AJAY DUGGAL,NEW DELHI V. INCOME TAX OFFICER 72(1), NEW DELHI

ITA 5612/DEL/2024

AI Insights

The case involves Ajay Duggal, the appellant, contesting the validity of a reassessment notice issued by the Income Tax Officer for the assessment year 2016-17. The primary legal contention was the improper issuance of the notice under section 148 of the Income Tax Act, 1961, without the necessary approval from the appropriate authority as mandated by section 151(2) of the Act. The Tribunal admitted the additional ground raised by the assessee regarding the legal validity of the notice and found that the notice was issued without the requisite higher-level approval, rendering it bad in law and void ab initio.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713370 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2016-2017
• Other Referred Cases: National Thermal Power Company Ltd. vs. CIT, Union of India vs. Rajiv Bansal, Manish Financial vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR ARORA
• Assessee Lawyers: MAYUR MAKADIA; SERVING UPON THEM A SHOW
• Keywords: Reassessment proceedings; Reopening of assessment; Principle of natural justice; Procedural lapse
• Section: 147; 148; 144; 143(3)

Judgement Text

"ITA No.5612/Del/2024 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI M BALAGANESH, ACCOUNTANT MEMBER आ.अ.सं/.I.T.A No.5612/Del/2024 िनधा रणवष /Assessment Year: 2016-17 AJAY DUGGAL C-138, Vivek Vihar, Anand Vihar, S.O., East Delhi. PAN No.AGLPD6006C बनाम Vs. INCOME TAX OFFICER, Ward-72(1), Aayakar Bhawan, Delhi. अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent Assessee by Shri Mayur Makadia, CA Revenue by Shri Ajay Kumar Arora, Sr. DR सुनवाईक\bतारीख/ Date of hearing: 05.06.2025 उ\u000eोषणाक\bतारीख/Pronouncement on 30.07.2025 आदेश /O R D E R PER C.N. PRASAD, J.M. This appeal is filed by the Assessee against the order of the Ld. CIT (Appeals), NFAC dated 21.10.2024 for the AY 2016-17. The assessee has raised the following grounds in his appeal: 1. “Invalid Reopening of Assessment The CIT(A) erred in upholding reopening u/s 147 without valid service of notice u/s 148, contrary to law and judicial precedents. Printed from counselvise.com ITA No.5612/Del/2024 2 2. Proceedings Against a Deceased Person The CIT(A) failed to appreciate that proceedings against a deceased individual are legally unsustainable. 3. Procedural Lapses The reasons for reopening were not communicated to the appellant, violating natural justice principles. 4. Unjustified Additions Addition of Rs.1,25,38,424 as undisclosed expenditure was incorrect, as the credit card transactions pertain to corporate expenses incurred on behalf of Trade Wings Limited. 5. Mischaracterization of Expenses The CIT(A) failed to consider that credit card expenses were reimbursed by Trade Wings Limited and related to business transactions. 6. Denial of Opportunity The CIT(A) dismissed the appeal without sufficient opportunity to present evidence and rebut AO’s findings. 7. The appellant reserves his right to add, amend alter or delete any of the grounds of appeal.” 2. The assessee also filed the following additional ground: “On the facts and circumstances of the case and in law, the notice issued u/s 148 of the Income Tax Act, 1961 dated 11.7.2022 is bad in law and void ab initio inasmuch as it has been issued after obtaining approval of the Principal Commissioner of Income Tax, whereas, as per the provisions of amended Section 151(ii) of the Act, it should have been issued after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner of Income-tax, the reassessment having been initiated after expiry of three years from the end of the relevant assessment years.” Printed from counselvise.com ITA No.5612/Del/2024 3 3. Ld. Counsel for the assessee, at the outset, submits that the additional ground raised by the assessee is purely a legal ground and going to the root of the validity of reassessment proceedings and for adjudication of this ground no further verification or evidences required and since it is jurisdictional in nature the same be admitted for adjudication. Ld. Counsel placed reliance on the decision of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. vs. CIT [229 ITR 383]. 4. Heard rival contentions. The additional ground raised by the assessee is purely a legal ground and challenged the very validity of notice issued u/s 148 of the Act and the consequential assessment made u/s 143(3) r.w.s. 147 of the Act and therefore the same is admitted following the decision of the Hon’ble Apex Court in the case of NTPC Ltd. vs. CIT (supra). 5. Coming to the merits of this additional ground the Ld. Counsel submits that the notice u/s 148 of the Act for the Ay 2016-17 was issued on 25.07.2022 by obtaining prior approval of the Pr. CIT-15, Delhi. Ld. Counsel submitted that as per the provisions of section 151(2) of the Act where a notice was issued u/s 148 of the Act beyond the period of more than 3 years from the end of the relevant assessment year, sanction for issue of such notice shall be obtained Printed from counselvise.com ITA No.5612/Del/2024 4 from the Pr. Chief Commissioner or Chief Commissioner of Income Tax. However, in the case of the assessee sanction was issued by the Pr. CIT-15, Delhi for reopening of the assessment for the AY 2016-17 and the notice u/s 148 was issued on 25.07.2022 which is much beyond the period of three years from the end of the relevant assessment year and therefore the notice issued u/s 148 of the Act is bad in law and consequently the assessment made u/s 143(3) r.w.s.147 of the Act pursuant to the said notice is also bad in law and void ab initio. Ld. Counsel for the assessee placed reliance on the decision of the Hon’ble Supreme Court in the case of Union of India vs. Rajiv Bansal and the decision of the coordinate bench in the case of Manish Financial vs. ACIT in CO No.230/Mum/2024 in ITA 5050/Mum/2024 dated 02.12.2024 for the AY 2016-17. 6. Ld. DR supported the orders of the authorities below. 7. Heard rival contentions, perused the case laws relied on. Admittedly in this case a notice u/s 148 of the Act was issued on 25.07.2022 after obtaining the prior approval from Pr. CIT-15, Delhi for reopening of assessment for the AY 2016-17. As per the provisions of section 151(2) for reopening an assessment by issue of a notice u/s 148 of the Act beyond a period of 3 years from the end of the relevant assessment year approval has to be obtained from the Printed from counselvise.com ITA No.5612/Del/2024 5 Pr. Chief Commissioner or Chief Commissioner of Income Tax. But whereas in the case of the assessee approval was obtained from Pr. CIT making the notice issued u/s 148 of the Act dated 25.07.2022 as bad in law. 8. We observed that the Hon’ble Supreme Court in the case of Rajiv Bansal (supra) decided the time limits of getting an approval from the appropriate authority u/s 151 of the Act before issue of notice u/s 148 to the cases where the Revenue has invoked the provisions of section 148 of the Act pursuant to the directions of the Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal. The observations of the Hon’ble Supreme Court are 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. A table representing the prescription under the old and new regime is set out below: Regime Time limits Specified authority Section 151(2) of the old regime Before expiry of four years from the end of the relevant assessment year Joint Commissioner Section 151(1) of the old regime After expiry of four years from the end of the relevant assessment year Principal Chief Commissioner or Chief Commissioner or Principal Commissioner Printed from counselvise.com ITA No.5612/Del/2024 6 or Commissioner 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 Commissioner 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 Section 151. 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 April 2021, 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 Printed from counselvise.com ITA No.5612/Del/2024 7 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. 76. 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 \"elevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under Section 151 affects their jurisdiction to issue a notice under Section 148. 77. Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre- conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will accordingly extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has an extended Printed from counselvise.com ITA No.5612/Del/2024 8 time till 30 June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021. 78. For example, the three year time limit for assessment year 2017-2018falls for completion on 31 March 2021. It falls during the time period of 20 March 2020 and 31 March 2021, contemplated under Section 3(1) of TOLA. Resultantly, the authority specified under Section 151(i) of the new regime can grant sanction till 30 June 2021. 79. Under Finance Act 2021, the Assessing Officer was required to obtain prior approval or sanction of the specified authorities at four stages: a. Section 148A(a) to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment; b. Section 148A(b) - to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under Section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022; c. Section 148A(d) - to pass an order deciding whether or not it is a fit case for issuing a notice under Section 148; and d. Section 148-to issue a reassessment notice. 80. In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before Printed from counselvise.com ITA No.5612/Del/2024 9 various High Courts \"shall be deemed to have been issued under Section 148-A of the Income Tax Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b).\" Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under Section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under Section 151 for Section 148A(b). It is well established that this. Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law. 130 81. This Court in Ashish Agarwal (supra) directed the assessing officers to \"pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned.\" Further, it directed the assessing officers to issue a notice under Section 148 of the new regime \"after following the procedure as required under Section 148- A.\" Although this Court waived off the requirement of obtaining prior approval under Section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under Section 148A(d) or issuing a notice under Section 148. These notices ought to have been issued following the time limits specified under Section 151 of the new regime read with TOLA, where applicable.” 9. We further find that the Mumbai Bench of the Tribunal in the case of Manish Financials vs. ACIT (supra) considering the decision of the Hon’ble Supreme Court in the case of Rajiv Bansal (supra) held Printed from counselvise.com ITA No.5612/Del/2024 10 that notice dated 29.07.2022 issued u/s 148 of the Act with the prior approval of Pr. CIT for reopening an assessment for the AY 2016-17 beyond a period of three years from the end of the relevant assessment year is bad in law. While holding so the Tribunal observed as under: - “14. We heard the parties and perused the material on record. In assessee's case for AY 2016-17 pursuant to the directions of the Hon'ble Supreme Court in the case of Ashish Agrawal, the AO passed an order under section 148(d) of the Act and issued a notice under section 148 on 30.07.2022. From the above observations of the Hon'ble Supreme Court it is clean that the though the prior approval under section 148A(b) and 148(d) were waived in terms of the decision of Ashish Agarwal (supra), for issue of notice under section 148A(a) and under section 148 on or after 1 April 2021, the prior approval should be obtained from the appropriate authorities specified under Section 151 of the new regime. The provisions of section 151 of the Act under the new regime read as under: Sanction for issue of notice. 151. 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. Printed from counselvise.com ITA No.5612/Del/2024 11 15. In assessee's case from the perusal of para 3 of the notice issued under section 148 for AY 2016-17 we notice that the same is issued with the prior approval of Pr.CIT-19 Mumbai accorded on 29.07.2022 vide reference No. Pr. CIT- 19/148/2022-23 and this fact is not contravened by the Id DR. For AY 2016-17, the period of three years have elapsed as of 31.03.2020 and the notice is issued beyond three years on 30.07.2022. Therefore as per the decision of the Hon'ble Supreme Court, the approval should have been obtained under the amended provisions of section 151 (ii) of the Act i.e. the approval should have been obtained from the Principal Chief Commissioner whereas the approval has been obtained from Pr.CIT as stated in the notice under section 148 itself. Therefore we see merit in the contention of the assessee that the notice under section 148 for AY 2016-17 is issued without obtaining the prior approval from the appropriate authority. Accordingly we hold that the notice under section 148 is invalid and the consequent assessment under section 147 is liable to be quashed.” 10. In the case before us the Assessing Officer while issuing notice u/s 148 dated 25.07.2022 for reopening of an assessment for the AY 2016-17 obtained prior approval from Pr. CIT instead of Pr. Chief Commissioner/Chief Commissioner of Income Tax under the provisions of section 151(2) of the Act and therefore we hold that the notice issued u/s 148 for reopening an assessment for AY 2016-17 is bad in law and consequently the assessment made u/s 144 r.w.s. 147 of the Act pursuant to such notice is bad in law and void ab initio. Hence, the same is hereby quashed. Printed from counselvise.com ITA No.5612/Del/2024 12 11. Since we have quashed the reassessment on legal issue allowing the additional ground, all other grounds raised by the assessee in the appeal are not adjudicated as they are of only academic at this stage. 12. In the result, appeal of the assessee is partly allowed as indicated above. Order pronounced in the open court on 30.07.2025 Sd/- Sd/- (M BALAGANESH) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30.07.2025 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "