DATTATRAY VITHOBA SAWANT,KALYAN V. INCOME TAX OFFICER, WD-42(2)(2), MUMBAI

ITA 6081/MUM/2025

AI Insights

The case involves Dattatray Vithoba Sawant, an employee of the Fire Department of the Municipal Corporation of Greater Mumbai, who appealed against the reassessment of his income for the assessment year 2017-18. The reassessment was initiated by a notice under section 148, which was later challenged on several grounds including the lack of proper authority and procedural lapses. The Tribunal examined the validity of the notice and the compliance with the statutory requirements under the new regime of section 148A introduced by the Finance Act, 2021. The Tribunal's decision emphasized the necessity of adhering to the procedural safeguards intended to protect taxpayers from arbitrary reassessments.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 835655 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 29-09-2025
• Other Referred Cases: UOI vs. Rajeev Bansal, Union of India vs. Ashish Agrawal
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LIMBASIYA KAVAN NARESHKUMAR
• Assessee Lawyers: SAIPRASAD GHOSH; AR
• Keywords: Set aside; Reassessment proceedings; Reopening of assessment; Competent authority
• Section: 148; 142(1); 133A; 80C; 10(14)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) I.T.A. No. 6081/Mum/2025 Assessment Year: 2017-18 Dattatray Vithoba Sawant D7/1103, Rounak City Sector-4, Khadakpada Kalyan (West) Maharashtra - 421301 [PAN: ACLPS7508Q] Vs. Income tax Officer, Ward- 42(2)(2) (Appellant) (Respondent) Assessee by Shri Saiprasad Ghosh, A/R Revenue by Shri Limbasiya Kavan Nareshkumar, Sr. DR. Date of Hearing 02.02.2026 Date of Pronouncement 13.02.2026 ORDER Per Smt. Beena Pillai, JM: The present appeal filed by the assessee arises out of the order dated 28/07/2025 passed by the NFAC, Delhi [hereinafter the “Ld.CIT(A)”] for A.Y. 2017-18, on the following grounds of appeal:- “The appellant prefers an appeal against an appeal order passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi dated 28/07/2025 on the following amongst other grounds each of which are without prejudice to any other:- 1.0 On facts and circumstances of the case and in law, Ld.CIT-(A) erred in confirming the validity of notice u/s.148 after elapse of 3 years, since had been issued without obtaining the approval from specified authority viz. Pr. CCIT prescribed u/s.151(ii), thereby violating the law settled by Hon'ble Apex Court in the case of UOI vs. Rajeev Bansal (167 taxmann.com 70); 2.0 On facts and circumstances of the case and in law, Ld.CIT-(A) erred in confirming the Order u/s 148A(d) and notice u/s 148 after elapse of 3 years, though alleged escapement of income is below the prescribed limit of Rs.50 lakhs, thereby violated the provision of sec 149(1) of the Act; Printed from counselvise.com 2 I.T.A. No. 6081/Mum/2025 3.0 On facts and circumstances of the case and in law, the order passed u/s 148A(d) and notice issued u/s.148 is bad-in-law, since had not been issued by Faceless Assessing Officer (FAO) and been issued by Jurisdictional Assessing Officer (JAO), on violating the provision of Sec. 151A of the Act; 4.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in passing the ex-parte order, without considering the bonafide reasons that had precluded the appellant to participate in the appeal; 5.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the disallowance of deduction u/s 80C of Rs.1,50,000/-; 6.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the disallowance of rent paid u/s 80GG of Rs.60,000/-; 7.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the disallowance of conveyance and other allowances of Rs.48,383/-; The appellant craves leave to add, amend, alter and/or withdraw any of the grounds of appeal at the time of hearing.” 2. The assessee is an individual employed in the Fire Department of the Municipal Corporation of Greater Mumbai and is deriving income primarily from salary and other sources. For the year under consideration, the assessee filed his return of income on 03/09/2017 declaring total income of ₹4,19,190 after claiming deduction under Chapter VI-A amounting to ₹2,10,000 and exemption of allowance u/s 10(14) of the Act. Subsequently, the assessment was reopened by issuance of notice u/s 148 dated 15/04/2021. Pursuant to the decision of the Hon’ble Supreme Court in Union of India vs. Ashish Agrawal, the Ld. AO issued a show cause notice u/s 148A(b) on 25/05/2022 based on information received from a survey action u/s 133A conducted at the premises of a tax practitioner, wherein certain material allegedly indicated suppression or misreporting of income. Thereafter, an order u/s 148A(d) was passed on 06/07/2022 after obtaining approval from the competent authority and notice u/s Printed from counselvise.com 3 I.T.A. No. 6081/Mum/2025 148 was issued directing the assessee to file a return. During reassessment proceedings, the Ld. AO issued notices u/s 142(1) calling for details to verify the claims made by the assessee and subsequently issued a show cause notice proposing disallowance of deduction claimed under Chapter VI-A and addition of exemption claimed u/s 10(14). The assessee, citing personal and compelling circumstances, could not effectively participate in the reassessment proceedings. The Ld. AO thereafter completed the reassessment by disallowing deduction under Chapter VI-A amounting to ₹2,10,000 and making an addition of ₹48,383 in respect of exemption claimed u/s 10(14), determining the assessed total income at ₹6,77,573. 3. Aggrieved by the order of the Ld.AO, the assessee carried the matter in appeal before the Ld.CIT(A), who, in the absence of effective representation by the assessee, passed an ex parte order upholding the reassessment proceedings. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before the Tribunal. 4. The Ld. AR submitted that, the assessee raised legal issue vide Ground Nos. 1, 2 & 3 challenging the validity of the notice issued u/s 148 of the Act under the new regime for reopening of the assessment. He submitted that original notice u/s 148 issued under the old regime was dated 15/04/2021 to reopen the assessment. Thereafter, the said notice was treated as a deemed notice as per the decision of the Hon’ble Supreme Court in Union of India vs. Ashish Agrawal reported in [2022] 444 ITR 1. The Revenue Printed from counselvise.com 4 I.T.A. No. 6081/Mum/2025 after following the procedure as per the new regime u/s 148A issued notice u/s 148 of the Act on 06/07/2022, which was approved by the Principal Commissioner of Income Tax–17, Mumbai, wherein the reasons recorded states that income chargeable to tax amounting to Rs.2,58,383/- had escaped assessment for the year under consideration. The Ld.AR submitted that the notice issued under section 148A(b) and the order passed u/s 148A(d) of the Act are beyond three years and that the income escaping assessment is observed to be Rs.2,58,383/-. 4.1. The Ld. AR submitted that in present facts, the appropriate authority who has to approve the issuance of notice u/s 148 of the new regime, as per section 151 of the Act, would be the Principal Chief Commissioner of Income Tax or the Chief Commissioner of Income Tax. The Ld. AR placed reliance on the decision of the Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal, reported in [2024] 469 ITR 46, wherein it has been held that the sanctioning authority has to be in accordance with the provisions of section 151 of the Act, based on the new provisions u/s 148A of the Act. 4.2. On the contrary, the Ld. DR relied on the orders passed by the authorities below. I have perused the submissions advanced by both sides in the light of the records placed before this Tribunal. 5. The limited issue that has been raised by the assessee is to examine whether the notice issued u/s 148 of the Act under the Printed from counselvise.com 5 I.T.A. No. 6081/Mum/2025 new regime dated 06/07/2022, based on the order passed u/s 148A(d) passed on the even date, is after obtaining approval of the appropriate authority, in accordance with the provisions of section 151 of the Act. 5.1. The Ld. AR relied on the following observations from the decision of the Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal (supra): “iii. Sanction of the specified authority 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 assessees from harassment resulting from the mechanical reopening of assessments Sri krishna (P.) Ltd. v. ITO [1996] 87 Taxman 315/221 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 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 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 Printed from counselvise.com 6 I.T.A. No. 6081/Mum/2025 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 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 Printed from counselvise.com 7 I.T.A. No. 6081/Mum/2025 (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 relevant 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 20th March 2020 to 31st 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 20th March 2020 and 31st March 2021, then the specified authority under section 151(i) has an extended time till 30th 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 20th March 2020 and 31st March 2021, then the specified authority under section 151(2) has time till 31st March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31st March 2021 because the new regime comes into effect on 1st April 2021. 78. For example, the three year time limit for assessment year 2017-2018 falls for completion on 31st March 2021. It falls during the time period of 20th March 2020 and 31st 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 30th June 2021. Printed from counselvise.com 8 I.T.A. No. 6081/Mum/2025 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 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 High Court Bar Association v. State of UP [2024] 160 taxmann.com 32/299 Taxman 21 (SC)/[2024] 6 SCC 267. 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 Printed from counselvise.com 9 I.T.A. No. 6081/Mum/2025 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.” 5.1.1. On a bare reading of the above extract from the decision, it is noted that under the new provisions of Section 148A introduced by the Finance Act, 2021, the Ld. AO is required to obtain prior approval or sanction of the specified authority at four stages, namely:- a. Section 148(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. 5.2. Thus, the Ld. AO was required to obtain prior approval of the specified authority u/s 151 of the Act under the new regime before passing an order under section 148A(d) and issuing a notice u/s 148 of the Act. Printed from counselvise.com 10 I.T.A. No. 6081/Mum/2025 5.3. It is noted that in the new regime, if the income escaping assessment is more than ₹50,00,000/-, a reassessment notice can be issued after the expiry of three years from the end of the relevant assessment year only after obtaining prior approval of the Principal Chief Commissioner or the Principal Director General or the Chief Commissioner or the Director General. It is also noted that if the income escaping assessment is less than ₹50,00,000/-, no reassessment notice can be issued after the expiry of three years, as per section 151(1)(b) of the Act. 5.3.1. In the present facts and circumstances of the case, the income alleged to have escaped assessment is ₹2,58,383/- and the notice issued under the new regime is beyond the period of three years. Accordingly, as per section 151(1)(b) of the Act, the notice issued on 06/07/2022 is bad in law. 5.4. Even otherwise, the appropriate authority who could sanction the said notice, issued beyond a period of three years, should have been the Principal Chief Commissioner or the Principal Director General or the Chief Commissioner or the Director General. In the present facts of the case, the said notice has been approved by the Principal Commissioner, which again does not satisfy the condition prescribed under section 151(ii)(b) of the Act. 6. This Tribunal is, thus, of the opinion that non-compliance with the provisions of section 151 renders the notice issued under section 148 of the Act dated 06/07/2022 to be bad in law and, hence, the same deserves to be quashed and set aside. As a Printed from counselvise.com 11 I.T.A. No. 6081/Mum/2025 consequence, the reassessment proceedings initiated thereafter also become bad in law. Accordingly, Ground Nos. 1, 2 & 3 stand allowed. As the assessment proceedings stand quashed, the issues raised by the assessee on merits become academic at this stage. In the result, the appeal filed by the assessee stands allowed. Order pronounced in the open court on 13/02/2026 Sd/- (BEENA PILLAI) Judicial Member Mumbai Dated: 13/02/2026 SC Sr. P.S. Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "