Facts of the Case

The batch of writ petitions before the Delhi High Court concerned 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 by the department under Section 143(1) of the Income Tax Act, 1961. Subsequently, following the judgment of the Supreme Court in Union of India v. Ashish Agarwal, the Income Tax Department issued notices under Section 148A(b) alleging that income had escaped assessment.

After receiving replies from the petitioners, the department passed orders under Section 148A(d) and issued consequential reassessment notices under Section 148.

The petitioners challenged these reassessment notices before the Delhi High Court on the ground that the notices and orders were issued without approval from the “specified authority” as mandated under the Income Tax Act.

 

Issues Involved

  1. Whether reassessment notices issued under Sections 148 and 148A(d) of the Income Tax Act, 1961 are valid when the approval of the specified authority under Section 151(ii) is not obtained.
  2. Whether reliance by the Revenue on Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No.1/2022 can override statutory requirements of approval under the Income Tax Act.
  3. Whether reassessment proceedings initiated without proper statutory approval are sustainable in law.

 

Petitioner’s Arguments

  • The reassessment proceedings were initiated without obtaining the mandatory approval of the “specified authority” under Section 151(ii) of the Income Tax Act.
  • The approval relied upon by the Revenue was granted by an authority not competent under the statutory scheme.
  • The requirement of approval by the specified authority is a jurisdictional condition, and absence of such approval renders the reassessment proceedings invalid.
  • Reliance by the Revenue on TOLA and CBDT Instruction No.1/2022 dated 11.05.2022 cannot override the provisions of the Income Tax Act.
  • The reassessment proceedings were therefore liable to be quashed.

 

Respondent’s Arguments

  • The reassessment proceedings were validly initiated after obtaining approval from the concerned authority.
  • The department relied upon the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No.1 of 2022.
  • According to the Revenue, the requirement of approval by a particular authority was not mandatory in the circumstances of the case.

 

Court Findings

  • The statute clearly mandates that prior approval of the specified authority is required before issuing a notice under Section 148.
  • The argument that approval of the specified authority is not mandatory is contrary to the provisions of the Income Tax Act.
  • Statutory requirements cannot be diluted by administrative instructions or reliance on TOLA.

 

Court Order

The Delhi High Court ruled in favour of the assessees and against the Revenue.

The Court held that reassessment proceedings initiated without obtaining approval of the specified authority under Section 151 of the Income Tax Act are not sustainable in law.

Important Clarification by the Court

  • The approval of the specified authority under Section 151 is a mandatory statutory requirement.
  • Administrative instructions or relaxation laws cannot override statutory provisions of the Income Tax Act.
  • Reassessment proceedings must strictly comply with the procedural safeguards provided in Sections 148, 148A and 151.  

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

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