Section 148 Income Tax Act | Reassessment Notice Invalid Beyond 3 Years Without Pr. CCIT Approval Under Section 151(ii) : ITAT Delhi

The Delhi Bench of the Income Tax Appellate Tribunal has delivered a significant ruling affirming that reassessment notices issued under Section 148 of the Income Tax Act, beyond the three-year window, are void ab initio if the requisite approval is not obtained from the Principal Chief Commissioner as mandated by Section 151(ii). This decision reinforces procedural rigour in tax reassessments and aligns with the Supreme Court’s jurisprudence on jurisdictional compliance.

Background & Facts

The Dispute

The appellant, Colvin Care Pvt. Ltd., was subjected to a reassessment for Assessment Year 2016-17 under Section 147 of the Income Tax Act, 1961, following the issuance of a notice under Section 148 on 29.07.2022. The reassessment was initiated on the ground that income of Rs. 78,78,470 had escaped assessment, primarily through cash credit entries under Section 68 read with Section 115BBE. The appellant challenged the validity of the notice and consequent assessment on multiple grounds, including jurisdictional defects in the approval process.

Key Facts

• The original assessment for AY 2016-17 was completed under Section 143(3) on 15.03.2018.
• A prior notice under Section 148 was issued on 22.04.2021, which was later deemed a notice under Section 148A(b) pursuant to the Supreme Court’s judgment in Union of India v. Ashish Aggarwal (04.05.2022).
• The Assessing Officer issued a notice under Section 148A(b) on 23.05.2022.
• An order under Section 148A(d) was passed on 29.07.2022, followed by the issuance of the reassessment notice under Section 148 on the same date.
• The approval for the Section 148A(d) order and the Section 148 notice was granted by the Principal Commissioner of Income Tax (Pr. CIT), Rohtak.
• The relevant assessment year ended on 31.03.2017. The three-year period for issuing a reassessment notice expired on 31.03.2020. The notice was issued on 29.07.2022, which is beyond the three-year limit.
• The amount of income escaping assessment was Rs. 78,78,470, which exceeds Rs. 50 lakhs, triggering the higher approval threshold under Section 151(ii).
• The appellant submitted that the approval should have been obtained from the Principal Chief Commissioner (Pr. CCIT), not the Pr. CIT.

Procedural History

• 15.03.2018: Original assessment completed under Section 143(3).
• 22.04.2021: First notice under Section 148 issued.
• 04.05.2022: Supreme Court judgment in Ashish Aggarwal issued, directing that all pending Section 148 notices be treated as Section 148A(b) notices.
• 23.05.2022: Notice under Section 148A(b) issued.
• 29.07.2022: Order under Section 148A(d) passed and notice under Section 148 issued, approved by Pr. CIT, Rohtak.
• 30.05.2023: Reassessment order passed under Section 147 r.w.s. 144B, adding Rs. 78,78,470 as income.
• 13.08.2025: Order of National Faceless Appeal Centre / Ld. CIT(A) upholding the reassessment.
• 01.04.2026: Hearing before ITAT Delhi.
• 08.04.2026: Judgment pronounced.

The Parties' Positions

For the Appellant

The appellant contended that:

• The notice under Section 148 was issued after the expiry of three years from the end of AY 2016-17 (i.e., after 31.03.2020), thereby mandating approval under Section 151(ii) by the Principal Chief Commissioner.
• The approval was obtained from the Pr. CIT, which is the authority under Section 151(i), applicable only for notices issued within three years.
• This non-compliance rendered the notice void ab initio, as jurisdictional compliance is mandatory and not merely procedural.
• The decision in Ashish Aggarwal did not waive the requirement for approval under Section 148A(d) or Section 148, only under Section 148A(a) and 148A(b).
• The Tribunal’s own coordinate bench in Anurag Pandey and the Mumbai Tribunal in Manish Financials, as well as the Madras High Court in Core Logistic Company, had uniformly held that approval under Section 151(ii) is mandatory beyond three years.

For the Respondent

The Revenue relied on the lower authorities’ orders and argued that:

• The original notice under Section 148 was issued under the old regime and was validly approved.
• The subsequent proceedings under Section 148A(d) and Section 148 were merely continuations and did not require fresh compliance with the new regime.
• The Supreme Court’s direction in Ashish Aggarwal was intended to provide relief to taxpayers and should not be interpreted to invalidate notices on technical grounds.

Relief Sought

The appellant sought:

• Quashing of the notice under Section 148 dated 29.07.2022.
• Setting aside of the reassessment order dated 30.05.2023.
• Cancellation of the addition of Rs. 78,78,470 under Section 68 r.w.s. 115BBE.
• Costs of litigation.

The Legal Issue

The central question was whether the issuance of a notice under Section 148 of the Income Tax Act, beyond three years from the end of the relevant assessment year, requires prior approval from the Principal Chief Commissioner under Section 151(ii), and whether failure to obtain such approval renders the notice void ab initio.

Arguments Presented

For the Appellant

The appellant relied on the Supreme Court’s judgments in Union of India v. Ashish Aggarwal and Rajeev Bansal, which held that while the requirement for prior approval under Section 148A(a) and 148A(b) was waived for notices issued before 1.4.2021, the requirement under Section 148A(d) and Section 148 remained intact. The appellant emphasized that Section 151(ii) is not a procedural formality but a jurisdictional precondition. The Tribunal’s coordinate bench in Anurag Pandey and the Mumbai Tribunal in Manish Financials had held that approval by the Pr. CCIT is mandatory for notices issued beyond three years. The Madras High Court in Core Logistic Company similarly held that non-compliance with Section 151(ii) vitiates the notice. The appellant argued that the approval by the Pr. CIT was legally incompetent and the notice was thus without jurisdiction.

For the Respondent

The Revenue contended that the original notice under Section 148 was validly issued under the old regime and that the subsequent proceedings under Section 148A(d) were merely procedural continuations. It argued that the Supreme Court’s direction in Ashish Aggarwal was meant to prevent hardship to taxpayers and should not be used to invalidate notices on technical grounds. It further submitted that the approval by the Pr. CIT was sufficient as the notice was issued under the transitional provisions.

The Court's Analysis

The Tribunal undertook a detailed analysis of the statutory framework under Sections 148, 148A, and 151, as amended by the Finance Act, 2021. It noted that the Supreme Court in Ashish Aggarwal had explicitly held that while the requirement for prior approval under Section 148A(a) and 148A(b) was waived for notices issued before 1.4.2021, the requirement for approval under Section 148A(d) and Section 148 remained unaffected. The Court emphasized that Section 151 is not a mere procedural provision but a jurisdictional one, linking the authority to grant approval to the time elapsed since the end of the assessment year.

"Grant of sanction by the appropriate authority is a pre-condition for the assessing officer to assume jurisdiction u/s 148 to issue a reassessment notice... 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, non-compliance by the Assessing Officer with the strict time limit prescribed u/s 151 affects their jurisdiction to issue a notice u/s 148."

The Tribunal observed that the notice under Section 148 was issued on 29.07.2022, more than three years after the end of AY 2016-17 (31.03.2017). The amount of income escaping assessment (Rs. 78,78,470) exceeded Rs. 50 lakhs, thereby triggering Section 151(ii). The approval was obtained from the Pr. CIT, who is the authority under Section 151(i), not the Pr. CCIT as required under Section 151(ii). The Tribunal held that this was a jurisdictional defect, not a mere irregularity. It further noted that the Revenue failed to distinguish the facts of the present case from those in Anurag Pandey, Manish Financials, and Core Logistic Company, all of which had held such notices void.

The Tribunal rejected the Revenue’s argument that the prior notice under the old regime validated the new proceedings. It held that the new regime under Section 148A and Section 151 applied to all reassessment proceedings initiated after 1.4.2021, regardless of the origin of the notice. The failure to obtain approval from the correct authority rendered the notice invalid ab initio, and consequently, the reassessment order under Section 147 could not survive.

The Verdict

The appellant succeeded. The Tribunal quashed the notice under Section 148 dated 29.07.2022 and set aside the reassessment order dated 30.05.2023. The addition of Rs. 78,78,470 under Section 68 r.w.s. 115BBE was cancelled. The Tribunal held that the notice was void ab initio due to non-compliance with Section 151(ii), and the consequent assessment was legally unsustainable. The appeal was partly allowed. The issue of the addition on merits was left open as academic.

What This Means For Similar Cases

Jurisdictional Compliance Is Non-Negotiable

• Practitioners must verify the date of the end of the relevant assessment year and calculate the three-year window strictly.
• If the notice is issued after three years, the approval must be from the Principal Chief Commissioner, Principal Director General, Chief Commissioner, or Director General - never from a lower authority.
• Any reliance on approvals granted under Section 151(i) for notices issued beyond three years will be legally untenable.

Transitional Notices Are Not Exempt

• Notices issued under the old regime before 1.4.2021, but acted upon after that date, must comply with the new regime’s approval requirements under Section 151(ii).
• The Ashish Aggarwal judgment does not exempt reassessments from Section 151 compliance - it only waives prior approval for Section 148A(a) and (b), not for (d) or Section 148.

Procedural Defects Can Invalidate Entire Assessments

• A defective notice under Section 148 renders the entire reassessment order void, regardless of the merits of the addition.
• Taxpayers must raise jurisdictional objections at the earliest opportunity, as they cannot be waived by acquiescence.
• Practitioners should routinely check the approving authority’s designation in the notice and cross-reference it with the date of issuance and the amount involved.