Invalid Sanction Under Section 151 Vitiates Reassessment: ITAT Mumbai Quashes Section 148 Notice for AY 2016-17
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently delivered a crucial ruling regarding the jurisdictional validity of reassessment proceedings initiated under the Income Tax Act 1961. In the matter of Ramdeo Dhanraj Bharadia Vs ITO, the Tribunal invalidated the reassessment action for the Assessment Year (AY) 2016-17, emphasizing that obtaining approval from the correct specified authority under Section 151 is a mandatory jurisdictional prerequisite, not a mere procedural formality.
Because the statutory notices were issued after the lapse of three years from the end of the relevant assessment year, the Tribunal determined that the sanction ought to have been granted by the Principal Chief Commissioner of Income-tax (Pr. CCIT) under Section 151(ii), rather than the Principal Commissioner of Income-tax (PCIT).
Factual Matrix of the Dispute
The assessee had originally filed the return of income for AY 2016-17, declaring a total income of Rs. 13,98,120/-. Subsequently, the Assessing Officer (AO) received information indicating that the assessee had engaged in transactions amounting to Rs. 6,76,76,150/-. These transactions were executed with two specific entities: M/s Monarch Trading (Proprietor Pravin Dayallal Shah) and M/s Monalisa Trading Co. (Proprietor Jagdish Naik).
The revenue authorities alleged that these entities were not conducting genuine business operations but were instead operating as accommodation entry providers. Based on these allegations, the AO initiated reassessment proceedings. A notice under Section 148 of the Income Tax Act 1961 was issued to the assessee on 31.07.2022.
Following the statutory procedures, the assessee submitted the return of income in response to the notice. The AO then issued further notices under Section 143(2) and Section 142(1). Ultimately, the AO concluded the assessment by making a substantial addition of Rs. 6,76,76,150/- to the assessee's income, invoking the provisions of Section 69A read with Section 115BBE of the Income Tax Act 1961.