Facts of the Case

The petitioners, including companies, individuals, and Hindu Undivided Families, had filed their returns of income for Assessment Years 2016-17 and 2017-18. The returns were processed under Section 143(1) of the Income Tax Act, 1961.

Subsequently, after the Supreme Court decision in Union of India v. Ashish Agarwal, the Income Tax Department issued notices under Section 148A(b) alleging that certain income had escaped assessment.

The assessees submitted replies to the notices. Thereafter, the Assessing Officer passed orders under Section 148A(d) and issued consequential reassessment notices under Section 148.

The petitioners challenged these notices before the Delhi High Court by filing multiple writ petitions. The principal contention raised was that the reassessment notices and orders were issued without obtaining approval from the “specified authority” as required under Section 151 of the Income Tax Act.

 

Issues Involved

  1. Whether reassessment proceedings initiated under Sections 148A(b), 148A(d) and 148 of the Income Tax Act were valid when approval of the specified authority under Section 151(ii) was not obtained.
  2. Whether reliance by the Revenue on the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No. 1/2022 dated 11.05.2022 could override the statutory requirement under Section 151.
  3. Whether reassessment notices issued in cases where alleged escaped income exceeded ₹50 lakh could be sustained without proper statutory approval. 

Petitioner’s Arguments

  • The reassessment proceedings were initiated without approval from the specified authority mandated under Section 151 of the Income Tax Act.
  • The approval must be obtained from the authority prescribed in Section 151(ii), and failure to obtain such approval renders the entire reassessment process invalid.
  • Administrative instructions such as CBDT Instruction No. 1/2022 cannot override the statutory requirement of the Act.
  • The notices issued under Section 148A(b) and the subsequent order under Section 148A(d) were therefore without jurisdiction and liable to be quashed. 

Respondent’s Arguments

  • The reassessment proceedings were validly initiated in view of the Supreme Court’s decision in Union of India v. Ashish Agarwal (2023) 1 SCC 617.
  • The proceedings were protected by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
  • The CBDT issued Instruction No.1 of 2022 dated 11.05.2022, which guided reassessment proceedings and supported the actions taken by the department.
  • It was argued that approval by the specified authority was not mandatory in the manner asserted by the petitioners. 

Court Findings

  • The statutory framework clearly mandates that prior approval of the specified authority is required before issuing reassessment notices.
  • The argument that such approval was not mandatory was contrary to the provisions of the Income Tax Act.
  • Administrative instructions or reliance on TOLA or CBDT circulars cannot override statutory requirements.
  • Compliance with the approval requirement under Section 151 is a mandatory jurisdictional condition. 

Court Order

  • The impugned notices issued under Section 148A(b) and Section 148, along with orders passed under Section 148A(d), were set aside.
  • The reassessment proceedings initiated against the petitioners were quashed. 

Important Clarification by the Court

  • The approval requirement under Section 151 is mandatory and forms a jurisdictional safeguard before reopening assessments.
  • Administrative circulars or instructions cannot dilute statutory provisions.
  • Any reassessment notice issued without complying with statutory approval requirements is liable to be invalidated.

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

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