Facts of the Case

The petitioners, including Twylight Infrastructure Pvt. Ltd. and several other assessees, filed multiple writ petitions before the Delhi High Court challenging reassessment proceedings initiated by the Income Tax Department for various assessment years.

The reassessment proceedings were initiated through notices issued under Sections 148 and 148A of the Income Tax Act, 1961, alleging that certain income had escaped assessment.

After issuance of notices under Section 148A(b), the petitioners submitted replies. However, the Assessing Officer passed orders under Section 148A(d) concluding that income had escaped assessment and subsequently issued notices under Section 148 to reopen the assessments.

The petitioners challenged these notices and consequential proceedings on the ground that the mandatory statutory procedure under the Income Tax Act had not been followed, particularly the requirement of obtaining approval from the “specified authority” under Section 151 of the Act.

Issues Involved

  1. Whether reassessment proceedings initiated under Sections 147, 148 and 148A of the Income Tax Act were valid in law.
  2. Whether the Assessing Officer had obtained the mandatory approval of the “specified authority” under Section 151 before issuing the reassessment notices.
  3. Whether reassessment notices issued without proper statutory sanction could sustain in law.

Petitioner’s Arguments

  • The reassessment proceedings were initiated without obtaining approval from the correct “specified authority” as mandated under Section 151 of the Income Tax Act.
  • Where more than three years had elapsed from the end of the relevant assessment year, approval must be obtained from a higher authority such as the Principal Chief Commissioner or Chief Commissioner.
  • In the present case, the approval had been obtained from an authority not competent under the amended statutory framework.
  • Therefore, the notices issued under Sections 148 and 148A(d) and all consequential proceedings were legally unsustainable and liable to be quashed. 

Respondent’s Arguments

  • The reassessment proceedings had been initiated on the basis of material indicating that income chargeable to tax had escaped assessment.
  • The Assessing Officer had followed the procedure prescribed under the reassessment provisions introduced by the Finance Act, 2021.
  • The Department maintained that the approval obtained was sufficient to initiate reassessment proceedings and the notices issued were legally valid. 

Court Findings

  • Section 151 clearly specifies which authority must grant approval before issuing reassessment notices.
  • Where more than three years have elapsed from the end of the relevant assessment year, approval must be obtained from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
  • In the present case, approval had been obtained from an authority mentioned in Section 151(i) instead of the competent authority under Section 151(ii).

Court Order

  • The impugned notices issued under Section 148,
  • The orders passed under Section 148A(d), and
  • All consequential reassessment proceedings

Important Clarification by the Court

  • Approval from the correct “specified authority” under Section 151 is a mandatory statutory requirement before issuing reassessment notices.
  • If such approval is obtained from an incompetent authority, the entire reassessment proceeding becomes invalid in law.
  • The statutory framework under the reassessment provisions must be strictly complied with.

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice for reassessment
  • Section 148A – Procedure before issuing notice under Section 148
  • Section 149 – Time limit for notice
  • Section 151 – Sanction for issue of notice

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

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