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 under the Finance Act, 2021, which substituted Sections 147 to 151 of the Income-tax Act.

The Revenue sought 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 stood extended.

The petitioners approached the Delhi High Court contending that the reassessment proceedings were initiated without obtaining approval from the competent sanctioning authority as required under the statutory provisions.

Issues Involved

  1. Whether reassessment notices issued under Section 148 of the Income-tax Act were valid when the sanction required under Section 151 of the Income-tax Act was not obtained from the appropriate authority.
  2. Whether TOLA, 2020 could override or modify the statutory requirement relating to the competent sanctioning authority under Section 151.
  3. Whether the reassessment proceedings complied with the mandatory procedural requirements prescribed under the amended reassessment provisions of the Income-tax Act. 

Petitioner’s Arguments

  • The reassessment notices were issued without obtaining approval from the competent sanctioning authority as mandated under Section 151 of the Income-tax Act.
  • The extension of limitation under TOLA does not alter or substitute the statutory requirement regarding the authority competent to grant sanction.
  • Since the sanction was obtained from an incorrect authority, the reassessment proceedings were without jurisdiction.
  • Consequently, the reassessment notices issued under Section 148 were liable to be quashed. 

Respondent’s Arguments

  • The reassessment notices were issued within the extended time period provided under TOLA, 2020.
  • The extension of limitation allowed the department to initiate reassessment proceedings even after the introduction of the amended reassessment regime under the Finance Act, 2021.
  • Therefore, the reassessment proceedings were legally sustainable.

 Court Findings / Court Order

  • The statutory requirement under Section 151 of the Income-tax Act mandates approval from the competent authority before issuance of reassessment notices under Section 148.
  • The extension of limitation under TOLA does not modify the statutory requirement regarding the authority competent to grant sanction.
  • Where sanction is obtained from an authority not empowered under the statute, the reassessment proceedings become invalid.

 Important Clarification by the Court

  • TOLA only extends limitation periods and does not change the statutory hierarchy of authorities competent to grant approval.
  • Compliance with the mandatory procedural requirements under the Income-tax Act remains essential even when limitation periods are extended. 

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice where income has escaped assessment
  • Section 148A – Conducting inquiry before issuance of notice
  • Section 149 – Time limit for notice
  • Section 151 – Sanction for issue of notice
  • Finance Act, 2021 (New Reassessment Regime)
  • Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA)

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

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