Facts of the Case

The petitioners challenged reassessment proceedings initiated by the Income Tax Department under Sections 147, 148, and 148A of the Income-tax Act, 1961 for various assessment years.

The Assessing Officer issued an order under Section 148A(d) and a notice under Section 148 alleging that income chargeable to tax had escaped assessment. These actions were taken after obtaining approval from a specified authority.

The petitioners approached the Delhi High Court by filing writ petitions under Article 226 of the Constitution of India, contending that the reassessment proceedings were initiated without obtaining approval from the correct specified authority as required under Section 151 of the Income-tax Act.

 

Issues Involved

  1. Whether reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961 were valid without approval from the correct specified authority under Section 151(ii).
  2. Whether the statutory requirement of obtaining prior approval from the specified authority is mandatory before issuing a notice under Section 148.
  3. Whether reassessment proceedings initiated without proper sanction are liable to be quashed.

 

Petitioner’s Arguments

  • The impugned reassessment notices were issued without obtaining approval from the correct specified authority as mandated under Section 151(ii) of the Income-tax Act.
  • Under the amended provisions introduced by the Finance Act, 2021, the authority competent to grant approval depends upon the time elapsed since the end of the relevant assessment year.
  • Since more than three years had elapsed from the relevant assessment year, approval was required from a Principal Chief Commissioner / Principal Director General / Chief Commissioner / Director General, but such approval was not obtained.
  • Therefore, the reassessment proceedings were invalid and liable to be quashed.

 

Respondent’s Arguments

  • The reassessment proceedings were initiated after following the procedure prescribed under Sections 148A and 148 of the Income-tax Act.
  • Approval for issuing the reassessment notice had been obtained from a competent authority.
  • The reassessment proceedings were justified as the Assessing Officer had information suggesting that income had escaped assessment.

Court Findings

  • The first proviso to Section 148 clearly mandates that no notice can be issued unless prior approval of the specified authority is obtained.
  • After the amendment by the Finance Act, 2021, Section 151 specifies different authorities depending on the time elapsed from the relevant assessment year.
  • If more than three years have elapsed, approval must be obtained from the higher authority mentioned in Section 151(ii).
  • In the present case, approval was obtained from an authority falling under Section 151(i) instead of Section 151(ii).

 

Court Order

The Delhi High Court held that the reassessment notices and orders issued under Sections 148A(d) and 148 of the Income-tax Act were invalid because they were issued without approval from the correct specified authority under Section 151(ii).

  • Quashed the impugned reassessment notices and orders in all the writ petitions.
  • Granted liberty to the Revenue to take further steps in accordance with law, if permissible.

 

Important Clarification by the Court

  • Prior approval of the specified authority is a mandatory statutory requirement before issuing a notice under Section 148.
  • The identity of the specified authority depends on the time limit prescribed in Section 151.
  • If approval is obtained from an incorrect authority, the entire reassessment proceeding becomes invalid.  

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

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