ITAT Mumbai sets aside reassessment for lack of valid Section 151(ii) approval

1. Background and procedural journey

The Mumbai Bench of the Income Tax Appellate Tribunal adjudicated the appeal of Joana Diago Dsouza Vs ITO (ITAT Mumbai) in ITA No. 8471/Mum/2025 concerning Assessment Year 2017-18, arising from a reassessment completed under Section 143(3) read with Section 147 and Section 144B of the Income Tax Act 1961. The Tribunal’s order was pronounced on 18/05/2026.

The litigation originated from information received by the Department from the DIT (Investigation & Criminal Intelligence), Mumbai, alleging that the assessee had acquired an immovable property for a price lower than the value adopted by the Stamp Valuation Authority. On that basis, the assessment was reopened and an addition was made under Section 56(2)(vii)(b) (later challenged as Section 56(2)(x) in grounds of appeal).

The assessee had originally not filed a return of income for AY 2017-18. Following the new reassessment procedure, an order under Section 148A(d) was passed and thereafter a notice under Section 148 was issued on 26.07.2022. In response, the assessee furnished a return declaring income of Rs. 3,48,550.

During the reassessment, the Assessing Officer (AO) noted that:

  • The assessee had jointly purchased a flat with her granddaughter.
  • The stated consideration for the flat was Rs. 1,29,10,500.
  • The corresponding stamp duty valuation was Rs. 1,42,90,000.

Considering the difference between the stated consideration and stamp duty value, the AO invoked Section 56(2)(vii)(b) and taxed Rs. 6,89,750 as the assessee’s 50% share of the differential amount. The reassessment order dated 13.04.2023 determined total income at Rs. 10,38,300 as against the returned income of Rs. 3,48,550.

The assessee filed an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, who passed an ex parte order under Section 250 on 17.10.2025, upholding:

  • The reopening under Section 147,
  • The addition of Rs. 6,89,750 under Section 56(2)(vii)(b), and
  • The initiation of penalty under Section 270A.

Aggrieved, the assessee approached the ITAT Mumbai.

2. Grounds raised before the Tribunal

Before the Tribunal, the assessee raised multiple grounds, broadly falling into two categories:

The core jurisdictional objections included:

  • Time-barred notice: The notice dated 26.07.2022 under Section 148 was issued for AY 2017-18, i.e., beyond three years from the end of the relevant assessment year, thereby triggering the regime of Section 151(ii).
  • Improper sanctioning authority: Prior approval for the order under Section 148A(d) and for issuance of notice under Section 148 was obtained from PCIT-20, Mumbai, whereas the assessee contended that under Section 151(ii), sanction of the PCCIT (or equivalent specified authority) was mandatory when more than three years had elapsed.
  • Additional assertions were also made regarding DIN, absence of opportunity of hearing, and other procedural aspects, but the central legal plank was the non-compliance with Section 151(ii).

The assessee’s prayer included a request to:

  1. Treat the reopening as null and void and quash it.
  2. Delete the addition made under Section 56(2)(x) / Section 56(2)(vii)(b).
  3. Correctly determine the purchase value for the property transaction.
  4. Delete interest charged under Section 234A, Section 234B, Section 234C, Section 234D and cancel initiation of penalty under Section 270A.

2.2 Merits of the addition under Section 56(2)(vii)(b) / Section 56(2)(x)

On the substantive tax issue, the assessee contested:

  • Relevant date for stamp duty valuation: It was argued that the AO incorrectly took the stamp duty value as on 11.08.2016 (agreement date), whereas, as per the assessee, the appropriate date should have been 23.06.2015, being the date of first payment as per the allotment letter.
  • Quantum of purchase consideration: The AO considered only Rs. 1,29,10,500 as the purchase consideration. The assessee claimed that the true consideration for the flat, including allied charges, was **Rs.