M/S. Soft Zone,Pune v DCIT: ITAT Pune on Reopening Approval Authority

In M/S. Soft Zone,Pune v DCIT, Circle5, Pune, Puine, the ITAT Pune dealt with a reopening for AY 2017-18. The notice under Section 148 and the order under Section 148A(d) were both issued with the approval of a Principal Commissioner of Income Tax. The Tribunal quashed both on that ground. It then treated the remaining grounds, which challenged the merits of the addition, as academic. The case is a useful reference for how the Pune Bench applied Bombay High Court rulings on the rank of the approving authority for Section 148A(d) orders and Section 148 notices.

This page is a research summary of one specific Indian tax judgment, NOT legal advice. Always verify against the full judgment and consult a professional for case-specific guidance.

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The case at a glance

• Parties: M/S. Soft Zone,Pune v. DCIT, Circle5, Pune, Puine
• Bench: Income Tax Appellate Tribunal - Pune
• Date: 21 May 2025
• Court level: Tribunal (ITAT)
• Sections engaged: 148, 148A(d)
• Outcome: Partial relief

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Facts of the case

The assessee's appeal (ITA No.724/PUN/2025, Assessment Year 2017-18) was filed against an order of the Commissioner of Income Tax (Appeals) [NFAC] dated 16.01.2025. The reassessment order that had been challenged below was dated 17.05.2023. The addition in that order was Rs. 1,08,71,550, representing cash deposited in an ICICI Bank account during the demonetization period. It had been treated as unexplained cash credit.

The assessee's grounds attacked the reopening itself. They argued that the sanction for issuing the Section 148 notice came from an authority without jurisdiction. They also argued that the notice was issued by the jurisdictional Assessing Officer, whereas the e-assessment scheme required a faceless Assessing Officer. Further grounds challenged the addition and the higher rate of tax applied to it.

The Tribunal recorded that the order under Section 148A(d) was passed on 15.07.2022 for AY 2017-18. The notice under Section 148 was also issued on 15.07.2022. Both were passed with the approval of the Principal Commissioner of Income Tax-3, Pune, communicated by a letter dated 12/07/2022 (copy at pages 41 and 42 of the paper book). The Tribunal noted it was an admitted fact that more than three years had elapsed from the end of the assessment year.

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Issues raised

• Was the approval for the Section 148A(d) order and the Section 148 notice granted by the competent authority, given that it came from the Principal Commissioner of Income Tax although more than three years had elapsed from the end of AY 2017-18?
• If the approving authority was not the correct one, are the Section 148A(d) order and the Section 148 notice liable to be quashed?
• What becomes of the remaining grounds on the merits once the legal ground succeeds?

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What the court held

The Tribunal quashed the order under Section 148A(d) and the notice under Section 148. It stated that the facts were "absolutely identical" to those in the Bombay High Court decision and the ITAT Pune decision it followed. It allowed the legal ground and observed that the other grounds became academic. Because both parties had argued only the legal ground, the remaining grounds were dismissed as unadjudicated. The order concludes that the assessee's appeal is partly allowed.

On the reasoning, the Tribunal took up the legal ground first. It reproduced the statutory provision on the specified authority for sanction. Where three years or less have elapsed from the end of the relevant assessment year, the specified authority is a Principal Commissioner, Principal Director, Commissioner or Director. Where more than three years have elapsed, it is the Principal Chief Commissioner or Principal Director General (or, failing that, the Chief Commissioner or Director General). Since more than three years had elapsed here, the competent authority was the Principal Chief Commissioner or Chief Commissioner. The approval had instead come from the Principal Commissioner.

The Tribunal relied on three Bombay High Court decisions, which it described as the jurisdictional High Court's rulings:

• Holiday Developers (P.) Ltd. v. ITO, which quashed a Section 148A(d) order and Section 148 notice approved by a PCIT for AY 2018-19, following Siemens Financial Services (P.) Ltd. v. Dy. CIT.
• Pradeep Himatlal Shah v. ITO, which quashed an order and notice for the same reason, and noted that the proviso to the provision was inserted only from 1 April 2023.
• Agnello Oswin Dias v. ACIT, which applied the same reasoning to AY 2018-19 and an order and notice dated 22 April 2022.

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Strategy observations

1. The assessee's authorised representative filed a written submission. He directed the Bench to the Section 148 notice at pages 41-42 of the paper book and argued that the approval had been given by the Principal Commissioner-3, Pune.
2. The representative made the same point about the Section 148A(d) order, which had also been approved by the Principal Commissioner-3, Pune. On that basis it was argued to be bad in law.
3. The Revenue's representative relied on the orders of the Assessing Officer and the CIT(A). Per the preview, no separate answer to the approval objection is recorded.
4. Both sides pleaded only the legal ground. The Tribunal recorded this when it dismissed the merits grounds as unadjudicated.
5. The Tribunal resolved the appeal by following the Bombay High Court decisions and an ITAT Pune decision on materially identical facts.

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Why this case matters

The decision shows the Pune Bench treating the rank of the sanctioning authority as a jurisdictional defect that is fatal to both the Section 148A(d) order and the Section 148 notice. It reaches that result without examining the merits of the underlying addition. The Tribunal's reasoning rests on an admitted fact (more than three years had elapsed from the end of the assessment year) and on the approving authority's designation as shown on the record.

The order also illustrates how a series of Bombay High Court decisions (Siemens, Holiday Developers, Pradeep Himatlal Shah, Agnello Oswin Dias) is applied by the Tribunal as binding jurisdictional precedent. The assessee's success was partial in form, since the merits grounds were dismissed as unadjudicated. In substance, the reopening was set aside.

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Source

This case is drawn from the TaxNoticeAI structured legal corpus (16,101 Indian tax judgments, CBIC circulars, ITAT rulings, AAR rulings, GSTAT rulings), sourced from indiankanoon.org and official court portals. Original document: https://indiankanoon.org/doc/44691209/