ITAT Mumbai Voids Reassessment for AY 2017-18 Over Improper Sanction Under Section 151

Background of the Dispute

The Mumbai Bench of the Income Tax Appellate Tribunal (“ITAT”) in the case of DCIT vs Unify Texturisers Private Limited examined the legal validity of a reassessment initiated under the new reassessment regime for Assessment Year 2017-18. The central controversy was not on the quantum of additions but on the legality of the sanction obtained under Section 151 of the Income Tax Act 1961 after the expiry of three years from the end of the relevant assessment year.

The revenue filed an appeal against the relief granted by the Ld. Commissioner of Income Tax (Appeals)-53, Mumbai [CIT(A)] on the merits of the additions made under Section 147. Simultaneously, the assessee filed a cross-objection challenging the very assumption of jurisdiction on the ground that the prior approval under Section 151 was obtained from an authority not empowered to grant such sanction for a reassessment beyond the three-year period.

The impugned order of the Ld. CIT(A), dated 26.06.2025, arose from the reassessment order passed by the Ld. Assistant Commissioner of Income Tax, Central Circle-53, Mumbai under Section 147 on 03.05.2023.

Chronology of Key Events

To understand the legal issue, the relevant sequence is as follows:

  • The assessee filed its original return of income under Section 139(1) for AY 2017-18.
  • A notice under Section 148 was issued on 29.06.2021.
  • In light of the decision of the Hon’ble Supreme Court in UOI vs Ashish Agarwal, [2022] 138 taxmann.com 64 (SC), such notice issued in FY 2021 was treated as a notice under Section 148A(b).
  • Reassessment proceedings were completed making multiple additions aggregating to substantial sums, including additions of Rs.66,77,836/-, Rs.2,15,00,000/- and Rs.90,88,219/-.
  • The assessee challenged the reassessment before the Ld. CIT(A) both on jurisdictional grounds and on merits.
  • The Ld. CIT(A) deleted the additions on merits but rejected the legal challenge to the reopening.
  • Aggrieved, the revenue appealed on merits, while the assessee filed a cross-objection raising the jurisdictional issue relating to sanction under Section 151.

Assessee’s Objection on Sanction Under Section 151

In the cross-objection, the assessee’s counsel (Ld. AR) raised a preliminary ground that went to the root of the reassessment proceedings. The contention was that the specified authority who had granted approval under Section 151 was not competent to do so in a case where more than three years had elapsed from the end of the relevant assessment year, as per the law applicable prior to the amendment brought in by the Finance Act 2023.

Documentary Support

The Ld. AR relied on the following documents:

  1. Notice under Section 148 dated 29.06.2021

    • As per paragraph 3 of this notice (appearing at APB page-49 in the paper book), the approval for issuance of the notice was recorded as being accorded by “Range 8(3), Mumbai”.

  2. Proceedings under Section 148A(d)

    • Pursuant to the judgment in UOI vs Ashish Agarwal, the reassessment framework shifted to the new regime, and an order under Section 148A(d) was passed.
    • In paragraph 10 of this Section 148A(d) order, the Assessing Officer specifically stated that approval for passing the order under Section 148A(d) and for issuance of the subsequent Section 148 notice had been obtained from Principal Commissioner of Income Tax-8, Mumbai (Pr. CIT-8, Mumbai), by approval dated 27.06.2022, reference No. Pr.CIT-8/148 Approval/2022-23/6/483.

The assessee argued that both these approvals, having been granted by the Pr. CIT-8, Mumbai after expiry of three years from the end of AY 2017-18, were contrary to the scheme of Section 151 as it stood prior to the Finance Act 2023 amendment.