Reassessment notice u/s 148 beyond three years from A.Y. end requires sanction from Principal Chief Commissioner u/s 151(ii); approval from Principal Commissioner renders it invalid, making proceedings void ab initio.

ORDER 

PER PRABHASH SHANKAR [A.M.] :-

The present appeal arising from the appellate order dated 10.01.2025 is filed by the Revenue against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 147 r.w.s. 144B of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 23.05.2023 for the Assessment Year [A.Y.] 2017-18.

2. The grounds of appeal are as under:-

1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding the notice u/s 148 of the Act as invalid and the assessment proceedings u/s 147 of the Act as void-ab-initio in this case without appreciating the fact that the order passed u/s 148A(d) and notice u/s 148 of the I.T. Act issued on 23.07.2022 were within the due time limit considering the “surviving period” as held by the Hon'ble Supreme Court in the case of Union of India &Ors. Vs Rajiv Bansal in civil appeal No. 8629 of 2024 dated 03.10.2024?

2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the specified authority to grant sanction to issue order u/s 148A(d) and notice u/s 148 of the Act in the present case would be Pr.CCIT/CCIT and not the PCIT, without appreciating the said “surviving period”?

3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the impugned notice was issued by the AO without obtaining prior approval of the specified authority as statutorily required in section 151 of the Act and the AO lacked jurisdiction to issue a notice u/s 148 of the Act, without appreciating the fact that prior approval of the PCIT-20, Mumbai was duly obtained as required under the provisions of section 151 of the Act?

4. Brief facts of the case are that the assessee is a Firm and has filed return for AY 2017-18 on 11.10.2017 declaring total income of Nil and the same was processed u/s 143(1) of the Act. Later, certain information was received by the AO from the Investigation wing of the Department whereby it was noticed that that the assessee was one of the beneficiaries of the bogus loan entries provided by one Aneri Fincap Ltd. which had no business activities and did not have the capacity of credit worthiness to advance the unsecured loans to the assessee. Accordingly, the assessment order was passed u/s 147 r.w. section 144B of the Act by making addition of Rs 3.50 cr. u/s 68 of the Act and also by making further addition of Rs 4,76,712/- on account of disallowance of interest.

4.1 The assessee preferred appeal before the ld.CIT(A) contesting the additions made above. Besides, it challenged the validity of the reopening u/s 147 of the Act and the reassessment order on legal ground. The appellate authority has dealt with the issue at length. Relevant paras are reproduced for ready reference and better understanding of the main issue involved:

“6.2 In additional Ground No. 1 and 2, the appellant has raised technical ground challenging the validity of reopening of the assessment. Therefore, before adjudicating Grounds on merit, it is prudent to adjudicate additional ground of appeal regarding validity of the assessment as this is the root cause before deciding the appeal on merits.

6.2.1 In additional Ground No.1 of the appeal, the appellant has challenged the validity of notice u/s 148 and contested the validity of reopening of the assessment u/s. 147 of the Act on the ground of lack of requisite prior approval of the appropriate specified authority i.e Pr.CCIT u/s. 151(ii) of the Act .

6.2.2 In the present case, AO initially issued a notice u/s 148 on 29.