PCIT Can Grant Sanction U/s 151 For Issuing Reopening Notice U/s 148 Even After Expiry Of Four Years From End Of Relevant AY: Mumbai ITAT

The Mumbai ITAT recently reiterated that a notice can be issued u/s 148 of the Income Tax Act, 1961, even after the expiry of limitation period, if the sanction for same has been granted by the Principal Commissioner of Income Tax.

The Member of the ITAT comprising of Sandeep Singh Karhail (Judicial Member) and B.R. Baskaran (Accountant Member) observed that “the sanction granted under section 151 of the Act was found to be improper as the sanction was not granted by the appropriate authority under the provisions of the Act, which is not so in the present case since PCIT had the authority under section 151 to grant the sanction for issuance of notice under section 148 of the Act after the expiry of four years from the end of the relevant assessment year”. (Para 14)

As per the brief facts of the case, the assessee e-filed her return which was processed u/s 143(1). Subsequently, based on information received from the office of DGIT (Investigation), that the assessee is a beneficiary of bogus purchase activity, the proceedings u/s 147 were initiated and notice u/s 148 was issued. As per the information received by DGIT (Investigation), Mumbai, M/s International Trade Agency has given bogus purchase bills to the assessee without actual transaction between them. The assessee challenged the reopening contending that the sanction to issue notice u/s 148 was not granted by the appropriate authority.

The Bench noted that the Assessee's case was not selected for scrutiny, and on the basis of the information received from DGIT (Investigation), Mumbai that the assessee is a beneficiary of the bogus purchase transaction, proceedings u/s 147 were initiated after more than four years from the relevant assessment year.

The Bench also noted that the AO obtained the sanction required under the provisions of section 151 of the Act prior to the issuance of notice under section 148 of the Act.

The Bench stated by the plain reading of Section 151 of the Act that where an assessment has not been made under section 143(3) or section 147, no notice under section 148 of the Act can be issued by an AO below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of such notice under section 148 of the Act.

The Bench observed that the sanctioning authority under section 151 for issuance of notice under section 148 of the Act has been amended from Joint Commissioner of Income Tax to PCIT.

The Bench also mentioned that the sanctioning authority for issuance of notice under section 151(2) continues to be the Joint Commissioner of Income Tax.

Referring to the judgment of Jharkhand High Court in Navketan Enterprises v/s CIT, [2001] 250 ITR 508, the Bench reiterated that “section 151 of the Act is in the nature of procedural law and therefore for the purpose of obtaining the approval, the Assessing Officer has to apply the law as it stands on the day when he decides, by recording his reasons, to invoke section 147 and thus, decides to issue notice under section 148 of the Act”.

Therefore, under the light of Section 151, the dismissed the appeal filed by the Assessee.

Counsel for Appellant/ Taxpayer: Piyush Chhajed

Counsel for Respondent/ Department: Nagnath B. Pasale

Case Title: Leelaben Kantilal Parekh verses Income Tax Officer

Case Number: ITA no.2926/Mum./2023

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