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 reassessment process was initiated through notices issued under Section 148A(b) of the Income Tax Act after the judgment in Union of India v. Ashish Agarwal (2023) 1 SCC 617.

After considering replies submitted by the assessees, the Assessing Officer passed orders under Section 148A(d) holding that certain income had allegedly escaped assessment and consequently issued notices under Section 148 for reassessment.

The petitioners approached the High Court contending that the reassessment notices and orders were invalid because the mandatory approval of the “specified authority” was not obtained as required under Section 151(ii) of the Income Tax Act.

 

Issues Involved

  1. Whether reassessment notices issued under Sections 148A(d) and 148 are valid without obtaining approval from the “specified authority” as prescribed under Section 151 of the Income Tax Act.
  2. Whether approval obtained from an authority not specified under Section 151(ii) is sufficient for initiating reassessment proceedings where more than three years have elapsed from the relevant assessment year.
  3. Whether reassessment proceedings initiated without proper statutory approval are liable to be quashed.

 

Petitioner’s Arguments

  • The reassessment proceedings were initiated without obtaining approval from the competent specified authority under Section 151(ii).
  • Under the amended provisions introduced by the Finance Act, 2021, approval of the specified authority is a mandatory statutory requirement before issuing notice under Section 148.
  • Since more than three years had elapsed from the relevant assessment year, approval was required from authorities mentioned in Section 151(ii) such as the Principal Chief Commissioner or Chief Commissioner, but the department obtained approval from authorities mentioned under Section 151(i).
  • Therefore, the entire reassessment proceedings were without jurisdiction and liable to be set aside.

 

Respondent’s Arguments

  • The reassessment proceedings were initiated in accordance with the provisions of the Income Tax Act and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
  • The Department also relied on CBDT Instruction No. 1/2022 dated 11.05.2022 to justify the issuance of reassessment notices.
  • The Revenue submitted that approval of the specified authority should not invalidate the proceedings if approval had been granted by another competent authority.

 

Court Findings

  • The first proviso to Section 148 clearly requires the Assessing Officer to obtain prior approval from the specified authority before issuing reassessment notices.
  • Section 151 of the Income Tax Act specifically identifies the authority whose approval is required depending on the time elapsed since the relevant assessment year.
  • Where more than three years have elapsed, approval must be obtained from the authorities specified in Section 151(ii).
  • In the present cases, the approval had been taken from authorities mentioned in Section 151(i) instead of those prescribed in Section 151(ii).

 

Court Order

  • Quashed the impugned orders under Section 148A(d) and the consequential notices issued under Section 148.
  • Held that the reassessment proceedings were invalid due to absence of approval from the specified authority under Section 151(ii).
  • Granted liberty to the Revenue to initiate fresh reassessment proceedings in accordance with law, if permissible.

 

Important Clarification

  • Approval of the correct “specified authority” under Section 151 is mandatory.
  • Issuance of reassessment notices without obtaining such approval renders the proceedings legally unsustainable.
  • The ruling also highlights the interlinkage between limitation under Section 149 and the authority granting approval under Section 151.

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

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