- April 20, 2025
- Posted by: Amit Mundhra CA
- Category: Income Tax Cases
This article explains how assessment under section 148 works under the old and new tax laws. It also covers what changed after the Supreme Court’s decision in the Rajeev Bansal case and why some reassessment notices are now being cancelled by courts.
Introduction
In 2021, the government made big changes to how income tax reassessment works. Earlier, if the Income Tax Department wanted to reopen your old tax returns, they would use Sections 147 to 151 of the Income Tax Act. But from 1st April 2021, new rules came into effect. These new rules added more checks and balances—like giving the taxpayer a chance to respond before any notice is issued, and getting approvals from higher tax officers.
However, because of the COVID-19 pandemic and a law called TOLA (Taxation and Other Laws Relaxation Act), there was confusion about how these new rules would apply to reassessment notices issued during a short period—from 1st April to 30th June 2021.
To clear this up, the Supreme Court gave two important judgments:
- Ashish Agarwal case in 2022
- Rajeev Bansal case in 2024
These judgments explained how tax officers should deal with old notices issued during the transition and what approvals they must get to proceed with reassessments under the new law.
Recently, the Income Tax Appellate Tribunal (ITAT) followed these Supreme Court rulings while hearing two cases—Ramchand Thakurdas Jhamtani and Manish Financial both of ITAT Mumbai Bench. In both cases, ITAT said the reassessment was invalid because the tax officers didn’t follow the correct procedure or got approval from the wrong authority.
In this article, we’ll look at what these ITAT decisions said, what rules were not followed, and what lessons both taxpayers and the Income Tax Department can learn from them.
II. Key Takeaways from the ITAT Decisions
The rulings in Ramchand Thakurdas Jhamtani v. ACIT and Manish Financial v. ACIT reflect the strict application of the procedural framework and limitation periods laid down under the amended reassessment provisions introduced by the Finance Act, 2021, as interpreted by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal. The key principles emerging from these decisions are as follows:
1. Approval from the Correct Specified Authority under Section 151 is Mandatory
In both cases, the reassessment notices were issued beyond the 3-year threshold from the end of the relevant assessment year. As per Section 151(ii) of the amended Income Tax Act, for such cases, approval must be obtained from the Principal Chief Commissioner or equivalent authority. However, in both instances, the Assessing Officer merely obtained sanction from the Principal Commissioner, which was held to be jurisdictionally defective.
The ITAT held that failure to obtain sanction from the correct “specified authority” renders the entire reassessment proceeding void ab initio. The requirement is not a procedural formality but a jurisdictional precondition for the validity of notice under Section 148.
2. First Proviso to Section 149(1)(b) Limits the Retrospective Reach of the New Time Limits
In Manish Financial, the ITAT addressed the applicability of the 10-year reassessment window under the amended Section 149(1)(b). The Tribunal reiterated that the first proviso to this section bars the reopening of past assessments if the time limit under the unamended Section 149 had already expired as of 31.03.2021.
In the case of AY 2015–16, the 6-year limitation period expired on 31.03.2022. A notice issued on 29.07.2022 was, therefore, held to be barred by limitation, despite the larger window introduced by the new regime. This aligns with the Supreme Court’s holding that the extended 10-year period applies only prospectively, and cannot revive cases already barred under the old regime.
3. Relief under TOLA is Available Only in Limited Circumstances
While TOLA was enacted to provide procedural relief during the pandemic, its applicability is conditional. The ITAT in Manish Financial held that TOLA extensions apply only where the original time limit expired between 20.03.2020 and 31.03.2021.
Since the limitation in AY 2015–16 expired only on 31.03.2022, the Tribunal held that TOLA did not extend the limitation in that case. Therefore, notices issued after 01.04.2022 were not saved by TOLA and were rightly held to be time-barred.
4. Waiver of Approvals Under Ashish Agarwal is Limited
In both cases, the ITAT clarified that the Supreme Court in Ashish Agarwal waived the requirement of prior approval only for the purpose of Section 148A(b) notices. However, the requirement for prior approval under Section 148A(d) and Section 148 remains intact.
Accordingly, reassessment notices issued post 01.04.2021 must comply with the sanctioning process specified in Section 151. Non-compliance with this requirement renders the proceedings invalid.
5. Procedural Compliance is Jurisdictional and Non-Curable
The consistent view of the Tribunal is that these are not mere procedural lapses but go to the root of jurisdiction. The reassessment proceedings are vitiated in their entirety if approvals are taken from the wrong authority or if time limits are ignored. These defects cannot be cured by subsequent actions or arguments on merits.
III. Implications of the Tribunal’s Rulings
The decisions of the Income Tax Appellate Tribunal (ITAT) in Ramchand Thakurdas Jhamtani and Manish Financial hold significant implications for the administration of reassessment proceedings under the post-2021 regime. These rulings not only reiterate the binding nature of procedural compliance but also provide critical guidance for both tax authorities and taxpayers. The key implications are summarized below:
1. Jurisdictional Pre-conditions Are Non-Negotiable
The Tribunal has reaffirmed that jurisdictional safeguards such as obtaining sanction from the appropriate authority under Section 151 are not procedural formalities, but statutory preconditions. Any failure to adhere to these mandates invalidates the reassessment at inception. Assessing Officers must, therefore, be vigilant in identifying whether Section 151(i) or 151(ii) applies, based on the number of years elapsed from the end of the relevant assessment year.
2. Limitation Must Be Evaluated with Reference to the Old Regime
The first proviso to Section 149(1) places a clear restriction on retrospective application of the new 10-year time limit. The ITAT has endorsed the view taken by the Hon’ble Supreme Court in Rajeev Bansal—that if a case was time-barred under the unamended provisions as of 31.03.2021, it cannot be reopened under the new law, even if it qualifies under the extended threshold of ₹50 lakh.
This interpretation ensures that the new regime does not override vested rights, and prevents arbitrary reopening of long-concluded assessments.
3. TOLA Does Not Grant Blanket Extension
The Tribunal has clarified that TOLA’s benefit is contingent upon the limitation period originally falling within the pandemic-related window (i.e., between 20.03.2020 and 31.03.2021). If the original time limit expired after this period, TOLA has no application. This prevents misuse of TOLA to justify otherwise invalid notices and ensures that the relaxation law is interpreted strictly in line with its intent.
4. Ashish Agarwal Decision Must Be Read Narrowly
While Ashish Agarwal permitted old Section 148 notices (issued between 01.04.2021 and 30.06.2021) to be treated as show-cause notices under Section 148A(b), it did not waive the requirement for sanction under Section 148A(d) or final notice under Section 148. The ITAT has upheld this interpretation, reinforcing that post-approval requirements under Section 151 remain fully applicable under the new law.
5. Procedural Irregularities Cannot Be Cured Through Subsequent Justifications
Both rulings emphasize that once a notice or order is issued without meeting the statutory requirements—particularly those that are jurisdictional in nature—subsequent arguments on merits or technical validations cannot cure the defect. This creates a strong legal basis for taxpayers to challenge reassessment proceedings that suffer from procedural or jurisdictional lapses.
IV. To Sum Up
The ITAT rulings in Ramchand Thakurdas Jhamtani and Manish Financial provide much-needed clarity and reinforce the principle that procedural compliance is the cornerstone of valid reassessment proceedings under the amended Income Tax regime. These decisions are consistent with the jurisprudence laid down by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal, particularly with respect to jurisdictional approvals, limitation periods, and the applicability of TOLA.
By holding that approvals under the correct clause of Section 151 are mandatory and that expired cases under the old law cannot be revived through the new provisions, the ITAT has sent a clear message—revenue authorities must follow the law in both letter and spirit. Any deviation, even if unintentional, renders the reassessment void ab initio.
For taxpayers, these rulings offer a strong defense against arbitrary and time-barred reassessments. For the tax department, they serve as a compliance roadmap, urging greater procedural discipline and respect for statutory timelines.
As reassessment litigation continues to evolve post-2021, these judgments are likely to act as guiding precedents in numerous pending and future cases.
Download both the ITAT Judgements
Ramchand Thakurdas Jamtani Vs Addl Commissioner of Income Tax 19(3) ITAT Mumbai 28-02-2025
