.6-7-22 is invalid as he was not the specified authority to grant sanction u/s151(ii) for AY16-17 under new regime i.e., more than 3 years from the end of the relevant AY; in absence of a valid approval granted by the specified authority i.e., Pr.Chief CIT u/s151(ii), order u/s148A(d) dt.15-7-22 & notice u/s148 dt.18-7-22 under new regime would be invalid; and therefore, assessment made u/s147 dt.26-5-23 would also be invalid and is thus, liable to be quashed; relied on Rajeev Bansal (2024) (SC); Ashish Agarwal (2022) (SC); Surya Ferrous Alloys P Ltd (2024) (Mum-Trib).”
Gr.No.3 “On the facts and circumstances of the case and in law, Id CIT(A)/NFAC has erred in sustaining addition of Rs.3,80,00,000 as unexplained money u/s69A on account of cash receipt from Babylon Group; addition of Rs.3,80,00,000 is merely based on third party material/ statement of Mr.Atul Shivastav, AO has not brought any material evidence on record for the alleged cash receipt of Rs.3,80,00,000 from Babylon Gr.; without giving opportunity to cross examine the third party (Mr. Atul); in absence of this, addition made u/s69A as unexplained money is merely on presumption & surmises is invalid & unjustified and is liable to be deleted.”
Gr.No.4 “On the facts and circumstances of the case and in law, Id CIT(A)/NFAC has erred in not considering the issue of higher rate of tax u/s115BBE on the alleged unexplained money u/s69A on the basis of ledger account found at third party premises (Babylon Gr.); AO has not brought any material evidence on record for the alleged cash receipts; and therefore, application of sec115BBE is not sustainable in the eyes of law and is liable to be deleted.”
Gr.No.5 “The appellant craves leave, to add, urge, alter, modify or withdraw any grounds before or at the time of hearing.”
3.1 The Revenue has raised following grounds of appeal:
“1. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) was justified in reclassification of income of Rs.3,80,00,000/- as Capital Gain instead of unexplained money u/s 69A of the Act relying upon the submission of the assessee, without going into the merits of the case and thereby ignoring the facts brought on record by the AO.
2. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred while deciding the appeal in favour of the appellant, failed to allude to relevant facts on record, misread the evidence and its probative value thereby giving rise to perversity in the order of Ld. CIT(A), which itself gives rise to Question of Law as held in several case laws including in the case of Sudarshan Silk and Sarees 300 ITR 205 (SC)?
3. Any other ground which may be adducted at the time of hearing.”
4. We have heard both the parties and perused the records.
5. The Ld. AR invited our attention to the paper book at page Nos.11 to 37, specifically Page No. 35, which shows that the order under section 148A (d) of the Act for AY 2016-17 dated 15.07.2022 was approved by the Principal Commissioner of Income Tax-1, Raipur (‘PCIT-1, Raipur). Similarly, Ld. AR submitted that notice under section 148 dated 18.07.2022 for AY 2016-17 has been approved by PCIT-1, Raipur. Ld. AR submitted that as per section 151(ii) after the lapse of three years from the end of assessment year, approval of Principal Chief Commissioner of Income Tax (‘PCCIT’) is required. Ld. AR submitted that hence, the notice under section 148 is bad in law and consequential assessment order is also bad in law and liable to be set aside. Ld. AR relied on the decisions of the Hon’ble High Courts, which are filed in the paper book.
6. Ld. DR has not brought on record any contrary decision.
7. We have verified the order under section 148A(d) dated 15.07.2022 and the notice under section 148 dated 18.07.2022 which have been filed by the assessee in the paper book at page Nos. 11 to 37. It is observed that order under section 148A(d) of the Act for AY 2016-17 dated 15.07.2022 was approved by the PCIT-1, Raipur.
8. We have perused the Notices u/s 148 and noted that the same has been approved by PCIT-1 Raipur for AY 2017-18.
9. Hon’ble Bombay High Court in the case of Ramesh Bachulal Mehta v. ITO  (Bombay)/Writ Petition no.271 of 2023, for AY 2016-17, vide order dated 11th August, 2025, held as under :
“11. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of the Respondent No. 1 to issue a notice under Section 148 of the Act.
12. We are clearly of the view that the present matter stands covered by the decision of Hon’ble Supreme Court in the case of UPI v. Rajeev Bansal (supra). We accordingly hold that the order dated 13.07.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated 15.07.2022 are bad in law for being violative of the provisions of Section 151(ii) of the Act. Hence they are required to be quashed and set aside.
13. We, accordingly, set aside the impugned order dated 13.07.2022 passed under section 148A(d), the Notice issued under Section 148 and all other proceedings/orders emanating therefrom and allow the writ Petition in terms of Prayer Clause (a) of the petition.
14. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. No order as to costs”.
10. Hon’ble Madras High Court in the case of Core Logistic Company v. Asstt. CIT  (Madras) [05-06-2025 held as under for AY 2016-17:
“8 . At this juncture, it would be relevant to extract the provision of Section 151, which is as follows: “Specified authority for the purposes of Section 148 and Section 148A shall be: (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.”
9. A perusal of Section 151(i) would show that, the specified authority for the purpose of issuing notice under Section 148 within a period of three years from the end of the relevant assessment year is, the Principal Commissioner or Principal Director or Commissioner or Director. Further, in terms of provision of Section 149, three year time period is fixed for issuance of 148 notice, in the event of the amount is below 50 lakhs. In the present case, the amount involved is Rs.3,65,09,748/-, which is more than 50 lakhs. 148 notice was issued on 25.07.2022, which is beyond the period of three years. So admittedly, the approval has to be obtained from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General as defined under Section 151(ii). But, in the present case, the approval was obtained from the Principal Commissioner in terms of Section 151(i) and no approval was obtained before issuance of 148 notice in terms of provision of Section 151(ii), which is mandatory. Therefore, the notice under Section 148 was issued in the present case in violation of provision of Section 151(ii) of the Income Tax Act. In view thereof, the initiation of proceedings itself is without any jurisdiction. Hence, the same is liable to be quashed.
10. Accordingly, the impugned proceedings of the 3rd respondent dated 30.05.2023 is hereby quashed”.
11. Hon’ble Bombay High Court in the case of Alag Property Construction (P.) Ltd. v. ACIT [2026] 487 ITR 440 (Bombay) [08-09-2025] has held as under :
“9. In the present case, the period of three years from the end of the A.Y. 2017-18 fell for completion on 31st March 2021. As the expiry date fell during the time period of 20th March 2020 and 31st March 2021, under Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short “TOLA”), the authority specified under Section 151(i) of the new regime could have granted sanction only till 30th June 2021.
10. On perusal of the order dated 18.08.2022, passed under Section 148A(d) of the Act we find that the aforesaid order was passed after taking approval from Principal Commissioner of Income Tax (Respondent No.2). Since the aforesaid order was passed, as well as the notice under section 148 was issued, after the expiry of three years from the end of A.Y. 2017-18 as per the substituted provisions of re-assessment, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. Accordingly, we conclude that in the present case, the approval has been obtained from the authority specified under Section 151(i) of the new regime instead of the authority specified under Section 151(ii) of the new regime.
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(i) can accord sanction only upto 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(ii).
12. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of Respondent No.1 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.
15. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. No order as to costs.”
12. Hon’ble Telangana High Court in the case of Deloittee Consulting India (P.) Ltd. v. Assessment Unit, Income-tax Department, National Faceless Assessment Center, New Delhi 481 ITR 175 (Telangana) [25-09-2025] has held as under :
“49. In the present case, the order under Section 148A(d) and notice under Section 148 have been issued on07.04.2022 relatable to the relevant Assessment Year 2018-19 i.e., after more than three years from the end of the relevant assessment year. The approval before passing the order under Section 148A(d) of the Act and before issuing of notice under Section 148 of the Act has been taken from the Principal Commissioner of Income Tax by the respondent No.1, which is permissible only if three years or less than three years have lapsed from the end of the relevant assessment year. In the present case, the relevant three years lapsed on31.03.2022. Therefore, the prior approval of the Principal Chief Commissioner or Principal Director General or the Chief Commissioner or the Director General was required to be obtained before passing of the order under Section 148A(d) or before issuance of the notice under Section 148 of the Act.
50. Learned counsel for the respondent has relied upon the proviso to Section 151 of the Act inserted by the Finance Act, 2023 with effect from 01.04.2023 quoted above to contend that the period of seven days furnished to the assessee to submit reply to the notice under Section 148A(b) issued on 23.03.2022 has to be excluded for counting the period of three years. It is submitted that the proviso is clarificatory in nature and as such, it would operate from the date when the amended Section 151 was brought into force i.e., 01.04.2021. However, such a contention is fit to be rejected since the proviso to Section 151 has been inserted by the Finance Act, 2023 only with effect from 01.04.2023. It, therefore, cannot be applied retrospectively to exclude the period of seven days in furnishing the reply to the notice under Section 148A(b) of the Act by the assessee. The Assessing Officer could not have assumed exclusion of such a period while passing the order under Section 148A(d) of the Act or issuing notice under Section 148 of the Act on 07.04.2022 that such proviso excluding the period consumed in furnishing the reply is going to be brought into the statute book amended by the Finance Act, 2023 with effect from 01.04.2023. In taxing statutes, intendment cannot be assumed unless specifically expressed in the provision enacted by the legislature. Therefore, the reopening of assessment without sanction/approval of the specified authority in accordance with Section 151 of the Act was bad in law. Consequently, reassessment order dated 16.01.2024 also is bad in law.”.
13. ITAT Mumbai in the case of Arvindbhai Khatri Sons Designs (P.) Ltd. v. Asstt. CIT, Circle – 4(1)(1)  (Mumbai – Trib.) has held as under :
“6. We have heard the rival submissions and carefully considered the materials placed before us. We are of the considered view that once a notice u/s. 148 is sought to be issued after 31.03.2021, the provisions regarding reopening, including those relating to the ‘specified authority’ for approval come into force. Since first notice in this case was issued on 29.06.2021 and the order u/s. 148A(d) was passed on 29.07.2022, the limited issue for consideration is that since more than 3 years have elapsed from the end of the relevant assessment year i.e A.Y. 2017-18, whether the specified authority to grant sanction for issue of notice in this case is Pr. CIT or PCCIT/CCIT. In this regard, the relevant provisions of section 151 are as under:

“151. Sanction for issue of notice. Specified authority for the purposes of section 148 and section 148A shall be,– (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.]”

6.1 Thus, in view of the legal provisions, clearly the sanctioning authority in this case is the Pr. CCIT/CCIT and not the Pr. CIT as more than three years have elapsed from the end of the assessment year. Thus we hold that the notice u/s. 148 in this case was issued without the approval of the prescribed specified authority and hence deserves to be quashed on this ground alone.
6.2 Grant of sanction by the appropriate authority is a precondition for the Assessing Officer to assume jurisdiction under section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, noncompliance by the AO with the strict time limits prescribed under Section 151 affects their jurisdiction to issue a notice under section 148. Thus, the order dated 29.07.2022 passed u/s. 148A(d) and consequential notice u/s. 148 were violative of the provisions of section 151(ii) of the Act as sanction could only be accorded by the higher specified authority for notices issued beyond three years from the end of the relevant assessment year. Accordingly, we quash the notice issued u/s 148 of the Act as invalid and ab initio void. Thus, the ground no.1 of the assessee’s appeal is allowed.
7. Since we have quashed the reassessment notice, other grounds on merit are rendered academic and hence are not being adjudicated upon. 8. In the result, appeal of the assessee is allowed” Unquote
14. Similarly, on the identical facts that the notice under section 148 of the Act dated 27.07.2022 for AY 2016-17 approved by Principal Commissioner of Income Tax, the ITAT Raipur Bench in the case of ITO v. Varda Energy and Engineering (P.) Ltd. [2025]  (Raipur – Trib.)/ITA No. 10/RRPR/2024 for AY 2016-17, has quashed the assessment order.
15. Respectfully following the judicial precedents, the notice under section 148 of the Income Tax Act 1961 for AY 2016-17 dated 18.07.2022 is held as bad in law as it was approved by the Principal Commissioner of Income Tax-Raipur, whereas as per section 151(ii) approval of Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax was required. Therefore, order under section 147 for AY 2016-17 dated 26.05.2023 is held as void ab initio. Accordingly, Ground No. 2 raised by the assessee is allowed.
16. Since, we have allowed the legal ground of the assessee, all other grounds become academic in nature. In result, grounds No. 1, 3, 4, 5 raised by assessee are dismissed as unadjudicated.
17. In the result asesssess’s appeal-ITA No.319/RPR/2025 is partly allowed.
ITA 409/RPR/2025
18. Neither Ld. AR nor Ld. DR argued on the Revenue’s appeal as Ld. AR only argued the legal ground raised by assessee. Since, we have partly allowed assessee’s appeal in ITA No. 319/RPR/2025 for AY 2016-17, the Revenue’s appeal in ITA No. 409/RPR/2026 for AY 2016-17, become academic in nature and accordingly, dismissed unadjudicated.
19. In the result, the appeal of the Revenue is dismissed as unadjudicated.