Woman’s Alleged ₹29-Lakh Land-Sale On-Money Reassessment Quashed As Gujarat HC Says 2023 Section 151 Proviso Can’t Validate 2022 Sanction

The petitioner, a co-owner of land at Village Vav, held a 16.66% share and stated that she received ₹8,43,250 as her share of the sale consideration.

Following a survey at a third party’s premises, the Revenue relied on impounded loose papers and a statement recorded under Section 131 of the Income-tax Act, 1961, to allege that the sellers had received on-money.

It attributed ₹29,42,074 of the alleged on-money to the petitioner.

On 19 March 2022, the Assessing Officer issued a notice under Section 148A(b), allowing a response until 28 March 2022; the petitioner replied on that date.

On 1 April 2022, the Principal Commissioner of Income-tax (Central), Surat, granted approval under Section 151(i), following which the Assessing Officer passed an order under Section 148A(d) and issued a notice under Section 148 for AY 2018–19.

The petitioner challenged both actions as lacking jurisdiction and also disputed the evidentiary connection between her and the impounded material.

1. Whether, under Section 151 as it stood on 1 April 2022, the approval for the impugned reassessment proceedings had to be obtained from the higher authority under Section 151(ii), because more than three years had elapsed from the end of AY 2018–19.

2. Whether the proviso to Section 151, inserted by the Finance Act, 2023 with effect from 1 April 2023, applied retrospectively so as to validate the approval granted by the Principal Commissioner in 2022.

3. Whether the impounded material and the statement relied upon by the Revenue established a sufficient connection between the petitioner and the alleged receipt of on-money to justify reassessment.

Sections 149 and 151 of the Income-tax Act govern, respectively, the time limit for issuing a reassessment notice and the authority competent to grant prior approval; under Section 151 as substituted by the Finance Act, 2021, the higher-level authority specified in clause (ii) was required where more than three years had elapsed from the end of the relevant assessment year.

The Supreme Court in Union of India v. Rajeev Bansal held that approval by the appropriate specified authority is a jurisdictional precondition to issuing a notice under Section 148, and that Section 151 links the applicable authority to the time elapsed.

The Finance Act, 2023 inserted a proviso to Section 151, effective 1 April 2023, directing that specified exclusions or extensions under Section 149 be taken into account when computing the three-year period for Section 151(i).

Applying CIT v. Vatika Township (P.) Ltd., the Court held that an amendment affecting jurisdiction and statutory safeguards is not retrospective absent express language or necessary implication.

The Court also assessed whether the material relied upon established a live link between the petitioner and the alleged income.

The impugned approval was granted on 1 April 2022, after the ordinary three-year period from the end of AY 2018–19 had expired on 31 March 2022.

The Court held that, under the version of Section 151 then in force, the approval therefore had to come from the authority specified in Section 151(ii); the later proviso to Section 151 could not retrospectively change the competent authority or validate the approval.

The Court distinguished the Revenue’s reliance on Dhanraj Govindram Kella and other decisions, finding that they did not determine the retrospective effect of the 2023 proviso in the circumstances before it.

Independently, the impounded loose papers did not name the petitioner, and the Revenue produced no material linking her to the third party, the statement-maker, or the alleged on-money transaction; the petitioner had sold the land to different purchasers.

The Court consequently found the reassessment unsupported on the merits as well.

The approval was therefore insufficient to confer jurisdiction for the impugned reassessment proceedings; the Court also found no adequate evidentiary link between the petitioner and the alleged on-money.

The writ petition was allowed, and the Section 148A(d) order and Section 148 notice, both dated 1 April 2022, were quashed and set aside.