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 Assessing Officer issued notices initiating reassessment proceedings under the Income Tax Act alleging that income chargeable to tax had escaped assessment.

The petitioners contended that the reassessment notices were issued without obtaining mandatory approval from the “specified authority” as required under the statutory framework of the Income Tax Act.

The reassessment proceedings were initiated following the Supreme Court’s decision in Union of India v. Ashish Agarwal, which dealt with the validity of reassessment notices issued during the transition to the new reassessment regime.

Therefore, the petitioners approached the High Court seeking quashing of the impugned notices and consequential orders.

Issues Involved

  1. Whether reassessment notices issued under Section 148 of the Income Tax Act were valid without obtaining prior approval from the specified authority under Section 151.
  2. Whether reassessment proceedings initiated by the Assessing Officer could survive in the absence of statutory approval mandated under the Act. 

Petitioner’s Arguments

  • The petitioners argued that the reassessment proceedings were void ab initio because the Assessing Officer failed to obtain approval from the correct specified authority under Section 151.
  • It was contended that where more than three years had elapsed from the end of the relevant assessment year, approval was required under Section 151(ii) from a higher authority.
  • Instead of obtaining approval from the appropriate authority, approval had been obtained from an authority contemplated under Section 151(i), which was not legally valid in the circumstances.
  • Consequently, the reassessment notices issued under Section 148 and subsequent orders were legally unsustainable.

 

Respondent’s Arguments

  • The Revenue contended that the reassessment notices were issued after following the procedure laid down under the reassessment provisions of the Income Tax Act.
  • It argued that approval had been obtained before issuing the notices and therefore the proceedings were valid.
  • The Department also relied upon the reassessment framework implemented after the judgment of the Supreme Court in Union of India v. Ashish Agarwal. 

Court Findings

  • The statutory scheme requires prior approval from the “specified authority” before issuance of reassessment notices.
  • The authority granting approval must strictly conform to the authority specified under Section 151 depending upon the time period involved.
  • In the present case, approval had been taken from an authority mentioned under Section 151(i) whereas approval was required from the authority specified under Section 151(ii).
  • Therefore, the mandatory statutory requirement was not satisfied.

Court Order

  • The reassessment notices and consequential orders were invalid in law due to absence of approval from the specified authority as required under Section 151(ii).
  • Accordingly, the Court quashed the impugned reassessment notices and orders in the writ petitions.
  • However, the Revenue was granted liberty to initiate reassessment proceedings afresh in accordance with law.

 

Important Clarification by the Court

  • Compliance with Section 151 approval requirements is mandatory for issuing a notice under Section 148.
  • Failure to obtain approval from the correct specified authority renders reassessment proceedings legally unsustainable.
  • The judgment does not prevent the Revenue from initiating fresh proceedings provided statutory conditions are fulfilled.

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

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