Reassessment Notice Quashed: ITAT Mumbai on Time Limits and Sanction under Section 151

Background of the Dispute

The Mumbai Bench of the Income Tax Appellate Tribunal in DCIT Vs Pranavkumar Prafulchandra Vora (ITAT Mumbai) dealt with cross appeals concerning reassessment proceedings arising out of alleged penny stock transactions in the scrip of Alankit Ltd. The Assessing Officer (AO) had reopened the assessment and made an addition under Section 68 on the ground that the assessee’s dealings in Alankit Ltd. represented accommodation entries and bogus profits.

While the Revenue challenged the relief granted by the Commissioner of Income-tax (Appeals) [CIT(A)] on merits, the assessee, through cross-objections, assailed the very jurisdiction of the reassessment initiated under the new regime of Section 148 and Section 148A.

The Tribunal chose to first address the assessee’s jurisdictional challenge, as it went to the root of the validity of the entire reassessment.

Appeals and Cross-Objections: Issues Raised

Revenue’s Grounds of Appeal

The Revenue questioned the order of the CIT(A) primarily on the following counts:

  • Deletion of the addition of ₹37,15,770 made under Section 68 relating to transactions in the scrip of Alankit Ltd., which the AO regarded as penny stock accommodation entries.
  • Alleged failure by the CIT(A) to appreciate material gathered from search and investigation in the Alankit Group indicating manipulation of share prices and generation of fictitious profits.
  • The stand that the entire credit of ₹37,76,422 was unexplained and not supported by genuine business activity, and therefore rightly taxable under Section 68.
  • Contention that mere presence of contract notes and banking channels did not establish authenticity when the scrip was part of a wider accommodation entry racket.
  • Assertion that sustaining the addition would not amount to double taxation, as Section 68 operates independently and places the onus on the assessee to prove genuineness of credits.

Assessee’s Cross-Objections

The assessee’s cross-objections were focused on validity and jurisdiction of the reassessment proceedings. Key objections included:

  1. Incorrect sanctioning authority: The notice under Section 148 dated 28.07.2022 (new regime) was issued with approval of the Principal Commissioner, whereas in the facts of the case the proper authority, according to the assessee, should have been the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

  2. Violation of Section 151A and CBDT Notification No. 18/2022 dated 29.03.2022: It was alleged that the reassessment was carried out contrary to the scheme and administrative directions governing faceless reassessment.

  3. Defective assessment order: The assessee argued that the assessment order was invalid as it was passed without mentioning the date of order and without a Document Identification Number (DIN), rendering it void.

  4. Defective Section 148 notice: The assessee further contended that the notice under Section 148 dated 28.07.2022 was itself void as it lacked a DIN.

  5. Time-barred reassessment: Relying on the decision of the Hon’ble Supreme Court in Union of India v/s. Rajeev Bansal [2024] 167 com 70 (SC) (judgment dated 03.10.2024), the assessee asserted that the notice under Section 148 issued on 28.07.2022 for A.Y. 2017-18 was barred by limitation under the new regime.

  6. Non-fulfilment of pre-conditions under Section 147: The assessee argued that the statutory conditions for reopening under Section 147 had not been complied with, thereby vitiating the reassessment order passed under Section 147 r.w.s. 143(3).

The assessee also reserved liberty to modify or add grounds, each being without prejudice to the others.

Tribunal’s Approach: Jurisdiction First

Recognising that the question of jurisdiction under Section 148 is foundational, the Tribunal decided to first examine: