Arvindbhai Khatri Sons Designs Pvt. Ltd. v. ACIT

Case snapshot

Sections / provisions: 151

Questions before the Court / Tribunal

• Reassessment sanction beyond three years: The reported ruling concerns sanction by the wrong authority for reassessment after the specified period and treats the jurisdictional defect as fatal.

Material facts and background

PER PRABHASH SHANKAR [A.M.] :The present appeal arising from the appellate order dated 18.08.2025 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 147 r.w.s. 144 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 29.05.2023 for the Assessment Year [A.Y.] 2017-18.

The grounds of appeal are as under: Reassessment is bad in law. 1.1. That on the facts and circumstances of the case and in law the Ld. National Faceless Appeal Centre (NFAC) has erred in upholding the Reassessment proceedings for AY 2017-18 on incorrect sanction under section 151 of the Income-tax Act, 1961 (Act). 1.2. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in upholding reassessment proceedings contrary to the decision of the Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC)/ [2024] 469 ITR 46 (SC), hence the reassessment order under section 147 read with section 144B of the Act may be quashed and set aside. 1.3. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in upholding reassessment proceedings as the Notice under section 148 of the Act is issued in violation of section 151A of the Act read with CBDT Notification 18 of 2022. 1.4. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in upholding reassessment proceedings as the alleged approval under section 151 of the Act is obtained in violation of CBDT Circular 19 of...

5. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in upholding the order of the Ld. AO in making addition of Rs. 3,71,03,745/- under section 68 read with section 115BBE of the Act on appellant's inter-bank transfers without appreciating that the accounts of the appellant are audited and the mismatch is duly reconciled and explained. 6. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in upholding the order of the Ld. AO in making addition of Rs. 5,05,01,134/-under section 68 read with section 115BBE of the Act on appellant's card sales, whereas the same has been offered to income under section 28 of the Act. 7. Without prejudice to above, that on the facts and circumstances of the case no defects were found in the books of account maintained by the appellant and VAT authorities have accepted the sales shown as per books of account, hence the addition of Rs. 45,07,000/-, Rs. 5,48,08,230/-,Rs. 3,71,03,745/-,Rs. 5,05,01,134/-confirmed by the NFAC may be directed to be deleted. 8. Without prejudice to the above the Ld. NFAC erred in relying on various case laws in the order without giving an opportunity to rebut how...

3. In this case, the assessee filed return of income disclosing total income of Rs 75,15,530/-. Subsequently, the AO got information that substantial cash deposits of Rs 4,09,89,250/-in its bank account was made by the assessee. The AO considered the same to have escaped assessment in terms of section 147/148 of the Act. Accordingly, order u/s 148A(d) was passed on 29.07.2022 and the assessment was

Appellant / assessee submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Revenue / respondent submissions

5. On the other hand, ld. DR has strongly relied on the orders of lower authorities and also contended that this ground was taken by the assessee before the lower authorities. 6. We have heard the rival submissions and carefully considered the materials placed before us. We are of the considered view that once a notice u/s. 148 is sought to be issued after 31.03.2021, the provisions regarding reopening, including those relating to the 'specified authority' for approval come into force. Since first notice in this case was issued on 29.06.2021 and the order u/s. 148A(d) was passed on 29.07.2022, the limited issue for consideration is that since more than 3 years have elapsed from the end of the relevant assessment year i.e A.Y. 2017-18, whether the specified authority to grant sanction for issue of notice in this case is Pr. CIT or PCCIT/CCIT. In this regard, the relevant provisions of section 151 are as under: "151. Sanction for issue of notice. Specified authority for the purposes of section 148 and section 148A shall be,-(i)Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant...

Court / Tribunal analysis and reasoning

5. On the other hand, ld. DR has strongly relied on the orders of lower authorities and also contended that this ground was taken by the assessee before the lower authorities. 6. We have heard the rival submissions and carefully considered the materials placed before us. We are of the considered view that once a notice u/s. 148 is sought to be issued after 31.03.2021, the provisions regarding reopening, including those relating to the 'specified authority' for approval come into force. Since first notice in this case was issued on 29.06.2021 and the order u/s. 148A(d) was passed on 29.07.2022, the limited issue for consideration is that since more than 3 years have elapsed from the end of the relevant assessment year i.e A.Y. 2017-18, whether the specified authority to grant sanction for issue of notice in this case is Pr. CIT or PCCIT/CCIT. In this regard, the relevant provisions of section 151 are as under: "151. Sanction for issue of notice. Specified authority for the purposes of section 148 and section 148A shall be,-(i)Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant...

6.1 Thus, in view of the legal provisions, clearly the sanctioning authority in this case is the Pr. CCIT/CCIT and not the Pr. CIT as more than three years have elapsed from the end of the assessment year. Thus we hold that the notice u/s. 148 in this case was issued without the approval of the prescribed specified authority and hence deserves to be quashed on this ground alone. 6.2 Grant of sanction by the appropriate authority is a precondition

Operative decision and relief

from the end of the relevant assessment year. Accordingly, we quash the notice issued u/s 148 of the Act as invalid and ab initio void. Thus, the ground no.1 of the assessee’s appeal is allowed. 7.

Authorities and precedents appearing in the judgment

• Supreme Court in the case of Union of India vs. Rajeev Bansal

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Reassessment sanction beyond three years. The operative result is classified as Allowed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Reassessment sanction beyond three years. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Reconstruct the reassessment timeline: original assessment, section 148A notice/reply, approval authority, notice date and the applicable section 149 limitation window.
• Preserve the complete response to section 148A(b), objections and proof of disposal; jurisdictional defects are often decided from the documentary chronology.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

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