Section 148A(d) Order Passed Without Section 151 Sanction Is Illegal: Bombay High Court

The Bombay High Court has held that if an order is passed under Section 148A(d) of the Income Tax Act in the absence of an appropriate sanction in terms of the provisions of Section 151 of the Income Tax Act, the order and the consequent notice under Section 148 would be required to be declared illegal.

The bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan has observed that a sanction for passing an order under Section 148A(d) was required to be obtained under clause (ii) of Section 151 as more than three years had elapsed from the end of the relevant assessment year for the proceedings to be adopted under Section 148A and thereafter under Section 148 of the Act. However, the sanction was obtained under clause (i) of Section 151.

Section 151 pertains to sanctions for the issue of notice. Section 151(1) states that no reassessment notice shall be issued after the expiry of eight years from the end of the relevant assessment year, unless the Board is satisfied on the reasons recorded by the income-tax officer that it is a fit case for the issue of such notice. Section 151(2) states that no reassessment notice shall be issued after the expiry of four years from the end of the relevant assessment year, unless the Commissioner is satisfied, based on the reasons recorded by the Income-tax Officer, that it is a fit case for the issue of such notice.

The petitioner/assessee has challenged the notice issued by the respondent department under Section 148 of the Income Tax Act, 1961. The assessment year was 2016–17. The notice is on the backdrop of a notice issued under Section 148A(b) and an order passed by the respondent department on notice under the provisions of Section 148A(d), which was also challenged by the petitioner.

The assessee contended that the order passed by the Assessing Officer under Section 148A(d), which sets out that the necessary approval for passing the order under Section 148A(d) was granted by the Principal CIT, Mumbai, via a letter or order sheet entry dated August 29, 2022, in accordance with the provisions of Section 151(i) read with paragraph 6.2(ii) of Instruction 01 of 2022 issued by the CBDT. The sanction ought to have been obtained under clause (ii) of Section 151, which could only be by the authorities set out in the provision, and if the Chief Commissioner or Director General has elapsed more than three years from the end of the relevant assessment year, which is assessment year 2016–17.

The court, while allowing the petition, quashed the order under Section 148A(d) as well as the consequent notice under Section 148.

Counsel For Petitioner: Bharat Raichandani

Counsel For Respondent: Sushma Nagaraj

Case Title: Umang Mahendra Shah Versus Union of India & Ors.

Case No.: Writ Petition No. 2914 Of 2024

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