Beyond three years, who has to approve the reopening — and what if the wrong officer signed?
Beyond three years the sanction must come from the authority in s.151(ii). Approval by the Principal Commissioner under s.151(i) is no approval at all, and the s.148A(d) order and s.148 notice built on it were quashed.
Decided by the High Court (Bombay High Court — K.R. Shriram and Dr. N.K. Gokhale, JJ. (judgment by K.R. Shriram, J.)) on 2023-08-25, reported as Writ Petition No. 4888 of 2022; [2023] 154 taxmann.com 159 (Bombay) / [2023] 457 ITR 647 (Bombay). It bears on section 147, section 148, section 148A, section 149, section 151 of the Income Tax Act 1961, in Reassessment & Reopening matters.
Sanction is the cheapest ground to check and the one most often defective. It takes one line in your reply: name the officer who approved, name the sub-clause of s.151 that applied on the elapsed period, and show they do not match.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner, an NBFC classified as an asset finance company, filed its return for AY 2016-17 on 28 November 2016 declaring Rs. 44,92,46,370, and a revised return on 28 March 2018 declaring Rs. 50,67,32,580. The case was scrutinised: a s.143(2) notice of 5 September 2018 was followed by a s.142(1) notice of 5 December 2018, to which the petitioner replied on 6 December 2018 with a transaction-wise summary of expenditure on software consumables. The assessment order under s.143(3) dated 23 December 2018 made no adjustment. Almost three years later, on 25 June 2021, a notice under s.148 issued under the pre-substitution provisions, recording that the satisfaction of Range 8(2), Mumbai had been obtained. After Union of India v. Ashish Agarwal the Assessing Officer issued a show-cause notice dated 31 May 2022 under s.148A(b), treating the earlier s.148 notice as a s.148A(b) notice; the annexure alleged that Rs. 6,41,87,931 debited for software consumables was capital expenditure attracting 60 per cent depreciation, so that 40 per cent, Rs. 2,56,75,172, should be disallowed. The petitioner responded on 9 June and 7 July 2022. The Assessing Officer passed the order under s.148A(d) on 31 July 2022 and issued the s.148 notice the same day, and the petitioner challenged the show-cause notice, the order and the notice.
The petition was allowed on two grounds and the s.148A(d) order and s.148 notice, both dated 31 July 2022, were quashed. First, approval for the s.148A(d) notice had not been properly obtained: where the notice to reopen issues beyond three years the sanction must come from the authority specified in the amended s.151(ii) and not from the Principal Commissioner under s.151(i), and TOLA, which extends time limits, does not alter the scope of s.151 — the sanction of the specified authority has to be obtained in accordance with the law in force when it is obtained. Second, the notice to reopen had been issued on a change of opinion, which is not permissible: the Assessing Officer had allowed the software consumables expenditure as revenue expenditure after being given a transaction-wise break-up during the original assessment, and could not now treat it as capital expenditure. The Court expressly declined to consider the other grounds raised, leaving them to be considered in some other matter at the appropriate stage (paras 26, 37, 41, 42).
On sanction, the Court held that TOLA relaxed time limits where a limitation for completing an action fell in the specified window, and did no more: it did not amend or alter the scope of s.151, and a subordinate notification extending dates from 31 March 2021 to 30 June 2021 cannot apply once the Finance Act 2021 is in force, since subordinate legislation cannot override a statute enacted by Parliament. The sanction must therefore be obtained under the law existing when it is obtained, which here meant the amended s.151(ii), and sanction taken under s.151(i) made the order and notice bad in law (para 26). The Court followed a line of its own decisions holding that TOLA cannot apply to reassessment for AY 2015-16 and later years — Tata Communications Transformation Services Ltd., J.M. Financial & Investment Consultancy Services (P.) Ltd., MA Multi-Infra Development (P.) Ltd., DCW Ltd., Soumya Girdhari Agarwal, Voltas Ltd. and others (para 27 onwards). On change of opinion, the assessee had debited Rs. 6,41,87,931 for software consumables and had given a transaction-wise break-up by letter of 6 December 2018, which the Assessing Officer considered before passing the s.143(3) order of 23 December 2018; reassessment cannot be used to have a relook at documents already filed and considered, and treating as capital what had been allowed as revenue was a clear change of opinion (para 37). The Court set out Kelvinator, in which the Supreme Court drew the difference between the power to review and the power to reassess and treated 'change of opinion' as an in-built test against abuse of power (para 38), and noted Seema Gupta v. ITO to the same effect (para 39). Answering the Revenue's plea that setting aside the notice for want of proper sanction would stall the reassessment altogether, the Court relied on Sudesh Taneja for the propositions that a taxing statute is construed strictly, that equity has no place in taxation, and that there is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him (para 40).
The Assessing Officer cannot initiate reassessment proceedings to have a relook at the documents that were filed and considered by him in the original assessment proceedings as the power to reassess cannot be exercised to review an assessment.
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Handle my notice → Ask a CA on WhatsAppBeyond three years the sanction must come from the authority in s.151(ii). Approval by the Principal Commissioner under s.151(i) is no approval at all, and the s.148A(d) order and s.148 notice built on it were quashed. This was decided by the High Court (Bombay High Court — K.R. Shriram and Dr. N.K. Gokhale, JJ. (judgment by K.R. Shriram, J.)) and bears on section 147, section 148, section 148A, section 149, section 151 of the Income Tax Act 1961. It is reported as Writ Petition No. 4888 of 2022; [2023] 154 taxmann.com 159 (Bombay) / [2023] 457 ITR 647 (Bombay). Sanction is the cheapest ground to check and the one most often defective. It takes one line in your reply: name the officer who approved, name the sub-clause of s.151 that applied on the elapsed period, and show they do not match. If it applies to you, the first step is this: Ask for a copy of the sanction under s.151 — you are entitled to know who approved and under which limb.
The petitioner, an NBFC classified as an asset finance company, filed its return for AY 2016-17 on 28 November 2016 declaring Rs. 44,92,46,370, and a revised return on 28 March 2018 declaring Rs. 50,67,32,580. The case was scrutinised: a s.143(2) notice of 5 September 2018 was followed by a s.142(1) notice of 5 December 2018, to which the petitioner replied on 6 December 2018 with a transaction-wise summary of expenditure on software consumables. The assessment order under s.143(3) dated 23 December 2018 made no adjustment. Almost three years later, on 25 June 2021, a notice under s.148 issued under the pre-substitution provisions, recording that the satisfaction of Range 8(2), Mumbai had been obtained. After Union of India v. Ashish Agarwal the Assessing Officer issued a show-cause notice dated 31 May 2022 under s.148A(b), treating the earlier s.148 notice as a s.148A(b) notice; the annexure alleged that Rs. 6,41,87,931 debited for software consumables was capital expenditure attracting 60 per cent depreciation, so that 40 per cent, Rs. 2,56,75,172, should be disallowed. The petitioner responded on 9 June and 7 July 2022. The Assessing Officer passed the order under s.148A(d) on 31 July 2022 and issued the s.148 notice the same day, and the petitioner challenged the show-cause notice, the order and the notice. The matter was decided on 2023-08-25 by the High Court (Bombay High Court — K.R. Shriram and Dr. N.K. Gokhale, JJ. (judgment by K.R. Shriram, J.)). On those facts the High Court held as follows. The petition was allowed on two grounds and the s.148A(d) order and s.148 notice, both dated 31 July 2022, were quashed. First, approval for the s.148A(d) notice had not been properly obtained: where the notice to reopen issues beyond three years the sanction must come from the authority specified in the amended s.151(ii) and not from the Principal Commissioner under s.151(i), and TOLA, which extends time limits, does not alter the scope of s.151 — the sanction of the specified authority has to be obtained in accordance with the law in force when it is obtained. Second, the notice to reopen had been issued on a change of opinion, which is not permissible: the Assessing Officer had allowed the software consumables expenditure as revenue expenditure after being given a transaction-wise break-up during the original assessment, and could not now treat it as capital expenditure. The Court expressly declined to consider the other grounds raised, leaving them to be considered in some other matter at the appropriate stage (paras 26, 37, 41, 42).
On sanction, the Court held that TOLA relaxed time limits where a limitation for completing an action fell in the specified window, and did no more: it did not amend or alter the scope of s.151, and a subordinate notification extending dates from 31 March 2021 to 30 June 2021 cannot apply once the Finance Act 2021 is in force, since subordinate legislation cannot override a statute enacted by Parliament. The sanction must therefore be obtained under the law existing when it is obtained, which here meant the amended s.151(ii), and sanction taken under s.151(i) made the order and notice bad in law (para 26). The Court followed a line of its own decisions holding that TOLA cannot apply to reassessment for AY 2015-16 and later years — Tata Communications Transformation Services Ltd., J.M. Financial & Investment Consultancy Services (P.) Ltd., MA Multi-Infra Development (P.) Ltd., DCW Ltd., Soumya Girdhari Agarwal, Voltas Ltd. and others (para 27 onwards). On change of opinion, the assessee had debited Rs. 6,41,87,931 for software consumables and had given a transaction-wise break-up by letter of 6 December 2018, which the Assessing Officer considered before passing the s.143(3) order of 23 December 2018; reassessment cannot be used to have a relook at documents already filed and considered, and treating as capital what had been allowed as revenue was a clear change of opinion (para 37). The Court set out Kelvinator, in which the Supreme Court drew the difference between the power to review and the power to reassess and treated 'change of opinion' as an in-built test against abuse of power (para 38), and noted Seema Gupta v. ITO to the same effect (para 39). Answering the Revenue's plea that setting aside the notice for want of proper sanction would stall the reassessment altogether, the Court relied on Sudesh Taneja for the propositions that a taxing statute is construed strictly, that equity has no place in taxation, and that there is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him (para 40). In the words reproduced by the source cited on this page: "The Assessing Officer cannot initiate reassessment proceedings to have a relook at the documents that were filed and considered by him in the original assessment proceedings as the power to reassess cannot be exercised to review an assessment." The decision followed or applied Tata Communications Transformation Services Ltd. v. ACIT [2022] 443 ITR 49 (Bom.) — followed; J.M. Financial & Investment Consultancy Services (P.) Ltd. v. ACIT [2023] 451 ITR 205 (Bom.) — followed; Sidhmicro Equities (P.) Ltd. v. Dy. CIT [2023] 150 taxmann.com 460 (Bom.) — followed; Godrej Industries Ltd. v. B.S. Singh, Dy. CIT [2015] 377 ITR 1 (Bom.) — followed; K.K. Agarwal & Sons HUF v. ITO, WPA No. 25770 of 2022, 14 December 2022 — followed; CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) — followed; Seema Gupta v. ITO [2022] 288 Taxman 519 (Delhi) — followed.
It was decided by the High Court on 2023-08-25 and is reported as Writ Petition No. 4888 of 2022; [2023] 154 taxmann.com 159 (Bombay) / [2023] 457 ITR 647 (Bombay). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 147, section 148, section 148A, section 149, section 151, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The petition was allowed on two grounds and the s.148A(d) order and s.148 notice, both dated 31 July 2022, were quashed. First, approval for the s.148A(d) notice had not been properly obtained: where the notice to reopen issues beyond three years the sanction must come from the authority specified in the amended s.151(ii) and not from the Principal Commissioner under s.151(i), and TOLA, which extends time limits, does not alter the scope of s.151 — the sanction of the specified authority has to be obtained in accordance with the law in force when it is obtained. Second, the notice to reopen had been issued on a change of opinion, which is not permissible: the Assessing Officer had allowed the software consumables expenditure as revenue expenditure after being given a transaction-wise break-up during the original assessment, and could not now treat it as capital expenditure. The Court expressly declined to consider the other grounds raised, leaving them to be considered in some other matter at the appropriate stage (paras 26, 37, 41, 42). It arises in Reassessment & Reopening matters, on section 147, section 148, section 148A, section 149, section 151 of the Income Tax Act 1961, and was decided by Bombay High Court — K.R. Shriram and Dr. N.K. Gokhale, JJ. (judgment by K.R. Shriram, J.). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Count the elapsed period from the end of the relevant assessment year to the date of the notice, and check which limb of s.151 that puts you in. The TOLA limb of this decision must now be read against Rajeev Bansal; the wrong-authority limb was applied afterwards in Zentest Software.
Overruled. This judgment was set aside by the Supreme Court in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 / (2024) 469 ITR 46 / 340 CTR 865, decided 3 October 2024, which held that TOLA extends the time limit for the grant of sanction by the authority specified under s.151 — the exact proposition this judgment rejected. Anyone citing this decision for the TOLA and sanction point is citing a judgment that no longer stands on it. Two qualifications go with that. The Supreme Court decision addresses the TOLA and s.151 limb. This judgment rested on a second and independent ground — that the reopening was a change of opinion on the software consumables expenditure of Rs. 6,41,87,931, which the Assessing Officer had already examined on a transaction- wise break-up before passing the s.143(3) order — and what became of that ground is not established in this entry. Do not assume it survives the setting aside without checking the Supreme Court order itself, and do not assume it was disturbed either. Second, the separate proposition that approval by the wrong specified authority destroys jurisdiction did not disappear with Rajeev Bansal: what Rajeev Bansal decided is that TOLA extends the time within which the specified authority may grant sanction, not that sanction by an authority other than the one the section names is good. That distinction has been applied since, and the ground remains worth checking in every reopening beyond three years — name the officer who approved, name the sub-clause of s.151 that applied on the elapsed period, and see whether they match. What would change the entry is a decision addressing the change-of-opinion ground of this judgment directly, or a statutory validation of approvals already granted. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Writ Petition No. 4888 of 2022 — not 4882 — decided 25 August 2023 by K.R. Shriram and Dr. N.K. Gokhale, JJ., for assessment year 2016-17. The case was set aside by the Supreme Court in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70, which held that TOLA does extend the time for sanction under s.151. Note that the petition succeeded on two independent grounds: the sanction ground and a change-of-opinion ground on software consumables expenditure of Rs. 6,41,87,931 that the Assessing Officer had already examined and allowed. The Court expressly left the petitioner's other grounds undecided at paragraph 42. The separate holding that approval by the wrong specified authority destroys jurisdiction was applied after Rajeev Bansal in Zentest Software. THREE THINGS ARE UNRESOLVED AND A READER SHOULD KNOW ABOUT THEM. First, the date is in conflict. One copy of Writ Petition No. 4888 of 2022 is headed 23 August 2023, while the Bombay High Court itself, in Bhansali and Co. v. DCIT (16 October 2023), cites this decision as 'Writ Petition No. 4888 of 2022 dated 25th August 2023'. The date recorded here is 25 August 2023, because a court's own citation of a sister judgment outweighs an automatically generated header line, but the conflict is unresolved and should be settled against the report at (2023) 457 ITR 647 (Bom). Second, the free electronic copy carries only the header and counsel names for this judgment, with no body text, so the quotation used in this entry and its paragraph number were confirmed indirectly, from the Bombay High Court's own reproduction of paragraphs 36 to 39 in Mira Bhavin Mehta v. ITO (13 February 2024), where the quoted sentence sits in paragraph 37 and is the Court's own reasoning. Third, the signature block could not be read: the coram as printed gives the second judge's name in full as 'Dr. Neela Kedar Gokhale', which the bench line here abbreviates to 'Dr. N.K. Gokhale', and the sections list — 147, 148, 148A, 149, 151 — has not been checked against the body of the judgment. For the same reason the entry's source is a published digest of the judgment rather than a full-text copy, and the full text should be taken from the law report before any longer passage is quoted. One last point on how the entry is to be used. The decision's continuing value is as a statement of the change-of-opinion principle applied to a reopening after a completed scrutiny in which the very item was examined, and as a reminder that the Court expressly refused to soften the result on the Revenue's plea that the reassessment would otherwise fail altogether, relying on Sudesh Taneja for the proposition that equity has no place in taxation. What Union of India v. Rajeev Bansal did with the second, independent ground of this decision — that the reopening was a change of opinion — is not established here; that judgment has not been examined for this entry, and what is recorded is only that this case was set aside. The Court also declined to consider the petitioner's remaining grounds, including that the s.148A(d) order was signed by the wrong authority (para 42). This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The petition was allowed on two grounds and the s.148A(d) order and s.148 notice, both dated 31 July 2022, were quashed. First, approval for the s.148A(d) notice had not been properly obtained: where the notice to reopen issues beyond three years the sanction must come from the authority specified in the amended s.151(ii) and not from the Principal Commissioner under s.151(i), and TOLA, which extends time limits, does not alter the scope of s.151 — the sanction of the specified authority has to be obtained in accordance with the law in force when it is obtained. Second, the notice to reopen had been issued on a change of opinion, which is not permissible: the Assessing Officer had allowed the software consumables expenditure as revenue expenditure after being given a transaction-wise break-up during the original assessment, and could not now treat it as capital expenditure. The Court expressly declined to consider the other grounds raised, leaving them to be considered in some other matter at the appropriate stage (paras 26, 37, 41, 42).
TaxSphere, “Siemens Financial Services Pvt Ltd v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/siemens-financial-services-v-dcit/ (validity last checked 2026-08-19)
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What happened to the thousands of s.148 notices issued under the old rules after the law changed in 2021?
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