Income Tax order u/s 148 is unsustainable without sanctions u/s 151 : Bombay HC

Income tax act has recently introduced Section 148A in the Budget 2021. This section empowers the Assessing Officer to issue a notice if they decide to initiate re­assessment. The need to introduce this section arises because it is possible that a taxpayer may have concealed income during any assessment year. Therefore, it empowers Income Tax officers to initiate reassessment proceedings.

Section 148A states that the income tax officer should provide the taxpayer with a chance to explain their case before issuing the notice.

Section 151 states that

• No notice shall be issued under section-148 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.
• No notice shall be issued under section-148 after the expiry of four years from the end of the relevant assessment year, unless the Commissioner is satisfied on the reasons recorded by the Income tax officer that it is a fit case for the issue of such notice.

The Bombay High Court has ruled in the case of Umang Shah that an order issued under Section 148A(d) of the Income Tax Act, without proper sanction as required by Section 151, must be declared illegal.

Issues Involved:
Petitioner Umang Shah received a notice under section 148 for AY 2016-17. This notice followed an initial notice under Section 148A(b) and an order under Section 148A(d), both of which were also challenged. Whether such an order can be passed as more than three years have been elapsed as notice was dated on 29^th August 2022?

Facts of the case explained:
Advocates of the petitioner submitted that order passed by AO u/s 148A(d) was granted by Principal CIT in accordance with provisions u/s 151(i). However, it was argued that the sanction ought to have been obtained under clause (ii) of Section 151. This could have been done only buy the authorities set out in this provision by the Chief Commissioner or Director General if more than three years have been elapsed from end of relevant AY which is AY 2016-17 in this case.

In the present case sanction under section 151(ii) was necessary but the same was obtained under 151(i). Since, more than three years had elapsed from the end of the relevant AY for the proceedings to be conducted under section  148A and thereafter under section 148 of the act sanction under section 151(ii) was a pre-requisite.

Conclusion:
Considering the above facts and order declared in the similar case of Siemens Financial Services PVT LTD., the order     under section 148A(d) and the notice under section 148 was declared illegal. The petition of the petitioner was accepted to succeed.