Facts of the Case

Omnipresent Credits Private Limited was one of the petitioners in a batch of writ petitions challenging reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, for Assessment Year 2015–16.

The reassessment notices were issued after the expiry of four years from the end of the relevant assessment year. The sanction for initiation of reassessment proceedings was granted by the Joint Commissioner of Income Tax. The Revenue sought to justify the initiation of proceedings by relying upon the extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), which was enacted in the backdrop of the COVID-19 pandemic.

 Issues Involved

Whether reassessment notices issued under Section 148 after the expiry of the prescribed period are valid when the mandatory sanction under Section 151 of the Income Tax Act has been granted by an authority not specified under law, and whether TOLA alters or relaxes the statutory requirement regarding the competent sanctioning authority.

 Petitioner’s Arguments

The petitioner contended that sanction under Section 151 is a jurisdictional precondition for initiation of reassessment proceedings. Since the notices were issued beyond the statutory period, approval was mandatorily required from the Principal Chief Commissioner / Chief Commissioner / Principal Commissioner / Commissioner, and not from the Joint Commissioner.

It was further argued that TOLA merely extended time limits for completion of statutory actions and did not amend or dilute the substantive requirement regarding the authority competent to grant sanction. Reliance was placed on judicial precedents, including Twylight Infrastructure Pvt. Ltd., Ganesh Das Khanna, and Siemens Financial Services Pvt. Ltd., holding that reassessment proceedings initiated without approval from the specified authority are void ab initio.

 Respondent’s Arguments

The Revenue contended that in view of the extensions granted under TOLA, the reassessment notices were validly issued and that approval by the Joint Commissioner was sufficient. It was argued that since the limitation period stood extended, sanction under Section 151(2) as it existed prior to the Finance Act, 2021, would apply.

The respondents also relied upon CBDT instructions and administrative clarifications to contend that the reassessment proceedings were legally sustainable.

 Court Order / Findings

The Delhi High Court allowed the writ petitions and quashed the impugned reassessment notices.

The Court held that Section 151 mandates approval by the specified authority depending upon the time elapsed from the end of the relevant assessment year. Where reassessment is sought to be initiated beyond the prescribed period, sanction by higher authorities alone is permissible.

The Court categorically held that TOLA does not amend or override Section 151 and only extends the time available for completing statutory actions. It does not alter the identity of the competent authority required to grant sanction.

Since the approval in the present case was granted by the Joint Commissioner, who was not the competent specified authority, the reassessment notices were held to be without jurisdiction and unenforceable in law.

 Important Clarification

The Court clarified that sanction under Section 151 is not a procedural formality but a substantive jurisdictional safeguard. Reassessment proceedings initiated without approval from the legally prescribed specified authority are void ab initio. Extensions granted under TOLA or reliance on CBDT instructions cannot cure defects arising from lack of jurisdiction or non-compliance with statutory mandates.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770194455_OMNIPRESENTCREDITSPRIVATELIMITEDVsINCOMETAXOFFICERWARD191ANR..pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.