ITAT Mumbai Quashes Reassessment Notice For Want of Proper Sanction Under New Reopening Regime

Background

Adarsh Developers, a partnership firm engaged in real estate development, had filed its return declaring nil income. The Assessing Officer reopened the assessment alleging that two properties were sold for ₹72.85 lakh against a stamp duty valuation of ₹1.42 crore, resulting in alleged undisclosed income of ₹69.40 lakh under Section 43CA. Additional gross profit of ₹2.42 lakh was also added. The reassessment was initiated under the new regime pursuant to Section 148A, following conversion of an earlier notice issued under the old law. The reassessment notice dated 29 July 2022 was approved by the Principal Commissioner of Income Tax.

The primary legal question was whether a reassessment notice issued beyond three years from the end of the relevant assessment year could be validly sanctioned by the Principal Commissioner, or whether approval was mandatorily required from higher authorities such as the Principal Chief Commissioner or Chief Commissioner under Section 151(ii).

Tribunal’s Analysis and Ruling

Relying extensively on the Supreme Court’s ruling in Union of India v. Rajeev Bansal, the Tribunal held that under the post-2021 reassessment framework, sanctioning authority is strictly time-linked. Where more than three years have elapsed, approval must come from the Principal Chief Commissioner or equivalent high-ranking authority. Since the notice in Adarsh Developers’ case was approved merely by the Principal Commissioner, the Tribunal found a clear violation of Section 151. Such non-compliance, it held, goes to the root of jurisdiction and renders the entire reassessment void.

Accordingly, the notice under Section 148 and all consequential proceedings were quashed. With the reopening itself held invalid, the additions on merits became academic.