The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has quashed reassessment proceedings against a charitable trust after finding that the Income Tax Department obtained approval from an authority not empowered to sanction the reopening under Section 151(ii) of the Income Tax Act, 1961.
The bench of Challa Nagendra Prasad (Judicial Member) and Prabhash Shankar (Accountant Member) has observed that because the assessment was reopened more than three years after the end of the relevant assessment year, approval was required from the Principal Chief Commissioner of Income Tax or another higher authority specified under Section 151(ii). Approval granted by the Principal Commissioner of Income Tax was insufficient to confer jurisdiction on the Assessing Officer.
The dispute arose after the Assessing Officer issued a notice under Section 148 on April 6, 2022, seeking to reopen the trust’s assessment for Assessment Year 2018-19.
The reassessment ultimately resulted in the addition of ₹41.30 lakh to the trust’s taxable income by treating certain expenses as non-genuine. The order was passed under Section 143(3), read with Section 147 of the Income Tax Act.
The Commissioner of Income Tax (Appeals)-53, Mumbai, upheld the reassessment and the corresponding addition by an order dated January 21, 2026. The trust thereafter approached the ITAT.
In its original grounds, the trust challenged the validity of the reopening, the alleged denial of an opportunity to cross-examine the persons whose material was relied upon and the addition of ₹41.30 lakh towards allegedly non-genuine expenses.
During the appellate proceedings, the trust raised an additional legal ground questioning the competence of the authority that had approved the reopening.
The assessee argued that the additional ground concerned the very jurisdiction of the Assessing Officer to issue the reassessment notice. Since the question was purely legal and went to the root of the proceedings, the Tribunal admitted it for adjudication.
The trust submitted that the notice under Section 148 was issued on April 6, 2022, which was beyond three years from the end of Assessment Year 2018-19. Therefore, the sanction had to be obtained from the higher authority prescribed under Section 151(ii).
However, the reassessment records showed that the approval had been granted by the Principal Commissioner of Income Tax (Central)-3, Mumbai. According to the assessee, the competent authority in such a case was the Principal Chief Commissioner of Income Tax and not the Principal Commissioner.
It was accordingly contended that the notice was issued without the mandatory approval of the “specified authority.” The jurisdictional defect, the trust argued, invalidated both the Section 148 notice and the reassessment order founded upon it.
Examining the statutory scheme, the Tribunal noted that Section 151 distinguishes between reassessment notices issued within three years and those issued after more than three years from the end of the relevant assessment year.
Where three years or less have elapsed, approval may be granted by the Principal Commissioner, Principal Director, Commissioner or Director under Section 151(i). Where more than three years have elapsed, Section 151(ii) requires approval from the Principal Chief Commissioner, Principal Director General, Chief Commissioner or Director General.
The Tribunal found it undisputed that the assessment for Assessment Year 2018-19 was reopened beyond the three-year period. Nevertheless, approval was taken from the Principal Commissioner of Income Tax, an authority covered by Section 151(i), instead of the higher authority specified under Section 151(ii).
The Bench relied substantially on the Bombay High Court’s judgment in Alag Property Construction (P.) Ltd. v. ACIT. In that case, the High Court held that an order under Section 148A(d) and a consequential notice under Section 148 issued after three years were invalid when approval was obtained from the Principal Commissioner rather than the authority specified under Section 151(ii).
The High Court had, in turn, relied upon the Supreme Court’s decision in Union of India v. Rajeev Bansal, which explained that the specified authority is directly linked to the date on which the reassessment notice is issued.
The Supreme Court had observed that Section 151 functions as a procedural safeguard against the mechanical reopening of assessments. It requires the Revenue to secure approval from a higher-level authority where the proposed reopening is undertaken after the prescribed period.
The Supreme Court further clarified that obtaining sanction from the appropriate authority is a precondition for an Assessing Officer to assume jurisdiction under Section 148. Failure to comply with this requirement affects the Assessing Officer’s jurisdiction to issue the reassessment notice.
Applying these principles, the ITAT observed that approval under Section 151 is not an empty procedural formality. The hierarchy prescribed by Parliament must be strictly followed, and sanction from an authority lower than the one statutorily designated cannot validate the reopening.
The Tribunal also referred to the Supreme Court’s decision in ITO v. Mangla Gupta, where the Revenue’s special leave petition against the Delhi High Court ruling in Twylight Infrastructure (P.) Ltd. v. ITO was dismissed.
The Delhi High Court had quashed a reassessment notice issued after three years because approval was obtained from the Principal Commissioner under Section 151(i), instead of the authority specified under Section 151(ii).
The Mumbai Bench found that the Bombay High Court’s ruling squarely covered the charitable trust’s case.
The Tribunal ultimately held that approval for reopening Jobanputra Charitable Trust’s assessment was granted beyond three years by the Principal Commissioner of Income Tax and not by the Principal Chief Commissioner or another competent higher authority mandated under Section 151(ii).
Consequently, the notice issued under Section 148 was held to be legally invalid. Since the Assessing Officer could not validly assume jurisdiction on the strength of that notice, the entire reassessment was declared void from its inception.
The Bench quashed the reassessment order passed under Section 147, read with Section 143(3), for Assessment Year 2018-19 and allowed the trust’s appeal.
As the proceedings themselves were invalidated on the jurisdictional ground, the Tribunal did not find it necessary to separately adjudicate the merits of the ₹41.30 lakh addition or the trust’s other objections concerning cross-examination and the genuineness of the expenses.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
