Facts of the Case

This batch of writ petitions, including Prashant Softwares Pvt. Ltd., challenged reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961 for Assessment Year 2015-16. The reassessment notices were issued after expiry of the statutory period from the end of the relevant assessment year.

The sole challenge raised by the petitioners was that the mandatory sanction required under Section 151 of the Act was not obtained from the competent authority. Instead, approval for issuance of notices under Section 148 was granted by the Joint Commissioner of Income Tax (JCIT).

The Revenue sought to justify the approval by placing reliance on the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA), contending that the extended timelines enabled sanction by the JCIT.

 

Issues Involved

Whether reassessment notices issued after the prescribed period were invalid for want of approval by the competent authority under Section 151 of the Act.

Whether sanction accorded by the Joint Commissioner of Income Tax satisfied the statutory requirement of Section 151.

Whether TOLA altered or diluted the requirement of sanction by the “specified authority” under Section 151.

Whether reassessment proceedings initiated without proper sanction were liable to be quashed in entirety.

 

Petitioner’s Arguments

The petitioners contended that Section 151 mandates approval by higher designated authorities where reassessment is initiated beyond the prescribed period. Approval by the Joint Commissioner was impermissible and rendered the reassessment proceedings void ab initio.

It was argued that TOLA merely extended limitation periods and did not amend or override the statutory requirement regarding the authority competent to grant sanction. The petitioners relied upon consistent judicial precedents holding that absence of valid sanction goes to the root of jurisdiction.

 

Respondent’s Arguments

The Revenue argued that in view of TOLA, the reassessment notices were validly issued within the extended time. It was contended that since the reassessment proceedings were initiated within the extended period, approval under Section 151(2) by the Joint Commissioner was sufficient.

The Revenue further submitted that the reassessment regime prevailing prior to the Finance Act, 2021 should apply and that the approvals obtained were in accordance with law.

 

Court Order / Findings

The Delhi High Court allowed the writ petitions and quashed the reassessment notices. The Court held that:

Section 151 clearly specifies the authority competent to grant sanction depending upon the time elapsed from the end of the relevant assessment year.

TOLA only extended timelines and did not amend or modify the statutory requirement regarding the authority empowered to grant sanction.

Approval by the Joint Commissioner in cases where sanction was statutorily required to be granted by higher authorities was invalid.

Absence of proper sanction is a jurisdictional defect that vitiates the entire reassessment proceedings.

The Court followed and reaffirmed its earlier decisions as well as judgments of other High Courts consistently holding that reassessment without valid sanction cannot be sustained.

 

Important Clarification

This judgment conclusively clarifies that:

Sanction under Section 151 is a mandatory jurisdictional requirement.

TOLA does not dilute or override the requirement of sanction by the specified authority.

Approval by an authority not empowered under Section 151 renders reassessment proceedings void ab initio.

Reassessment notices issued without valid sanction are liable to be quashed without examination of merits.

The decision strengthens procedural safeguards and reiterates strict compliance with statutory conditions governing reassessment under the Income-tax Act.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770194825_PRASHANTSOFTWARESPVT.LTDVsADDITIONALJOINTDEPUTYASSISTANTCOMMISSIONEROFINCOMETAXANR..pdf

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