Reassessment Proceedings Invalidated: ITAT Mumbai Holds PCIT an Incompetent Authority Under Section 151(ii) for Notices Issued Beyond Three Years

Background and Context

A significant ruling has emerged from the Mumbai bench of the Income Tax Appellate Tribunal in the matter of SushilKumar Jain Vs DCIT (ITAT Mumbai), pertaining to Assessment Year 2017-18. The Tribunal rendered a decisive finding on the jurisdictional competence of the sanctioning authority under Section 151(ii) of the Income Tax Act, 1961, ultimately quashing the reassessment notice and all proceedings flowing from it.

The appeal before the Tribunal arose from the order dated 09.02.2026 passed by the National Faceless Appeal Centre (NFAC) / Commissioner of Income Tax (Appeals) under Section 250 of the Income Tax Act, 1961.

Grounds Raised by the Assessee

The assessee challenged the NFAC/CIT(A) order on multiple fronts. The grounds of appeal covered:

  1. The order passed under Section 250 dated 09.02.2026 confirming the Assessing Officer's order under Section 143(3) read with Section 147 read with Section 144B was stated to be bad and invalid in law.
  2. The reopening of assessment under Section 148 and consequential reassessment order under Section 147 were alleged to be invalid and bad in law.
  3. The assessee contended that the impugned order was passed in violation of principles of natural justice.
  4. Addition of Rs. 2,50,00,000/- on account of unsecured loans taken from M/s. Aneri Fincap Ltd. under Section 68 was challenged.
  5. An alleged commission addition of Rs. 1,35,000/- on loans taken from M/s. Aneri Fincap Ltd. under Section 68 was also contested.
  6. Charging of interest under Section 234B and Section 234D was challenged as bad and invalid.
  7. Initiation of penalty proceedings under Section 271AAC was also assailed as invalid.

Factual Matrix

The Assessing Officer had reopened the case of the assessee under Section 147 of the Income Tax Act, 1961, by issuing a notice under Section 148 dated 30.07.2022. Before issuing this notice, the Assessing Officer obtained sanction from the Principal Commissioner of Income Tax-19, Mumbai vide letter No. Pr. CIT-19/148/2022-23/711 dated 29.07.2022.

Consequent to reopening, the Assessing Officer made an addition under Section 69A of Rs. 2,51,35,000/- on account of unexplained cash deposit. The assessee challenged this assessment before the first appellate authority. However, the National Faceless Appeal Centre sustained the addition, prompting the assessee to approach the Tribunal.

The pivotal question before the Tribunal was whether the Principal Commissioner of Income Tax (PCIT) was the competent authority to grant sanction for the issuance of a Section 148 notice for AY 2017-18, where the notice was issued on 30.07.2022 — i.e., beyond three years from the end of the relevant assessment year.

Assessee's Submissions