ITAT Pune Quashes Reassessment for AY 2017-18 Due to Invalid Approval under Section 151(ii)

Background of the Dispute

The Pune Bench of the Income Tax Appellate Tribunal dealt with an appeal in the case of Somnath Kannure Vs ITO concerning the legality of reassessment proceedings initiated for Assessment Year 2017–18. The core controversy centered on whether the reassessment proceedings triggered through Section 148 and Section 148A(d) were valid when the statutory approval was not obtained from the authority mandated under Section 151(ii) of the Income Tax Act 1961.

The assessee, an individual proprietor conducting a grocery (kirana) business under the name Veerbhadreshwar Kirana Stores for around two decades, had furnished the original return of income on 07/11/2017. The case was later reopened through:

  • Notice under Section 148 dated 28/07/2022, and
  • Order under Section 148A(d) of the same date,

both of which carried the approval of the Principal Commissioner of Income Tax-4, Pune.

The assessee challenged the entire reassessment on two principal grounds:

  1. Jurisdictional defect: Absence of approval from the correct “specified authority” as mandated under Section 151(ii) because the notice was issued after three years from the end of the relevant assessment year.
  2. Merits of addition: The addition of cash deposits of ₹10,09,700 treated as unexplained, despite being claimed as part of regular business turnover of ₹93,71,000.

Statutory Framework: Section 148, Section 148A and Section 151

Reassessment Scheme under Section 148 and Section 148A

Under the amended reassessment regime:

  • Section 148 empowers the Assessing Officer (AO) to issue a notice for income escaping assessment.
  • Section 148A lays down a pre-notice procedure, requiring:
    1. Providing information to the assessee,
    2. Allowing an opportunity of being heard,
    3. Passing a speaking order under Section 148A(d) before issuance of notice under Section 148.

However, both Section 148 and Section 148A are subject to the pre-condition of obtaining sanction from the “specified authority” as defined in Section 151.

Role of Section 151: Specified Authority and Time Threshold

Section 151 divides the sanctioning authority into two tiers based on the time elapsed from the end of the relevant assessment year:

  • Section 151(i) – where three years or less have passed:

    • Approval must be from:
      • Principal Commissioner or Principal Director, or
      • Commissioner or Director.

  • Section 151(ii) – where more than three years have passed:

    • Approval must be from:
      • Principal Chief Commissioner or Principal Director General, or
      • Chief Commissioner or Director General.

This scheme clearly elevates the level of sanctioning authority for “old” years where more than three years have elapsed, making the requirement jurisdictional, not procedural.

In the case at hand, since the reassessment notice for AY 2017–18 was issued on 28/07/2022, the Tribunal was required to determine whether the matter fell under Section 151(i) or Section 151(ii) and whether the approval obtained from the Principal Commissioner was legally sustainable.

Facts Considered by the Tribunal

Original Return and Business Profile

  • The assessee, a proprietor of a kirana shop operating for around twenty years in a rural/semi-rural setting, filed his return of income for AY 2017–18 on 07/11/2017.
  • The declared turnover from grocery business was ₹93,71,000.

Reassessment Proceedings

  1. Notice under Section 148:

    • Dated 28/07/2022.
    • Pertained to AY 2017–18.
    • Issued after the end of three years from the close of the relevant assessment year.

  2. Order under Section 148A(d):

    • Also dated 28/07/2022.
    • Both the notice and the order carried the sanction of the Principal Commissioner of Income Tax-4, Pune.

  3. The AO proceeded to reopen the assessment under Section 147 and framed an order dated 17/03/2023, making addition on account of alleged unexplained cash deposits of ₹10,09,700.

  4. The assessee’s appeal before the Commissioner of Income Tax (Appeals) under Section 250 was dismissed by order dated 27/10/2025, leading to the further appeal before ITAT Pune.

Assessee’s Contentions

On Jurisdiction and Approval under Section 151

The learned authorised representative (AR) argued that: