Jurisdictional Defect in Reassessment: ITAT Raipur Quashes Section 148 Notice Due to Invalid Sanction Under Section 151

The procedural validity of reassessment proceedings relies heavily on strict adherence to statutory mandates, particularly concerning the assumption of jurisdiction. A critical safeguard provided to the assessee under the Income Tax Act 1961 is the requirement of prior administrative approval before reopening a concluded assessment.

In a recent judicial determination, the Income Tax Appellate Tribunal (ITAT), Raipur Bench, adjudicated a pivotal matter in the case of ITO Vs Satkar Caterers Pvt. Ltd. The tribunal dismissed the appeal preferred by the Revenue, ultimately invalidating the reassessment proceedings initiated for the Assessment Year (AY) 2015-16. The core foundation for quashing the proceedings was a jurisdictional error: the assessing authority had procured the requisite sanction for issuing the notice under Section 148 from the Principal Commissioner of Income Tax (PCIT) instead of the Joint Commissioner of Income Tax (JCIT), who was the legally designated competent authority under the erstwhile Section 151 framework.

Factual Matrix of the Case

The assessee, a private limited company, submitted its original return of income for AY 2015-16 on 05.11.2015, declaring a total income of Rs. 9,44,260/-.

Subsequently, the tax department received intelligence suggesting that the assessee had allegedly engaged in illicit financial maneuvers. The information indicated that the assessee had obtained bogus billing accommodation entries amounting to Rs. 1,79,13,000/-. These entries were purportedly routed through a shell entity named Silverlake Marketing Pvt. Ltd. The intelligence stemmed from a search and seizure operation executed against the Kolkata-based Bathwal group and an alleged entry operator, Shri Ajit Kumar Jindal.

Acting on this information, the Assessing Officer (AO) formed a belief that income chargeable to tax had escaped assessment. Consequently, a notice under Section 148 of the Income Tax Act 1961 was issued to the assessee on 31.03.2021.

In response to the reassessment notice, the assessee filed a return on 28.07.2021, reiterating the originally declared income of Rs. 9,44,260/-. During the ensuing scrutiny, the assessee vehemently denied executing any transactions with the suspected shell company, Silverlake Marketing Pvt. Ltd.

Despite the assessee's submissions, the AO proceeded to frame the reassessment order on 29.03.2022. The AO made a primary addition of Rs. 1,79,13,000/- under Section 69A of the Income Tax Act 1961, treating the amount as unexplained money belonging to the assessee. Furthermore, an estimated commission expense of Rs. 7,16,520/- was added under Section 69C for allegedly procuring the accommodation entries. The total income of the assessee was thus recomputed at Rs. 1,95,73,780/-.