Reassessment Beyond Three Years Without PCCIT Approval Invalid: ITAT Chennai

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) on 25 March held that reassessment proceedings initiated beyond three years from the end of the relevant assessment year are invalid if the Assessing Officer does not obtain prior approval from the Principal Chief Commissioner of Income Tax (PCCIT), as mandated under the Income Tax Act.

The Bench, comprising Judicial Member Aby T. Varkey and Accountant Member S.R. Raghunatha, set aside the reassessment notice issued against Vasanthi Ragunathan, observing:

“the notice under section 148 is dated 13.04.2022, which event is undisputedly beyond the period of 3 years from the end of the relevant AY; and therefore as per the provisions of Section 151 of the Act, the AO should have obtained the approval from Principle Chief Commissioner of Income Tax (PCCIT) before issuing the ibid notice. However, in the present case the AO has obtained approval from Principle Commissioner of Income Tax (PCIT), Coimbatore, while issuing notice under section 148 and therefore the notice is found to be in defiance to prescription given in section 151 of the Act and hence it is invalid in eyes of law.”

In the present case, the Assessing Officer issued a reassessment notice beyond the prescribed period of three years from the end of the relevant assessment year. However, the officer obtained approval from the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner of Income Tax (PCCIT), as required under the statutory framework.

The party contended that when a reassessment notice is issued after three years, the law mandates prior sanction from the PCCIT under Section 151(ii) of the Income Tax Act. Approval from the PCIT, therefore, did not meet the statutory requirement.

The Tribunal examined the provisions and emphasized that following the prescribed approval mechanism is not a mere procedural formality but a jurisdictional requirement. It observed that the Assessing Officer should have obtained prior approval from the PCCIT before issuing the notice. The Bench stated:

“AO ought to have obtained approval from the Principal Chief Commissioner of Income Tax (PCCIT) before issuing the ibid notice as per Section 151(ii) of the Act.”

The Tribunal held that failing to obtain approval from the competent authority vitiates jurisdiction. It ruled that the reassessment notice was invalid in law and quashed the entire reassessment proceedings. The Bench noted:

“The re-opening notice issued by the AO u/s 148 for AY 2018-19 beyond three years on 13.04.2022 with the approval of PCIT instead of PCCIT as per the provisions of Section 151(ii) is not valid. Consequently, the assessment completed on 07.03.2014 stemming from the invalid notice dated 13.04.2022 deserves to be quashed, and we order accordingly.”

Accordingly, the Tribunal allowed the appeal.

For Appellant: None

For Respondent: Anitha, Addl.CIT