Section 151

Section 151 — the law in short

What the courts have decided on section 151, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Union of India v Rajeev Bansal Supreme CourtCuts both ways
  Your notice was issued in the 1 April to 30 June 2021 window. Was it saved by TOLA, or is it dead?
  Saved, but only within limits. TOLA extends the time limit for issuing the reassessment notice and for the sanction under s.151. It does not extend anything else, and every other defence survives — including the surviving-period computation for your own assessment year.
• Union of India v Ashish Agarwal Supreme CourtHelps department
  What happened to the thousands of s.148 notices issued under the old rules after the law changed in 2021?
  Reported as treating those notices as s.148A(b) show-cause notices instead of quashing them, with directions on how they were to proceed.
• CIT v S. Goyanka Lime & Chemical Ltd Supreme CourtHelps taxpayer
  Is 'Yes, I am satisfied' enough for the sanctioning authority to write?
  No. Recorded that way, the satisfaction is mechanical and shows no sign that the officer's reasons were examined. The s.148 notices were held unsustainable and the department's SLP was dismissed.
• Sri Krishna Pvt Ltd v ITO Supreme CourtHelps department
  I disclosed my hundi loans in the return and the officer accepted them. He now says the same lenders were bogus in the next year. Can he reopen?
  Yes. The Supreme Court held that a false disclosure is not a full and true disclosure. Whether a loan shown in the return is genuine is itself a material fact, not an inference to be drawn by the officer, so an assessee who records bogus loans has failed the duty section 147(a) imposes. That the officer could have investigated at the time, and did so in the following year, does not relieve the assessee of that duty. At the notice stage the enquiry is only whether reasonable grounds exist, not whether escapement is proved. The appeals were dismissed with costs.
• ITO v Lakhmani Mewal Das Supreme CourtHelps taxpayer
  How strong does the officer's material have to be before he can reopen?
  Strong enough to have a live link with the belief. Material that is vague, indefinite, distant or far-fetched will not do. The statute says reason to believe, not reason to suspect.
• Chhugamal Rajpal v S.P. Chaliha Supreme CourtHelps taxpayer
  The sanctioning authority just wrote 'yes' and signed. Is that a sanction?
  No. The officer had set out no reason for concluding it was a fit case, and the Commissioner merely noted the word yes and signed beneath it. Neither s.147 nor s.151 was satisfied, so the officer had no jurisdiction.
• Biswajit Deb v Union of India High CourtHelps taxpayerValidity unconfirmed
  The recorded reasons admit the AO had no time to verify my transactions. Is the reopening valid?
  No. The Gauhati High Court quashed the s.148 notice on two independent grounds: an officer who records that he could not identify the transactions for want of time has formed no reason to believe, and the s.151 approval was mechanical.
• PCIT v MDLR Hotels Pvt Ltd High CourtHelps taxpayerValidity unconfirmed
  The Additional Commissioner approved my search assessment along with hundreds of others in a single letter that says nothing but 'approved'. Is that enough under s.153D?
  No. Where the approving authority accorded approval to 246 proposed assessments by one letter that merely directed that the orders be passed before limitation and copies sent for record, the Delhi High Court held there was no substantial question of law in the Tribunal's conclusion that the approval was mechanical, and dismissed eighteen Revenue appeals. Approval that neither mentions the seized material nor shows that the draft orders were examined is a ritual, not the safeguard s.153D creates.
• Rahul Sachan v Income Tax Officer High CourtHelps department
  The officer passed the order under section 148A(d) without answering a single point in my reply. Can I get the reassessment quashed on that ground alone?
  No, not on that ground alone. The Allahabad High Court held that section 148A does not oblige the Assessing Officer to deal with objections pointwise or to record detailed reasons. The old requirement of recording a 'reason to believe' has been done away with and replaced by a lighter, more subjective decision that it is a 'fit case' to issue a notice under section 148, on information that suggests escapement. The officer must not act whimsically, on extraneous material, or in ignorance of the reply, but an overall consideration is enough. Reading in a duty to give reasons for rejecting each objection would reintroduce 'reason to believe' by the back door. The petition was dismissed, with all merit defences left open.
• Hexaware Technologies Ltd v ACIT High CourtHelps taxpayerPartly overruled — read this first
  Your s.148 notice came from your own local officer, not from the faceless unit. Does that matter?
  In Bombay, yes. After the CBDT scheme notified under s.151A on 29 March 2022, only a Faceless Assessing Officer acting through automated allocation can issue a reassessment notice. There is no concurrent jurisdiction, and a notice from the jurisdictional officer was quashed.
• Sevensea Vincom P Ltd v PCIT High CourtHelps taxpayerValidity unconfirmed
  They reopened AY 2016-17 in 2022 for under Rs 50 lakh. Is the notice time-barred?
  Yes. The Jharkhand High Court held the three-year period for AY 2016-17 ended on 31 March 2020, and because the Department itself alleged escapement of only Rs. 39,21,450 the extended ten-year window in s.149(1)(b) was unavailable. The whole proceeding was without jurisdiction.
• Ganesh Dass Khanna v ITO High CourtHelps taxpayerValidity unconfirmed
  I got a section 148 notice for 2016-17 where the alleged escaped income is under Rs 50 lakh. Is three years the limit, or can they use ten?
  Three years. The Delhi High Court held that where the escaped income is below Rs 50 lakh, clause (a) of section 149(1) applies and no notice under section 148 may issue after three years from the end of the relevant assessment year. It quashed the section 148A(d) orders and the consequent section 148 notices for assessment years 2016-17 and 2017-18 in a batch of writ petitions. It also declared bad in law paragraphs 6.1 and 6.2(ii) of the CBDT Instruction of 11 May 2022, to the extent they propound the travel back in time theory, holding those paragraphs ultra vires section 119 and section 149(1) and, in any event, vague.
• Susai Amalanathan Antoni Vincent v Income Tax Officer High CourtHelps department
  The section 148A order does not say the information came from the Risk Management Strategy or an audit objection. Does that make the reassessment bad for want of jurisdiction?
  No. The Madras High Court held that the Risk Management Strategy is merely a phrase for an evolving departmental strategy covering all the sources from which information may be collated, and no limitation should be placed on it. The Board's circulars of 10 and 13 December 2021 list many permissible sources, and the Court held there can be no fetters on an Assessing Officer's power to gather information on which reassessment may be initiated. Here the officer had referred to information from the Director of Income Tax (Investigation and Criminal Intelligence), which sufficed for section 148A. The Rs 50 lakh condition in section 149(1)(b) was satisfied on the sale of 19 plots for Rs 1,50,25,585, and sanction under section 151 had been obtained. The petition was dismissed.
• Mon Mohan Kohli v ACIT High CourtHelps taxpayerValidity unconfirmed
  I got a section 148 notice after 1 April 2021 under the old reassessment provisions. Could the department still use them because of the COVID relaxation notifications?
  No, on this decision. The Delhi High Court held that the substitution of sections 147 to 151 by the Finance Act 2021 repealed the old provisions and replaced them, and that the Explanations in the notifications of 31 March 2021 and 27 April 2021, purporting to keep the old procedure alive until 30 June 2021, could not do so. Section 3(1) of the relaxation Act allows the Central Government to extend time limits and no more; a delegated legislation cannot vary the date on which Parliament's provisions take effect. Section 6 of the General Clauses Act does not save the old notices, because the new Act manifests an intention to destroy the old procedure.
• PCIT v N.C. Cables Ltd High CourtHelps taxpayerValidity unconfirmed
  The sanction for my reassessment notice is just the word approved on the file. Is that enough under section 151?
  No. The Delhi High Court held that section 151 requires the competent authority to apply his mind and form an opinion, and that the mere appending of the expression approved says nothing. He need not record elaborate reasons, but satisfaction must be recorded, which can be reflected in the briefest possible manner; here the exercise was ritualistic and formal rather than meaningful, which defeats the rationale of the safeguard of approval by a higher ranking officer. The Court also upheld the concurrent findings that the Assessing Officer had made only a perfunctory inquiry before adding Rs 1.35 crore under section 68. Both questions were answered in the assessee's favour.
• CIT v SPL's Siddhartha Ltd High CourtHelps taxpayer
  My reopening notice was sanctioned by the Commissioner instead of the Joint Commissioner. Does approval by a more senior officer cure the defect?
  No. The Delhi High Court held that where section 151 names the Joint Commissioner as the authority to be satisfied, sanction by the Commissioner is not compliance, even though he is senior. The file here was routed through the Additional Commissioner, but he merely endorsed "CIT may kindly accord sanction" and applied no mind of his own. The Court held this was not an irregularity curable under section 292B. Where a statute requires a thing to be done in a certain manner it must be done in that manner alone, and the satisfaction of one authority cannot be substituted by that of another. The Revenue's appeal was dismissed.
• German Remedies Ltd v DCIT High CourtHelps taxpayer
  My scrutiny assessment is being reopened more than four years later, and the Commissioner signed the section 151 approval the same day the file reached him. Can I have the notice quashed?
  Yes. The Bombay High Court quashed the section 148 notices and the orders rejecting the objections. Three things were fatal. The recorded reasons were unsustainable: the tax deduction details were on record in Form No.27 and in the tax audit report, and the closing stock valuation had already been examined in the original assessment. Reopening beyond four years without alleging any failure to disclose fully and truly cannot stand. And the approval under section 151 showed non-application of mind - the Assessing Officer carried the file to the Commissioner and approval was granted the same day, in his presence, without considering either the four-year bar or whether there had been any failure to disclose.
• Nashit Suhail Ansari v ITO ITATHelps taxpayerValidity unconfirmed
  My client has a section 148 notice for AY 2018-19 saying he sold bitcoin and did not file a return. He was a student and made a profit of Rs 48,000. Is there anything in the notice itself?
  There may well be. The Mumbai Bench held that where AY 2018-19 was reopened by a notice dated 19 April 2022, that is beyond three years from the end of the assessment year, so the sanction under s.151 had to come from the Principal Chief Commissioner or Chief Commissioner; approval taken from the Principal Commissioner was invalid, the notice under s.148 was invalid, and everything that followed including the assessment order was void ab initio. On the merits it also held that the addition of Rs 11,28,013 could not stand where the assessee had produced bank statements showing a purchase at Rs 4,10,000 and a sale at Rs 4,58,594 and the Assessing Officer had made the addition on information alone without bringing any adverse material on record or making any enquiry.
• Siemens Financial Services Pvt Ltd v DCIT High CourtHelps taxpayerOverruled
  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.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.