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 filed their returns of income which were processed by the Income Tax Department under Section 143(1) of the Income Tax Act, 1961. Subsequently, reassessment proceedings were initiated after the decision of the Supreme Court in Union of India v. Ashish Agarwal (2023), pursuant to which notices were issued under Section 148A(b) alleging that certain income had escaped assessment.

The petitioners submitted replies to these notices. However, the assessing authorities passed orders under Section 148A(d) and issued consequential notices under Section 148, asserting that substantial income had escaped assessment.

The petitioners approached the High Court contending that the reassessment proceedings were invalid as the mandatory approval from the “specified authority” under Section 151 of the Income Tax Act had not been obtained before issuance of the impugned notices.

Issues Involved

  1. Whether reassessment notices issued under Sections 148A(d) and 148 of the Income Tax Act are valid without approval of the specified authority under Section 151.
  2. Whether reliance by the Revenue on the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No.1/2022 dated 11.05.2022 could cure the defect relating to absence of approval from the specified authority.
  3. Whether reassessment proceedings initiated in such circumstances could be sustained in law. 

Petitioner’s Arguments

  • The reassessment proceedings were initiated without the mandatory approval of the specified authority under Section 151(ii) of the Income Tax Act, 1961.
  • The statute clearly mandates prior approval from the specified authority before issuing notices under Sections 148A(d) and 148.
  • The approval taken from a different authority (such as Principal Commissioner of Income Tax) did not satisfy the statutory requirement where approval of the specified authority was required.
  • Therefore, the reassessment proceedings were void and liable to be quashed.
  • The petitioners also relied on the Delhi High Court judgment in Ganesh Dass Khanna v. Income Tax Officer & Anr. (2023), where similar issues relating to reassessment and limitation were considered in favour of assessees. 

Respondent’s Arguments

  • The reassessment proceedings were initiated in accordance with the legal framework after the Supreme Court’s judgment in Union of India v. Ashish Agarwal (2023).
  • The department had obtained approval from the Principal Commissioner of Income Tax, which should be considered sufficient compliance with the statutory provisions.
  • The provisions of TOLA and CBDT Instruction No.1/2022 dated 11.05.2022 were relied upon to justify the reassessment process and procedural steps undertaken by the department.
  • According to the Revenue, strict compliance with the specific authority requirement was not mandatory in the circumstances. 

Court’s Findings

  • The approval of the specified authority under Section 151 of the Income Tax Act is mandatory before issuing reassessment notices under Sections 148 and 148A.
  • The argument of the Revenue that such approval was not necessary was contrary to the explicit statutory provisions.
  • The Court examined both the pre-Finance Act 2021 and post-Finance Act 2021 provisions of Sections 148, 149 and 151, emphasizing that the law clearly requires prior approval of the specified authority.
  • If reassessment notices are issued without obtaining the legally mandated approval, the proceedings cannot be sustained in law.

Court Order

The Delhi High Court held that reassessment notices issued without proper approval of the specified authority under Section 151 of the Income Tax Act, 1961 are invalid.

Accordingly, the impugned reassessment proceedings in the batch of petitions were liable to be quashed where such approval requirement was not complied with.


Important Clarification

  • The statutory requirement of obtaining approval from the specified authority before issuance of reassessment notices is mandatory.
  • Administrative instructions or reliance on TOLA or CBDT instructions cannot override the explicit provisions of the Income Tax Act, 1961.
  • Any reassessment initiated without following the statutory approval mechanism would be legally unsustainable.  

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

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