ITAT Pune Sets Aside Reassessment for Want of Proper Section 151 Approval

Background and Appeal Context

The dispute in Soft Zone Vs DCIT (ITAT Pune) concerns the reassessment framed for AY 2017-18 under the Income Tax Act 1961. The assessee approached the Income Tax Appellate Tribunal, Pune, challenging the order of the Commissioner of Income Tax (Appeals) [NFAC], dated 16.01.2025, passed under Section 250.

The primary challenge was not on the merits of the addition but on the very validity of the reassessment proceedings, specifically:

  • The legality of sanction obtained under Section 151
  • The validity of notice issued under Section 148
  • The consequential reassessment order passed under Section 147 read with Section 144B

Additionally, the assessee had also questioned:

  • An addition of ₹ 1,08,71,550 treated as unexplained cash credit under Section 68 on account of cash deposits during the demonetisation period, and
  • The application of Section 115BBE for taxing such addition at a higher rate.

However, the Tribunal ultimately decided the matter solely on the legal issue of improper sanction under Section 151, rendering the other issues academic.

Grounds Raised in the Appeal

The assessee assailed the reassessment on multiple grounds, which, in essence, comprised:

  1. Invalidity of reopening:

    • The assessee contended that the reopening under Section 148 and the resultant reassessment order dated 17.05.2023 under Section 147 r.w.s. 144B were void in law.
    • It was argued that the sanction under Section 151 for issuing the notice under Section 148 was obtained from an authority lacking jurisdiction over the case.
    • On this basis, the assessee sought quashing of the sanction, the notice under Section 148, and the reassessment order.

  2. Error in appellate finding on sanction:

    • The assessee asserted that the Commissioner (Appeals) erred in holding that the sanction under Section 151 for issuing notice under Section 148 was in accordance with law.

  3. Non-compliance with faceless scheme:

    • It was urged that the notice under Section 148 had been issued by the jurisdictional Assessing Officer in breach of Section 151A and the e-assessment scheme 2022, which mandated issuance of notice by a faceless Assessing Officer in a faceless manner.

  4. Merits of addition under Section 68:

    • The assessee disputed the confirmation of addition of ₹ 1,08,71,550 as unexplained cash credit u/s 68 representing cash deposits during the demonetisation period in an ICICI Bank account, seeking deletion of the entire addition.

  5. Applicability of Section 115BBE:

    • The assessee challenged the invocation of Section 115BBE to subject the above addition to a higher rate of tax and prayed that such action be vacated.

  6. General ground:

    • A residuary ground was kept open to amend, modify, or delete any of the grounds.

Despite the multiple grounds, both sides confined their arguments before the Tribunal to the single legal ground concerning the competence of the sanctioning authority under Section 151.

Assessee’s Submissions on Section 151 Sanction

The Authorised Representative for the assessee placed on record the notice issued under Section 148 dated 15.07.2022 for AY 2017-18 (paper book pages 41–42). Key submissions were:

  • The notice under Section 148 dated 15.07.2022 was issued with approval granted by the Principal Commissioner of Income Tax-3, Pune (Pr. CIT-3) on 14.07.2022.
  • For AY 2017-18, more than three years from the end of the relevant assessment year had already expired when the notice under Section 148 and the order under Section 148A(d) were issued.
  • Under the then-prevailing Section 151, where more than three years had elapsed from the end of the relevant assessment year, the specified authority empowered to grant sanction was the Principal Chief Commissioner of Income Tax (Pr. CCIT) or Chief Commissioner of Income Tax (CCIT), and not the Principal Commissioner.
  • It was also emphasized that the order under Section 148A(d) dated 15.07.2022 was similarly approved by Pr. CIT-3, Pune instead of the legally mandated Pr. CCIT/CCIT.

On this foundation, the assessee argued that: