Facts of the Case

The petitioners challenged reassessment notices issued by the Income Tax Department for Assessment Years 2016-17 and 2017-18.

The reassessment proceedings were initiated by the Assessing Officer alleging that income had escaped assessment. However, the petitioners contended that the mandatory prior approval from the “specified authority” under Section 151(ii) of the Income Tax Act, 1961 had not been obtained before issuing the reassessment notices.

Multiple writ petitions involving similar issues were filed before the Delhi High Court seeking quashing of the notices and related proceedings.

 

Issues Involved

  1. Whether reassessment notices issued under Sections 147 and 148 of the Income Tax Act were valid when the mandatory approval from the specified authority under Section 151(ii) was not obtained.
  2. Whether approval granted by an authority not prescribed under Section 151(ii) would invalidate reassessment proceedings.

 

Petitioner’s Arguments

  • The petitioners argued that prior sanction from the specified authority is mandatory before issuing reassessment notices.
  • In cases where more than three years have elapsed from the end of the relevant assessment year, approval must be obtained from the authority specified under Section 151(ii).
  • The reassessment notices were issued based on approval obtained from an incorrect authority, which renders the entire proceedings illegal.
  • Therefore, the notices issued under Section 148 and subsequent proceedings deserved to be quashed.

 

Respondent’s Arguments

  • The Income Tax Department contended that the reassessment proceedings were initiated in accordance with law.
  • It argued that approval had been obtained before issuing the notices.
  • According to the Department, the reassessment notices were valid and the petitioners could contest the matter during the assessment proceedings.

 

Court Findings

The Delhi High Court examined the statutory framework under Section 151 of the Income Tax Act regarding approval for reassessment notices.

The Court observed that where three years have elapsed from the end of the relevant assessment year, sanction must be obtained from the specified authority as required under Section 151(ii).

However, in the present case, the approval had been obtained from an authority prescribed under Section 151(i) rather than the authority mandated under Section 151(ii).

The Court held that such approval does not satisfy the mandatory statutory requirement.

Accordingly, the Court concluded that the reassessment notices issued to the petitioners were legally unsustainable.

 

Court Order

The Delhi High Court quashed the reassessment notices and related proceedings issued against the petitioners on the ground that the mandatory approval from the specified authority under Section 151(ii) was not obtained.

 

Important Clarification by the Court

The Court clarified that statutory safeguards under Section 151 are mandatory and cannot be bypassed.

Where the law requires approval from a specific authority, approval from any other authority cannot validate reassessment proceedings.

Failure to comply with this requirement renders the reassessment notices invalid.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS05012024CW165242022_114311.pdf

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