VASANTHI RAGUNATHAN,SALEM V. ITO, WARD-1(2), SALEM

ITA 2896/CHNY/2025

AI Insights

The case revolves around an appeal by Vasanthi Ragunathan against the order of the Learned Commissioner of Income Tax (Appeals), Delhi, which had dismissed her earlier appeal. The primary contention in the appeal was the validity of the notice issued under section 148 of the Income Tax Act, 1961, for reopening the assessment for the Assessment Year 2018-19. The notice was challenged on the grounds that it was issued beyond the three-year period from the end of the relevant assessment year without the requisite approval from the PCCIT, as mandated by section 151 of the Act. The Tribunal examined the procedural compliance in issuing the notice and found it lacking, leading to the quashing of the reassessment order.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848655 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Chennai
• Assessment Year: 2018-2019
• Appeal Filed On: 22-10-2025
• Other Referred Cases: Meganapuram Primary Agricultural Cooperative Credit Society vs PCIT, Giriraj Commercial (P.) Ltd. v. Union of India, Core Logistic Company v. Assistant Commissioner of Income-tax, Vodafone Idea Limited Vs DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANITHA
• Keywords: Set aside; Invalid notice; Period of limitation; Competent authority
• Section: 147; 148; 263

Judgement Text

"आयकर अपीलीय अिधकरण, ’सी’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी एस. आर. रघुनाथा, लेखा सद क े सम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2896/Chny/2025 िनधा\u000eरण वष\u000e/Assessment Year: 2018-19 Vasanthi Ragunathan, Plot No.156, Door No.24/40, Gr. Naga Selva Vinayagar Kovil Street, Seelanaickenpatti, Salem-636 201. [PAN: AAYPR 3824 M] v. The ITO, Ward-1(2), Salem. (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : None \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Mrs.Anitha, Addl.CIT सुनवाईक\u001aतारीख/Date of Hearing : 05.02.2026 घोषणाक\u001aतारीख /Date of Pronouncement : 25.03.2026 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal), (hereinafter referred to as ‘Ld.CIT(A)‘), Delhi, dated 12.09.2025 for the Assessment Year (hereinafter referred to as ‘AY’) 2018-19. 2. The assessee is an individual and didn’t file the return of income (RoI) for A.Y 2018-19, despite the assessee has time-deposit other than interest on securities of ₹20 lakhs and that she had sold immovable Printed from counselvise.com ITA No.2896/Chny/2025 (AY 2018-19) Vasanthi Ragunathan :: 2 :: property at ₹1.80 Crs. Based on this facts/information, the A.O issued notice u/s. 148A(b) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) proposing to reopen; and subsequently the AO passed an order u/s.148A(d) of the Act on 13.04.2022 and issued notice u/s. 148 of the Act on the same date, conveying his desire to reopen the assessment for AY 2018-19. Pursuant to which, assessee filed RoI on 25.01.2024 declaring ₹3,32,650/-. The AO completed the assessment u/s. 147 of the Act assessing the income of the assessee total income at Rs.56,71,398/-. Aggrieved, the assessee filed further appeal before the CIT(A), who dismissed the appeal. The assessee is in appeal before this Tribunal against the order of the Ld CIT(A). 3. The Ld. Authorized Representative (AR) of the assessee submitted that through ground No.3, the assessee is challenging the validity of notice u/s. 148 of the Act issued after expiry of three years with the approval of Principle Commissioner of Income Tax (PCIT), instead of Principle Chief Commissioner of Income Tax (PCCIT). The Ld. AR further submitted that if the said ground is adjudicated in favour of the assessee, the other grounds on legal as well as on merits would become academic. Accordingly, we will first proceed to consider the said legal contention. 4. In this regard, the Ld. AR submitted that the notice under section 148 is dated 13.04.2022, which event is undisputedly beyond the period Printed from counselvise.com ITA No.2896/Chny/2025 (AY 2018-19) Vasanthi Ragunathan :: 3 :: of 3 years from the end of the relevant AY; and therefore as per the provisions of Section 151 of the Act, the AO should have obtained the approval from Principle Chief Commissioner of Income Tax (PCCIT), instead, in the present case the AO has obtained approval from Principle Commissioner of Income Tax (PCIT), Coimbatore, while issuing notice under section 148 and therefore the notice is invalid. For such a proposition, he relied on the decision of this Tribunal in the case of Meganapuram Primary Agricultural cooperative Credit Society vs PCIT (ITA No.895/Chny/2025 dated 19.09.2025 wherein similar issue cropped up, and the Tribunal allowed the ibid legal issue in favor of assessee, by holding as under;- “40. We find that the Show Cause Notice u/s.148A(b) of the Act came to be issued on 23.03.2022 in proposing to issue notice u/s.148 of the Act and as a consequence proposing to assumption of jurisdiction in terms of Section 147 of the Act. The assessee had filed its response to the said notice on 29.03.2022 and the AO had issued a letter dated 04.04.2022 in seeking further details in support of the submissions of the assessee and ultimately the order u/s.148A(d) of the Act came to be passed on 19.04.2022 by the AO, wherein the AO deemed it fit to issue notice u/s.148 of the Act. Thus, the notice u/s.148 of the Act came to be issued on 19.04.2022 for the A.Y. 2018-19. 41. The provisions of Section 151 defines the sanctioning authority and the relevant provisions as it stood at that point in time reads as under: “151. Specified authority for the purposes of section 148 and section 148A 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.]” From a plain reading of the above provisions, the competent authority to grant / accord sanction in terms of Section 151 of the Act is determined based on the date of issuing of sanction and in the event of issuing the sanction beyond the period of three years from the end of the relevant Printed from counselvise.com ITA No.2896/Chny/2025 (AY 2018-19) Vasanthi Ragunathan :: 4 :: assessment year, the same would be covered by clause (ii) to Section 151 of the Act. 42. If the notice u/s.148 of the Act / order u/s.148A(d) of the Act is issued / passed within 3 years from the end of the relevant assessment year, the competent authority for the purpose of granting sanction in terms of Section 151 of the Act is either Principal Commissioner or Principal Director or Commissioner or Director, as the case may be. 43. On the other hand, if the same is issued / passed after the expiry of the 3 years from the end of the relevant A.Y., the competent authority in this regard should be Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General. 44. Now, let us examine the facts of the present case by keeping in mind the above legal position. The Show Cause Notice in terms of Section 148A(b) of the Act came to issue on 23.03.2022 after obtaining prior approval from the office of the PCIT, Madurai – 1 and thereafter the order in terms of Section 148A(d) of the Act came to be passed on 19.04.2022 along with the notice u/s.148 of the Act being issued on the same day, i.e. 19.04.2022. We find that both the order passed u/s.148A(d) of the Act as well as the notice u/s.148 of the Act dated 19.04.2022 was issued after getting approval from the office of the PCIT, Madurai – 1. The assessment year under consideration being A.Y.2018-19, the notice u/s.148 of the Act / order passed u/s.148A(d) of the Act being issued / passed on 19.04.2022, it can be said that same were passed / issued after the expiry of 3 years from the end of the A.Y under consideration. 45. Hence, it can be said that the notice u/s.148 of the Act was issued / order in terms of Section 148A(d) of the Act was passed without obtaining proper sanction from the competent authority as prescribed in terms of Section 151(1)(ii) of the Act. 46. It is pertinent to note that the proviso to Section 151 of the Act contemplates exclusion of time provided to the tax payer to response to Show Cause Notice u/s.148A(b) of the Act to the date of actual passing of the order u/s.148A(d) of the Act / notice u/s.148 of the Act, which proviso reads as follows: “Provided that the period of three years for the purposes of clause (i) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of section 149.” 47. However, we find that the proviso to Section 151 of the Act was only introduced by way of Finance Act, 2023, with effect from 01.04.2023, i.e. the said amendment was introduced only after the sanction was granted on the present case / not available at the time of recording of sanction in terms of Section 151 of the Act in the case of the appellant herein. 48. The Ld. AR took us through the Finance Bill, 2023, wherein clause 71, proposing the said amendment to Section 151 as well the notes of clauses to Finance Bill, 2023, wherein relevant note to the said amendment reads as follows: Clause 71 of the Bill seeks to amend the section 151 of the Income-tax Act relating to sanction for issue of notice. It is proposed to amend clause (ii) of the said section to provide that the specified authority for the purposes of section 148 and section 148A shall be the Principal Chief Commissioner or Principal Director General or Chief Printed from counselvise.com ITA No.2896/Chny/2025 (AY 2018-19) Vasanthi Ragunathan :: 5 :: Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year. It is further proposed to insert a proviso in the said section so as to provide that the period of three years for the purposes of clause (i) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub- section (1) of section 149. These amendments will take effect from 1st April, 2023. 49. Thus, it is an irrefutable fact that the amendment brought in by Finance Act, 2023 in introducing the proviso to Section 151 of the Act by giving effect to the exclusion of time limit by operation of 3rd to 5th proviso to Section 149(1) of the Act would take effect only from 01.04.2023. 50. Hence, it can be said that the said amendment would not come to the rescue of the revenue on the facts of the present case in view of the fact that the notice u/s.148 as well the order u/s.148A(d) of the Act being issued / passed well prior to the introduction of the said amendment, i.e. on 19.04.2022. 51. Before us, the Ld.DR argued that the said amendment introduced by Finance Act, 2023 ought to be reckoned as clarificatory and would have retrospective applicability, thereby validating the sanction accorded by the PCIT, Madurai – 1 on the facts of the present case. He further relied on the judgment of the Hon’ble Calcutta High Court in the case of Giriraj Commercial (P.) Ltd. v. Union of India reported in 169 taxmann.com 168 in support of his contentions. 52. This argument of the ld.DR is unable to be countenanced by us for the simple reason that the said amendment was introduced specifically with effect from 01.04.2023 and the plain reading of the notes on clauses as well as the memorandum to Finance Act, 2023 leave no room whatsoever to interpret it otherwise. Moreover, we are not inclined to accept the argument of the Department since the AO could not have foreseen such an amendment while passing the order u/s.148A(d) of the Act / issuing the notice u/s.148 of the Act nor the PCIT, Madurai – 1 could have foreseen such amendment while according sanction in terms of Section 151 of the Act. 53. Hence for the reasons discussed above, we hold that the amendment to Section 151 of the Act, introduced by Finance Act, 2023, with effect from 01.04.2023 cannot be reckoned to have retrospective applicability and on this ground we reject the argument put forth by the ld.DR. 54. It was further argued by the ld.DR, that the approval granted by the competent authority, i.e. PCIT, Madurai – 1 to the AO for issuing the notice u/s.148A(b) of the Act vide approval dated 23.03.2022 as mandated by 1st proviso to Section 148 of the Act would suffice the requirement as per the Section 151 of the Act and as such there was no requirement for the AO to obtain approval / sanction once again by the competent authority for issuing the notice u/s.148 of the Act / passing of the order u/s.148A(d) of the Act. 55. We find that the 1st proviso to Section 148 of the Act as per Finance Act, 2021 reads as follows: “Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.” Printed from counselvise.com ITA No.2896/Chny/2025 (AY 2018-19) Vasanthi Ragunathan :: 6 :: Thus, on the facts of the present case, the Show Cause Notice u/s.148A(b) of the Act was issued upon the assessee herein only upon prior approval of the competent authority, PCIT, Madurai – 1. But whether this sanction would also be available / extended to the issuance of notice u/s.148 of the Act / passing of the order u/s.148A(d) of the Act by the AO by reckoning it was a fit case for issuance of such notice u/s.148 of the Act ? 56. We are unable to further accept this argument of the ld.DR, because if it were to be accepted, it would result in a scenario wherein the competent authority was according sanction / approval in terms of Section 151 of the Act for issuing notice u/s.148 of the Act even prior to reply of the assessee to the Show Cause Notice u/s.148A(b) of the Act and even prior the decision of the AO in reckoning whether it was a fit case or not for issuing notice u/s.148 of the Act. 57. Furthermore, if the said argument were to be accepted, then the very purpose behind introduction of provisions in Section 148A of the Act by way of Finance Act, 2021 to grant an opportunity to the tax payer to demonstrate his case for dropping the proceedings before issuing notice u/s.148 of the Act would stand defeated. 58. Thus, on the facts of the present case, we find that although the sanction was granted to the AO for issuing the Show Cause Notice u/s.148A(b) of the Act, a separate sanction is to be granted for the purpose of issuance notice u/s.148 of the Act as well as the passing of the order u/s.148A(d) of the Act, in the event of the AO finding it fit to do so. Hence, we reject this argument of the ld.DR also. 59. We further find that the Hon’ble Madras High Court in the case of Core Logistic Company v. Assistant Commissioner of Income-tax, reported in 175 taxmann.com 453, had proceeded to quash the reassessment order passed in terms of Section 147 of the Act on account of grant of sanction by the improper authority. The Hon’ble Madras High Court while quashing the said re-assessment order had held as follows: “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.” 60. Thus, respectfully following the decision of the Madras High Court in the case of Core Logistic Company (supra) we hold that the sanction accorded by the authorities prescribed u/s.151(i) of the Act on the facts of the case, i.e. PCIT, Madurai – 1 for the notice issued u/s.148 of the Act dated 19.04.2022 and the order u/s.148A(d) of the Act after the expiry of 3 years from the end of the relevant assessment year as against the correct sanction to have been granted by the authorities prescribed u/s.151(ii) of the Act would vitiate the entire re- assessment proceedings initiated and completed in terms of Section 147 of the Act. The PCIT by assuming revisionary jurisdiction in terms of Section 263 of the Act could not have set aside a non-est re-assessment order and further could not have directed the AO to pass a fresh assessment order.” Printed from counselvise.com ITA No.2896/Chny/2025 (AY 2018-19) Vasanthi Ragunathan :: 7 :: 5. The Ld. DR on the other hand pointed out that the AO initiated the proceedings by issue of notice u/s. 148A(b) within 3 years and therefore the AO has rightly obtained the approval from PCIT. The Ld DR in this regard placed reliance on the decision of the Hon'ble Calcutta High Court in the case of Girija Commercial (P) Ltd vs UOI 2024 169 taxmann.com 168 (Calcutta). 6. We heard the parties and perused the material on record. In respect of the legal issue raised by assessee assailing that statutory notice issued by AO u/s 148 as bad in law for non-sanction by competent authority as prescribed u/s 151 of the Act, we note that the notice under section 148 is dated 13.04.2022, which event is undisputedly beyond the period of 3 years from the end of the relevant AY; and therefore as per the provisions of Section 151 of the Act, the AO should have obtained the approval from Principle Chief Commissioner of Income Tax (PCCIT) before issuing the ibid notice. However, in the present case the AO has obtained approval from Principle Commissioner of Income Tax (PCIT), Coimbatore, while issuing notice under section 148 and therefore the notice is found to be in defiance to prescription given in section 151 of the Act and hence it is invalid in eyes of law. We further notice that that the contentions raised by the Revenue against the ibid legal issue, has been addressed by the Tribunal while passing the order in the case of Meganapuram Primary Agricultural cooperative Credit Society (supra), wherein the Tribunal Printed from counselvise.com ITA No.2896/Chny/2025 (AY 2018-19) Vasanthi Ragunathan :: 8 :: inter-alia has held that as per scheme of section 148A, separate sanction from competent authority is to be obtained by AO u/s.151 of the Act while issuing notices u/s 148A, which is sine qua non requirement of law at different stages envisaged u/s 148A of the Act. The Tribunal is noted to have further held that if the argument of the Ld DR is to be accepted it would defeat purpose of introduction of section 148A of the Act whereby the assessee is granted an opportunity to demonstrate his case for dropping the proceedings before issuing notice u/s.148 of the Act. In this regard, we notice that the Hon'ble Bombay High Court in the case of M/s. Vodafone Idea Limited Vs DCIT (WP No. 2768 of 2022 dated 06.02.2024) has considered identical issue wherein it was held that even in cases where the notice u/s. 148A(b) was issued before completion of 3 years, if the notice u/s. 148 is issued beyond 3 years the approval needs to be obtained from PCCIT as per Section 151(ii) of the Act. 7. Applying the ratio held by the Hon'ble Bombay High Court in the case of M/s. Vodafone Idea Limited (supra), in assessee's case, it is noted that impugned notice u/s. 148 has been issued on 13.04.2022, which is an event undisputedly beyond 3 years from the end of the relevant AY, and find that the approval has been obtained from PCIT, Coimbatore-1. The relevant extract of the notice u/s. 148 is as under: Printed from counselvise.com ITA No.2896/Chny/2025 (AY 2018-19) Vasanthi Ragunathan :: 9 :: 8. From the perusal of this relevant fact, we are of the view that AO ought to have obtained Approval from Principle Chief Commissioner of Income Tax (PCCIT) before issuing the ibid notice as per Section 151(ii) Printed from counselvise.com ITA No.2896/Chny/2025 (AY 2018-19) Vasanthi Ragunathan :: 10 :: of the Act. Accordingly, respectfully following the ratio of judicial precedence cited supra, we hold that the re-opening notice issued by the AO u/s.148 for AY 2018-19 beyond 3 years on 13.04.2022 with the approval of PCIT instead of PCCIT as per the provisions of section 151(ii) is not valid. Consequently, the assessment completed on 07.03.2014 stemming from the invalid notice dated 13.04.2022 deserves to be quashed, and we order accordingly. 9. Since we have allowed the appeal considering the legal issue raised by the assessee supra, other grounds have become academic, so not examined. 10. In result, appeal of the assessee is allowed. Order pronounced on the 25th day of March, 2026, in Chennai. Sd/- (एस. आर. रघुनाथा) (S.R.RAGHUNATHA) लेखा सद\u0003य/ACCOUNTANT MEMBER Sd/- (एबी टी. वक ) (ABY T. VARKEY) \u0005याियक सद\u0003य/JUDICIAL MEMBER चे ई/Chennai, !दनांक/Dated: 25th March, 2026. TLN आदेश क\u001a \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ /Appellant 2. \u000e\u000fथ /Respondent 3. आयकरआयु\u0015/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u000eितिनिध/DR 5. गाड फाईल/GF Printed from counselvise.com TUMMALACHARLA LAKSHMI NARAYANA Digitally signed by TUMMALACHARLA LAKSHMI NARAYANA Date: 2026.03.25 15:05:36 +05'30' "