ITAT Mumbai Quashes Bang Overseas Reassessment, Holds PCIT Sanction Invalid Under Section 151(ii)

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) on 25 May quashed reassessment proceedings initiated against Bang Overseas Limited, holding that the sanction for issuing notice under Section 148 of the Income Tax Act, 1961 violated Section 151(ii) of the Act.

Vice President Saktijit Dey and Accountant Member Prabhash Shankar clarified that where authorities issue a notice after the expiry of three years from the end of the relevant assessment year, they must obtain approval from the Principal Chief Commissioner of Income Tax or the Chief Commissioner of Income Tax, and not from the Principal Commissioner of Income Tax (PCIT). The Bench held:

“Whereas, if the notice is issued after expiry of three years from the end of the relevant assessment year, the competent authority who can grant approval in terms with clause (ii) of section 151 of the Act is Pr. Chief Commissioner of Income Tax or Chief Commissioner of Income Tax. Thus, it is proven on record that there is non-compliance with the conditions of section 151(ii) of the Act in the present case.”

The reassessment proceedings concerned Assessment Year 2018–19 and arose from a notice issued on 7 April 2022, beyond three years from the end of the relevant assessment year.

Bang Overseas Limited contended that Section 151(ii) mandated prior sanction from the Principal Chief Commissioner or Chief Commissioner in such cases, and that approval granted by the PCIT invalidated the entire reassessment action. The Revenue did not dispute that the PCIT granted the sanction.

While deciding the issue, the Tribunal relied on the Bombay High Court ruling in Prakash Pandurang Patil v. ITO and noted that the Supreme Court had affirmed the view. It also relied on Siemens Financial Services Pvt. Ltd. v. DCIT, where the Bombay High Court held that sanction by an authority lower than the one prescribed under Section 151(ii) invalidates reassessment proceedings initiated after three years from the end of the relevant assessment year.

Accordingly, the ITAT held that the notice issued under Section 148 lacked valid sanction under Section 151(ii) and quashed both the reassessment proceedings and the consequential assessment order.

Appearance for the Assessee: Shri Himandhu Gandhi

For the Revenue: Shri Vikas K. Suryawanshi (CIT-DR)