ITAT Mumbai Quashes Reassessment Order — Approval Under Section 151 Obtained from Wrong Authority

Background and Overview

The Income Tax Appellate Tribunal (ITAT), Mumbai, in the case of Narendra Khimji Savla Vs ITO, delivered a significant ruling concerning the validity of reassessment proceedings initiated under the Income-tax Act, 1961. The case pertained to Assessment Year (AY) 2017-18, and the appeal was directed against the order passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) dated 16.10.2025.

The reassessment in question had been framed under Section 147 read with Section 144 and Section 144B of the Income-tax Act, 1961. The assessee mounted a multi-pronged challenge against the reassessment proceedings, raising objections both on legal grounds and on the merits of the additions made by the Assessing Officer. Ultimately, the Tribunal's decision turned on a singular but decisive jurisdictional issue — whether the sanctioning authority who approved the issuance of the notice under Section 148 was the authority legally prescribed under Section 151 of the Act.

Grounds of Appeal Raised by the Assessee

The assessee placed before the Tribunal a comprehensive set of grounds, encompassing both procedural infirmities and substantive disputes:

  1. The initiation of reassessment proceedings under Section 148 was bad in law and liable to be quashed.
  2. The notice under Section 148 was issued without securing approval from the appropriate authority as mandated by Section 151 of the Income-tax Act, 1961.
  3. The notice under Section 148 failed to carry the Document Identification Number (DIN), in violation of CBDT Circular No. 19 of 2019 dated 14.08.2019.
  4. The reassessment proceedings for AY 2017-18 were barred by limitation under Section 149(1)(b) of the Income-tax Act, 1961.
  5. The assessment order was passed in breach of natural justice, as no opportunity for cross-examination was provided to the assessee.
  6. The Assessing Officer passed the assessment order without issuing the mandatory notice under Section 143(2) of the Income-tax Act, 1961.
  7. An addition of Rs. 35,00,000/- on account of an alleged cash borrowing was made without furnishing the material relied upon by the Assessing Officer.
  8. Without prejudice to the above, the borrowing of a loan does not fall within the definition of income and therefore could not be added to the total income of the assessee.
  9. The assessment order was framed against PAN No. DQGPS6936E — a PAN for which the assessee had already filed a cancellation application — instead of the regularly used PAN No. AHEPS9345P.
  10. The Assessing Officer failed to grant credit for taxes paid under PAN No. AHEPS9345P, particularly when the income assessed under that PAN was included in the reassessment proceedings.
  11. The assessment order and the additions therein were made without citing any provision of the Income-tax Act, 1961, rendering the assessment legally unsustainable.
  12. Interest was incorrectly charged under Section 234A and Section 234B of the Income-tax Act, 1961.
  13. Penalty proceedings were erroneously initiated under Section 271AAC of the Income-tax Act, 1961.

The Assessee's Submission