Bombay High Court Quashes Reassessment for AY 2016 – 17 and 2017 – 18: Lack of Proper Sanction Under Section 151 Fatal
The Bombay High Court, in a recent landmark ruling in the case of Ramesh Bachulal Mehta v. ITO Ward 27(3)(1), Mumbai & Ors. (Writ Petition No. 271 of 2023, dated 11th August 2025), has quashed reassessment proceedings for Assessment Years (AY) 2016–17 and 2017–18 on the ground that the Assessing Officer (AO) failed to obtain sanction from the correct authority under Section 151 of the Income-tax Act, 1961.
This decision, delivered by a Division Bench of Justices B.P. Colabawalla and Firdosh P. Pooniwalla, reiterates the importance of strict compliance with jurisdictional preconditions for reopening assessments, especially under the substituted reassessment regime brought in by the Finance Act, 2021.
Background of the Case
• A notice under Section 148 was initially issued on 19th May 2021 under the old law.
• Following the Supreme Court’s ruling in Union of India v. Ashish Agarwal (2022) 444 ITR 1 (SC), the said notice was deemed to be a show-cause notice under Section 148A(b) of the new regime.
• The AO eventually passed an order under Section 148A(d) on 13th July 2022 and issued a fresh notice under Section 148 on 15th July 2022, after obtaining approval from the Principal Commissioner of Income Tax (PCIT).
The assessee challenged the reassessment proceedings on the ground that approval was obtained from the wrong authority, rendering the entire exercise without jurisdiction.
Legal Issue
The central issue was:
Whether, when more than three years had elapsed from the end of AY 2016–17 and AY 2017–18, approval of the Principal Chief Commissioner of Income Tax (PCCIT) was mandatory under Section 151(ii), and not that of the PCIT?
Court’s Analysis
1. Requirement of Sanction under Section 151:
• Section 151 of the substituted law prescribes different levels of approval depending on the time elapsed.
• For cases within three years, approval of the PCIT/PDGIT/Commissioner suffices [Section 151(i)].
• For cases beyond three years, approval of the PCCIT/Chief Commissioner/Principal DGIT is mandatory [Section 151(ii)].
2. Supreme Court Guidance:
• The Court relied on Union of India v. Rajeev Bansal[2024] 469 ITR 46 (SC), which clarified that:
• Proper sanction is a jurisdictional preconditionfor issuing reassessment notices.
• TOLA (Taxation and Other Laws Relaxation Act, 2020) extended the timeline only up to 30th June 2021for AYs where three years expired between 20th March 2020 and 31st March 2021.
3. Application to Present Case:
• For AY 2016–17, the three-year period ended on 31st March 2020. By virtue of TOLA, sanction could be obtained until 30th June 2021—but not thereafter.
• Since the order under Section 148A(d) was passed on 13th July 2022, the AO was required to obtain sanction from the PCCIT (Section 151(ii)).
• Instead, sanction was obtained from the PCIT, an authority under Section 151(i).
Court’s Ruling
• The sanction was obtained from an incompetent authority, vitiating the jurisdiction of the AO.
• Consequently, the order under Section 148A(d) dated 13th July 2022 and the notice under Section 148 dated 15th July 2022 were held bad in law and quashed.
• The writ petition was allowed, and all consequential proceedings were set aside.
Key Takeaways
1. Sanction is Jurisdictional:
Approval by the specified authority under Section 151 is not a mere formality but a condition precedent. Wrong approval renders reassessment invalid.
2. Role of TOLA Limited:
TOLA extended timelines only up to 30th June 2021for AYs expiring during the pandemic window. Beyond that, only higher authorities under Section 151(ii) can approve.
3. Greater Checks in New Regime:
The new reassessment regime prescribes a higher level of authority for cases beyond three years, ensuring greater scrutiny and protection for taxpayers.
4. Relief for Taxpayers:
This judgment is a strong precedent for assessees who have been subjected to reassessment notices issued with improper sanction.
Conclusion
The Bombay High Court’s ruling underscores that procedural safeguards are not to be diluted in the reassessment regime. The Revenue cannot bypass statutory checks under the guise of procedural irregularities. For taxpayers, this ruling reaffirms that jurisdictional lapses-especially regarding sanction under Section 151-can be a strong ground to invalidate reassessment proceedings.
The copy of the order is as under:
