Facts of the Case

Multiple writ petitions were filed before the Delhi High Court challenging reassessment proceedings initiated by the Income Tax Department for Assessment Years 2016-17 and 2017-18.

The petitioners had originally filed their returns of income, which were processed under Section 143(1) of the Income Tax Act, 1961.

Subsequently, following the decision of the Supreme Court in Union of India v. Ashish Agarwal, the Revenue issued notices under Section 148A(b) alleging that certain income had escaped assessment.

After receiving replies from the assessees, the Assessing Officer passed orders under Section 148A(d) and issued consequential notices under Section 148 for reassessment proceedings.

The petitioners challenged these proceedings primarily on the ground that the notices and orders were not approved by the “specified authority” as required under Section 151 of the Income Tax Act, 1961.

Issues Involved

  1. Whether reassessment notices issued under Sections 148A(d) and 148 of the Income Tax Act, 1961 are valid without approval from the specified authority under Section 151.
  2. Whether approval from an authority other than the one prescribed under Section 151(ii) satisfies the statutory requirement.
  3. Whether reliance on Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No.1/2022 dated 11.05.2022 can validate reassessment proceedings initiated without proper approval.

Petitioner’s Arguments

  • The reassessment proceedings were initiated without the mandatory approval of the specified authority prescribed under Section 151(ii) of the Income Tax Act.
  • Approval was allegedly granted by an authority not recognized as the “specified authority” under the amended statutory framework introduced by the Finance Act, 2021.
  • Since sanction by the correct authority is a jurisdictional requirement, failure to comply renders the reassessment proceedings illegal and void.
  • The Revenue cannot rely on CBDT instructions or TOLA to override mandatory statutory provisions.

 

Respondent’s Arguments

  • The reassessment proceedings were initiated in compliance with the scheme laid down by the Supreme Court in Union of India v. Ashish Agarwal.
  • The approvals obtained from higher authorities within the Income Tax Department were sufficient to satisfy statutory requirements.
  • The procedure adopted was consistent with CBDT Instruction No.1/2022 dated 11.05.2022, which guided reassessment proceedings following the Supreme Court’s judgment.
  • Therefore, the reassessment notices and orders were valid and enforceable.

 

Court Findings

  • The approval of the “specified authority” under Section 151 is mandatory before issuing reassessment notices under Sections 148A(d) and 148.
  • The statutory scheme after the Finance Act, 2021 clearly identifies the competent authority whose sanction is required.
  • If the approval is obtained from an authority not designated as the specified authority, the reassessment proceedings become invalid in law.
  • Administrative instructions or relaxation statutes such as TOLA cannot override the express requirements of the Income Tax Act.
  • Since the impugned reassessment notices were issued without valid approval from the prescribed authority, they were unsustainable in law.

 

Court Order

  • The impugned orders under Section 148A(d) and notices under Section 148 issued by the Income Tax Department were liable to be quashed.
  • Reassessment proceedings initiated without approval from the specified authority under Section 151 are invalid.

 

Important Clarification by the Court

  • Compliance with statutory approval requirements under Section 151 is a jurisdictional prerequisite for reassessment proceedings.
  • Even where escaped income exceeds ₹50 lakh, the statutory procedure must still be strictly followed.
  • Instructions issued by administrative authorities cannot substitute or dilute the requirements under the Income Tax Act, 1961.  

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

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