Facts of the Case

The petitioners challenged reassessment proceedings initiated by the Income Tax Department through notices issued under Section 148 of the Income-tax Act, 1961.

The reassessment notices were issued after the introduction of the new reassessment regime brought in by the Finance Act, 2021, which substituted Sections 147 to 151 of the Income-tax Act.

The Revenue attempted to justify the notices by relying on the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), arguing that the limitation period for issuing reassessment notices had been extended.

The petitioners contended that despite the extension of limitation, the reassessment notices were issued without obtaining proper statutory sanction under Section 151 of the Act, making them invalid.

Issues Involved

  1. Whether reassessment notices issued under Section 148 of the Income-tax Act were valid when the sanction required under Section 151 was not obtained from the appropriate authority.
  2. Whether TOLA could override or alter the statutory requirement regarding the competent sanctioning authority under Section 151.
  3. Whether reassessment proceedings initiated under the amended provisions complied with mandatory procedural requirements.

Petitioner’s Arguments

  • The petitioners argued that reassessment notices were issued without approval from the competent sanctioning authority, as mandated under Section 151 of the Income-tax Act.
  • They contended that the extension of limitation under TOLA does not modify or dilute the statutory requirement regarding the authority competent to grant sanction.
  • Therefore, the reassessment proceedings lacked jurisdiction and were liable to be quashed.
  • It was further argued that procedural safeguards introduced under the amended reassessment regime must be strictly complied with.

Respondent’s Arguments

  • The Revenue contended that reassessment notices were valid and issued within the extended limitation period permitted under TOLA.
  • It was argued that the extension of limitation allowed the department to initiate reassessment proceedings even beyond the original statutory time frame.
  • The Revenue maintained that the reassessment actions were legally sustainable within the transitional framework between the old and new reassessment provisions.

Court Findings

  • Obtaining sanction from the competent authority under Section 151 is a mandatory statutory requirement before issuing a notice under Section 148.
  • The extension of limitation under TOLA does not change the statutory requirement regarding the competent sanctioning authority.
  • Even during the transitional phase between the old and new reassessment regime, statutory safeguards under the Income-tax Act must be strictly followed.

Court Order

The Delhi High Court allowed the writ petitions and held that reassessment notices issued without obtaining proper sanction under Section 151 were invalid.

Accordingly, the Court quashed the impugned reassessment notices and the related reassessment proceedings.

 Important Clarification by the Court

  • TOLA only extends the limitation period for initiating proceedings.
  • It does not modify or override the statutory provisions governing approval or sanction under the Income-tax Act.
  • Procedural safeguards in reassessment proceedings are mandatory and cannot be diluted even during legislative transition. 

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

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