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 income tax returns which were processed under Section 143(1) of the Income Tax Act, 1961. Subsequently, the Income Tax Department 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 reassessment notices under Section 148.

The petitioners approached the High Court contending that the reassessment notices and orders were invalid because they were issued without approval from the “specified authority” as mandated under Section 151 of the Income Tax Act, 1961.

The reassessment proceedings were also linked to the directions issued by the Supreme Court in Union of India v. Ashish Agarwal (2023) 1 SCC 617, which allowed certain reassessment notices issued under the old law to be treated as notices under Section 148A(b) under the amended regime.

Issues Involved

  1. Whether reassessment notices issued under Sections 148 and 148A of the Income Tax Act, 1961 are valid if they are not approved by the specified authority under Section 151.
  2. Whether the approval of the specified authority is mandatory before issuance of reassessment notices under the amended provisions introduced by the Finance Act, 2021.
  3. Whether reliance on Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No. 1 of 2022 can justify issuance of such notices without proper statutory approval.

 

Petitioner’s Arguments

  • The reassessment proceedings were initiated without obtaining approval from the proper “specified authority” as required under Section 151(ii) of the Income Tax Act, 1961.
  • Under the amended framework introduced by the Finance Act, 2021, approval from the specified authority is a mandatory jurisdictional requirement.
  • The authorities issuing the approvals were not the authorities prescribed under the statute for the relevant time period.
  • Reliance on TOLA or CBDT Instructions cannot override the mandatory provisions of the Income Tax Act.
  • Therefore, the reassessment notices and orders were legally unsustainable and liable to be quashed.

Respondent’s Arguments

  • The reassessment proceedings were initiated pursuant to the judgment of the Supreme Court in Union of India v. Ashish Agarwal (2023) 1 SCC 617.
  • The notices were issued in compliance with the framework introduced by the Supreme Court and CBDT Instruction No.1/2022 dated 11.05.2022.
  • The approval obtained from the concerned authority was sufficient and the requirement of approval by a specific authority should not invalidate the reassessment proceedings.
  • The department relied upon provisions of TOLA, 2020 to justify the reassessment process.

Court Findings

  • The first proviso to Section 148 clearly requires the Assessing Officer to obtain prior approval from the specified authority before issuing a reassessment notice.
  • Section 151 defines who the “specified authority” is, depending on the time period involved.
  • Where more than three years have elapsed from the end of the relevant assessment year, approval must be obtained from Principal Chief Commissioner or equivalent authority.

Court Order

  • Approval of the specified authority under Sections 148 and 151 of the Income Tax Act, 1961 is mandatory.
  • Reassessment notices issued without such approval are not legally sustainable.
  • The reassessment proceedings initiated in the batch of petitions were therefore liable to be set aside.

Important Clarification by the Court

  • After the Finance Act, 2021, the statutory scheme requires strict compliance with Sections 148, 148A and 151.
  • The requirement of approval by the specified authority is not a procedural formality but a jurisdictional condition.
  • Administrative instructions or relaxation laws such as TOLA cannot override the mandatory statutory requirements of the Income Tax Act.

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

 

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