Introduction
The Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘B’, delivered a significant ruling in ITA No.6867/DEL/2025, quashing the reassessment order passed under section 147 of the Income Tax Act, 1961, for Assessment Year (AY) 2016-17. The case involved Colvin Care Pvt. Ltd. (the assessee) versus the Deputy Commissioner of Income Tax, Circle-4(2), Delhi (the Revenue). The core dispute centered on the validity of the notice issued under section 148, with the assessee challenging the legality of the reassessment proceedings on multiple grounds. After hearing both parties, the Tribunal, comprising Judicial Member Shri Challa Nagendra Prasad and Accountant Member Shri Amitabh Shukla, allowed the appeal by holding the notice void ab initio due to improper approval under section 151(ii) of the Act. This commentary provides a deep legal analysis of the judgment, focusing on the jurisdictional requirements for reopening assessments and the impact of recent judicial precedents.
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Facts of the Case
The assessee, a private limited company, had originally filed its return for AY 2016-17. The Revenue initiated reassessment proceedings by issuing a notice under section 148 on 22.04.2021. Subsequently, following the landmark decision of the Hon’ble Supreme Court in Union of India & Others vs. Ashish Aggarwal (Civil Appeal No. 3005/2022 dated 04.05.2022), the department treated the earlier notice as a show-cause notice under section 148A(b) and issued a fresh notice on 23.05.2022. Later, the Assessing Officer (AO) passed an order under section 148A(d) on 29.07.2022 and simultaneously issued a notice under section 148 of even date, leading to the reassessment order dated 30.05.2023 under section 147 read with section 144B. The AO made an addition of Rs. 78,78,470/- under section 68 read with section 115BBE, treating unsubstantiated credits as unexplained cash credits.
The assessee raised ten grounds of appeal before the ITAT, including legal challenges to the reopening proceedings and a challenge on merits. However, grounds no. 7 and 9 (relating to non-availability of DIN and issuance of notice by Jurisdictional Assessing Officer) were not pressed. The primary legal ground was that the approval for issuing the impugned notice under section 148 was granted by the Principal Commissioner of Income Tax (Pr. CIT), Rohtak, whereas under the applicable statutory provisions, the approval should have been obtained from the Principal Chief Commissioner of Income Tax (Pr. CCIT) since more than three years had elapsed from the end of the relevant Assessment Year. The assessee argued that this non-compliance rendered the notice void ab initio and the consequential assessment order unsustainable.
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Reasoning of the ITAT
The Tribunal meticulously examined the legal framework governing the issuance of notice under section 148, particularly the requirements of section 151 of the Act after the Finance Act, 2021 amendments. The key reasoning is as follows:
1. Applicable Statutory Provisions:
Section 151 specifies the authority required to grant approval for issuing a notice under section 148. Under the new regime, two time-based categories exist:
– Section 151(i): If three years or less have elapsed from the end of the relevant Assessment Year, approval must be obtained from the Principal Commissioner or Principal Director.
– Section 151(ii): If more than three years have elapsed from the end of the relevant Assessment Year, approval must be obtained from the Principal Chief Commissioner or Principal Director General.
In the present case, AY 2016-17 ended on 31.03.2017. The notice under section 148 was issued on 29.07.2022, i.e., more than five years later. Therefore, the approval had to come from the higher authority under section 151(ii). However, the record showed that approval was granted by the Pr. CIT, Rohtak (page 27-30 of the assessee’s paper book), which is a lower authority than the Pr. CCIT.
2. Judicial Precedents:
The Tribunal relied heavily on several binding decisions:
– Ashish Aggarwal (Supreme Court): The apex court directed that all pending notices under section 148 (issued before the amendment) shall be deemed to be notices under section 148A(b), and fresh compliance with section 148A(d) and 148 must follow.
– Rajeev Bansal (Supreme Court) [469 ITR 46]: The Supreme Court specifically held that grant of sanction by the appropriate authority is a pre-condition for the AO to assume jurisdiction under section 148. The court emphasized that Section 151(ii) mandates a higher level of authority if more than three years have elapsed. Non-compliance with this strict time limit affects the jurisdiction to issue notice.
– Manish Financials (Mumbai ITAT) [ITA 5050/Mum/2024 dated 02.12.2024]: The Mumbai Tribunal had earlier ruled that where more than three years have elapsed, approval from the Principal Commissioner is invalid; only the Principal Chief Commissioner can grant sanction.
– Core Logistic Company (Madras High Court) [WP No. 18168/2023 dated 05.06.2025]: The High Court struck down similar notices where the authority lacked competence to approve.
– Anurag Pandey (Coordinate Bench, Delhi ITAT) [ITA No.3924/DEL/2024 dated 09.07.2025]: The Delhi Tribunal itself had held that improper approval vitiates the entire reassessment proceedings.
The ITAT noted that the Revenue’s counsel could not distinguish the present case from these precedents. The facts were squarely covered: the notice was issued after three years, and approval was from the wrong authority.
3. Jurisdictional Nullity:
The Tribunal concluded that the notice under section 148 dated 29.07.2022 was void ab initio because it lacked the mandatory prior approval from the Pr. CCIT. Since the foundation of the reassessment proceedings (the notice) was invalid, the entire assessment order under section 147 read with section 144B dated 30.05.2023 could not survive. The Tribunal did not delve into the merits of the addition under section 68, as the legal issue was dispositive.
4. Grounds Dismissed:
Ground no. 1 (general) was dismissed as infructuous. Grounds no. 7 and 9 were dismissed as not pressed by the assessee. The remaining legal grounds were allowed, and the appeal was consequently allowed in full.
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Conclusion
The ITAT’s decision in Colvin Care Pvt. Ltd. vs. DCIT underscores the critical importance of adhering to the procedural safeguards built into the reassessment framework under the Income Tax Act. The ruling reinforces that the requirement of obtaining approval from the correct authority under section 151 is not a mere technicality but a jurisdictional pre-condition. By quashing the assessment order on this ground, the Tribunal has sent a clear message that the Revenue cannot mechanically reopen assessments without strict compliance with the law. The judgment aligns with the Supreme Court’s guidance in Rajeev Bansal and Ashish Aggarwal, ensuring that taxpayers are protected from arbitrary reassessments. For practitioners, this case serves as a powerful precedent to challenge any reassessment notice where the approving authority is not the one mandated by law, especially in cases involving older assessment years.
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