Income Tax - Reassessment, Approval under Section 151, Specified Authority - The Assessing Officer (AO) had issued a notice under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2017-18, which was beyond the period of 3 years from the end of the relevant assessment year. The approval for the notice was obtained from the Commissioner of Income Tax, instead of the Principal Chief Commissioner or Chief Commissioner as required under the amended provisions of Section 151 - Whether the approval obtained from the Commissioner of Income Tax was valid or the approval ought to have been obtained from the Principal Chief Commissioner or Chief Commissioner as per the amended provisions of Section 151 - HELD - As per the amended provisions of Section 151, which came into effect from 1st April 2021, the approval for issuing the notice under Section 148 beyond a period of 3 years from the end of the relevant assessment year, ought to have been obtained from the Principal Chief Commissioner or Chief Commissioner and not the Commissioner of Income Tax. The Supreme Court in the case of Union of India v. Rajeev Bansal had clearly held that the specification of authority under Section 151 is directly co-related to the time when the notice is issued and non-compliance with the strict time limits prescribed under Section 151 affects the jurisdiction of the AO to issue the notice under Section 148. Since the approval was obtained from the Commissioner of Income Tax and not the Principal Chief Commissioner or Chief Commissioner, the reassessment proceedings were held to be invalid and the reassessment order was quashed – The appeal of the Revenue and the cross objection of the assessee are dismissed

2025-VIL-1567-ITAT-MUM

IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI

ITA No. 4253/Mum/2025

Assessment Year: 2017-18

Date of Hearing: 08.10.2025

Date of Pronouncement: 31.10.2025

ACIT (IT) – 1(2)(1)

BARCLAYS EXECUTION SERVICES LIMITED

CO No.235/Mum/2025

(Arising out of ITA No.4253/Mum/2025)

Assessment Year :2017-18

BARCLAYS EXECUTION SERVICES LIMITED

ACIT (IT) – 1(2)(1)

Assessee by: Shri Madhur Agrawal, Advocate

Revenue by: Shri Satya Pal Kumar, CIT DR

BEFORE

SHRI AMIT SHUKLA, JUDICIAL MEMBER

SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER

ORDER

PER AMIT SHUKLA (J.M):

The present appeal by the Revenue and the cross-objection by the assessee emanate from the order dated 19 March 2025 passed by the learned CIT(A)-55, Mumbai, relating to the assessment framed under section 147 read with section 144C for A.Y. 2017-18.

2. The Revenue has raised grounds, inter alia, challenging the decision of the CIT(A) in holding that approval for issue of notice under section 148 was required from the Principal Chief Commissioner in terms of section 151(ii), and not merely from the Commissioner. The grievance essentially revolves around the interpretation and temporal applicability of the substituted provisions of section 151 and their interplay with the Finance Act 2021 and the Supreme Court’s pronouncement in Union of India v. Rajeev Bansal (2024 SCC OnLine SC 2693).

3. The assessee, on the other hand, through its cross-objection, has assailed both the assumption of jurisdiction under section 147 and the addition made on merits towards allocation/recharges of support-service costs treated by the AO as FTS under the India–UK DTAA.

4. The backdrop of the dispute may briefly be delineated. Information was received on the Insight Portal that during FY 2016-17 the assessee remitted substantial sums aggregating to Rs.1027.41 crores and Rs.1593.02 crores to non-resident companies, accompanied by filing of Form 15CA. The AO formed a prima facie view that such remittances represented income chargeable to tax in India without corresponding deduction of TDS, and that no return of income had been filed. Hence, the AO recorded reasons to believe that income chargeable to tax had escaped assessment and initiated proceedings under section 148A.

5. A notice under section 148A(b) was issued on 1 June 2022, enclosing the relied-upon material. The assessee responded on 14 June 2022 with detailed explanations; nonetheless, the AO passed an order under section 148A(d) on 22 July 2022 and simultaneously issued a notice under section 148, after obtaining approval from CIT (IT-1), Mumbai. Subsequently, assessment was completed treating the support-service recharges of Rs.58.43 crores as FTS taxable under the DTAA.

6. The CIT(A), after a detailed examination of the statutory framework of section 151 and judicial pronouncements, held that the approval granted by the CIT (IT-1) was not by the “specified authority” prescribed under section 151(ii) as amended w.e.f. 1 April 2021. Since more than three years had elapsed from the end of A.Y. 2017-18 at the time of issuance of notice under section 148, the approval ought to have been obtained from the Principal Chief Commissioner of Income Tax. Accordingly, the CIT(A) quashed the re-assessment order as void ab initio, rendering the grounds on merits academic.

“Thus , it is clear that in the instant case , the approval of the Principal CCIT was required to be taken before issuing the impugned notice u/s 148 of the Act dated 22.07.2022 , since the said date was clearly beyond the prescribed period of three years from the end of the relevant AY . The appellant has submitted documentary evidence to establish that in its case, approval was taken from the Commissioner of Income Tax and not PCCIT/CCIT. As per the amended provisions of section 151 of the Income Tax Act , the specified authority for giving sanction for section 148 and 148 A of the Act in the case of the appellant for the instant AY will be PCCIT/CCIT , since more than three years have elapsed from the end of relevant AY 2017-18. The Hon’ble Supreme Court has clearly stated in the above discussed judgment of Rajeev Bansal (supra) wherein it was clarified that :-“Although this Court waived off the requirement of obtaining prior approval under Section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under Section 148A(d) or issuing a notice under Section 148. These notices ought to have been issued following the time limits specified under Section 151 of the new regime read with TOLA, where applicable.”

7.1.10 The order u/s 148A (d) of the Act dated 22.07.2022 was passed by the AO. On perusal of order, the AO has categorically mentioned in para 3 that it is a fit case to issue notice u/s 148 of the Act with the approval of the CIT(IT)-1,Mumbai . Further, in para 5 of this order, it is clearly stated that the order u/s.148A(d) is passed with the prior approval of CIT-IT-1, Mumbai. The approval letter dated 148A(d) dated 21.07.2022 has also been mentioned in para 5 of the order stating clearly that the approval was obtained from CIT (IT)-1, Mumbai (WZ), whereas the same should have been approved by the Hon’ble PCCIT, International Tax , New Delhi/CCIT(IT), WZ , Mumbai and not by CIT(IT) , Mumbai .Therefore , it is clear that the impugned notice issued by the AO under section 148 of the Act dated 22.07.2022 and order u/s 148A(d) of the Act dated 22.07.2022 was issued without obtaining approval from correct appropriate authority is invalid and the assessment done under section 147 r.w.s. 144(13) of the Act is liable to be quashed.

7.1.11 Since the impugned order u/s 147 rws 144C(3) of the Act stands quashed based on the legal contention that the impugned notice u/s 148 of the Act dated 22.07.2022 for AY 2017-18 has been issued without approval of the specified authority as discussed above , the other legal contentions raised by the appellant regarding the validity of assessment proceedings are not required to be adjudicated .As a result, Ground 1 of appeal is considered as partly allowed.

7.1.12 Since the impugned reassessment order dated 11.07.2023 u/s 147 rws 144C(3) of the Act gets quashed on the legal ground raised by the appellant, the other grounds of appeal disputing the addition on merits have become infructuous and hence not required to be adjudicated. Therefore, Grounds 2 to 9 of appeal are being considered as dismissed for statistical purposes.

7. We have carefully considered the rival submissions and the entire record. The chronology of events is not in dispute and is tabulated below for clarity:

Particulars	Date
1st Reassessment Notice	29-Jun-21
Judgment in case of Ashish Agarwal	04-May-22
Issuance of show cause notice under section 148A(b) of the Act	01-Jun-22
Response submitted by the Asssesse against 148A(b) notice	14-Jun-22
Order passed by the AO under section 148A(d) of the Act	22-Jul-22
2nd Reassessment Notice	22-Jul-22
Letter received from Office of CIT(IT)-1 stating that approval has been accorded by CIT(IT)-1 under section 151	21-Jul-22

8. The record reveals that the first notice u/s 148 dated 29 June 2021 was issued during the extended period permitted under TOLA (ending 30 June 2021). By virtue of the Supreme Court’s decision in Union of India v. Ashish Agarwal (444 ITR 1), such notices are to be treated as deemed notices under section 148A(b) of the new regime. Consequently, the subsequent order under section 148A(d) and notice under section 148 issued on 22 July 2022 must comply with the new section 151 which mandates prior sanction from the specified authority.

9. Section 151, as substituted by the Finance Act 2021, draws a clear distinction between cases where a notice is issued within three years and those issued after three years but before ten years from the end of the relevant assessment year. In the former, the approval must emanate from the Principal Commissioner or Commissioner; in the latter, it must be accorded by the Principal Chief Commissioner or Chief Commissioner. Since the impugned notice was issued beyond three years from A.Y. 2017-18, the sanction of the Principal Chief Commissioner was imperative. Admittedly, approval was obtained only from the CIT (IT-1), Mumbai.

10. The issue is no longer res integra in view of the law laid down by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal (2024 SCC OnLine SC 2693), which has succinctly explained the scheme of Section 151 under the old and new regimes and the role of TOLA in extending time limits during the pandemic. The Apex Court emphasized that the specification of authority is inseparably linked to the elapsed time from the end of the assessment year, and that non-compliance goes to the root of jurisdiction.

73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments Sri krishna (P.) Ltd. v. ITO [1996] 87 Taxman 315/221 ITR 538 (SC)/[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below:

Regime	Time limits	Specified authority
Section 151(2) of the old regime	Before expiry of four years from the end of the relevant assessment year	Joint Commissioner
Section 151(1) of the old regime	After expiry of four years from the end of the relevant assessment year	Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner
Section 151(i) of the new regime	Three years or less than three years from the end of the relevant assessment year	Principal Commissioner or Principal Director or Commissioner or Director
Section 151(ii) of the new regime	More than three years have elapsed from the end of the relevant assessment year	Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General

74. The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime:

(i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and

(ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

75. After 1 April 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of Section 151 of the new regime is thus:

(i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and

(ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

76. Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148.

77. Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will accordingly extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(i) has an extended time till 30 June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021.

78. For example, the three year time limit for assessment year 2017-2018 falls for completion on 31 March 2021. It falls during the time period of 20 March 2020 and 31 March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till 30 June 2021.

79. Under Finance Act 2021, the assessing officer was required to obtain prior approval or sanction of the specified authorities at four stages:

a. Section 148A(a) - to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

b. Section 148A(b) - to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022;33

c. Section 148A(d) - to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and

d. Section 148 - to issue a reassessment notice.

80. In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before various High Courts "shall be deemed to have been issued under section 148-A of the Income-tax Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b)." Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under section 151 for Section 148A(b). It is well established that this Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law High Court Bar Association v. State of U P [2024] 160 taxmann.com 32/299 Taxman 21 (SC)/[2024] 6 SCC 267.

81. This Court in Ashish Agarwal (supra) directed the assessing officers to "pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned." Further, it directed the assessing officers to issue a notice under Section 148 of the new regime "after following the procedure as required under section 148-A." Although this Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under section 148A(d) or issuing a notice under section 148. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable.

11. From the aforesaid judgment of the Hon’ble Supreme Court now, it is well settled that if the three-year time limit for A.Y. 2017-18 falls for completion on 31 March 2021 as contemplated under TOLA, resultantly, the authorities specified u/s 151(i) of the new regime could grant sanction till 30 June 2021. In paragraph 79 of the judgment, the Court highlighted that under the Finance Act 2021, the Assessing Officer was required to obtain prior approval or sanction of the specified authorities at four distinct stages, including those under sections 148A(d) and 148, which were never waived. Thus, following the principles laid down by the Hon’ble Supreme Court, we hold that the Assessing Officer was required to obtain prior approval from the Principal Chief Commissioner or Chief Commissioner u/s 151 under the new regime before passing the order u/s 148A(d) or issuing the notice u/s 148.

12. This principle has been reiterated by the Hon’ble Jurisdictional High Court also in Holiday Developers (P) Ltd. v. ITO [(2024) 159 taxmann.com 178 (Bom)] wherein it has been held that where more than three years had expired from end of assessment year 2018-19, sanctioning authority under section 151(ii) should have been the Principal Chief Commissioner and not the Principal Commissioner, and thus, the order under section 148A(d) and notice under section 148 issued on basis of approval granted by the Principal Commissioner were to be quashed and set aside.

“where more than three years had expired from end of assessment year 2018-19, sanctioning authority under section 151(ii) should have been Principal Chief Commissioner and not Principal Commissioner and, thus, order under section 148A(d) and notice under section 148 issued on basis of approval granted by Principal Commissioner were to be quashed and set aside. On similar lines, the assessee has argued that in its case, since more than three years had expired from the end of impugned AY 2017-18 at the time of issue of notice u/s.148 of the Act, sanctioning authority under section 151(ii) should have been Principal Chief Commissioner and not Commissioner of Income Tax, and, thus, order under section 148A(d) and notice under section 148 issued on basis of approval granted by Commissioner of Income Tax were to be quashed and set aside.”

13. On perusal of the decision of the jurisdictional High Court, it is noted that the facts of the present case are on identical footing. Since more than three years had expired from the end of the impugned assessment year 2017-18 at the time of issuance of notice under section 148, the sanctioning authority under section 151(ii) should necessarily have been the Principal Chief Commissioner and not the Commissioner of Income Tax. Accordingly, we find that the order of the CIT(A) is in consonance with law and requires no interference.

14. The learned counsel for the assessee submitted that if the Revenue’s appeal is dismissed, the cross-objection should be treated as academic and kept open. We therefore treat the cross-objection as infructuous, keeping the issues raised therein open.

15. In the result, the appeal filed by the Revenue is dismissed and the cross-objection filed by the assessee is dismissed as infructuous.

Order pronounced on 31st October, 2025.

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