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 petitioners had originally filed their income tax returns which were processed under Section 143(1) of the Income Tax Act, 1961. Later, after the decision of the Supreme Court in Union of India v. Ashish Agarwal, the Income Tax Department issued notices under Section 148A(b) alleging that certain income had escaped assessment.

Subsequently, the Assessing Officer passed orders under Section 148A(d) and issued reassessment notices under Section 148 of the Income Tax Act.

The petitioners challenged these notices on the ground that the reassessment proceedings were initiated without approval from the “specified authority” required under Section 151(ii) of the Income Tax Act.

Issues Involved

  1. Whether reassessment notices issued under Section 148 of the Income Tax Act are valid without obtaining approval from the specified authority under Section 151(ii).
  2. Whether the approval granted by a lower authority instead of the authority prescribed under the amended provisions of the Act is legally sustainable.
  3. Whether reassessment proceedings triggered without such mandatory approval are liable to be quashed.

Petitioner’s Arguments

  • The reassessment proceedings were initiated after three years from the end of the relevant assessment year, therefore approval was required from the higher specified authority under Section 151(ii) of the Income Tax Act.
  • The approval for issuing notice was obtained from Principal Commissioner of Income Tax, which is not the authority prescribed under Section 151(ii) when the time period exceeds three years.
  • The mandatory statutory requirement of obtaining approval from the Principal Chief Commissioner or equivalent authority was not followed.
  • Consequently, the reassessment notices and orders passed under Sections 148A(d) and 148 were without jurisdiction and invalid in law.

Respondent’s Arguments

  • The reassessment proceedings were validly initiated after following the procedure prescribed under Sections 148A(b) and 148A(d).
  • Reliance was placed on the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No. 1/2022.
  • It was contended that approval obtained from the Principal Commissioner was sufficient and the requirement regarding the specified authority should not invalidate the reassessment proceedings.

Court Findings

  • The first proviso to Section 148 clearly mandates prior approval from the specified authority before issuing reassessment notice.
  • Section 151 specifies the rank of authority whose approval is required depending on the time elapsed from the relevant assessment year.
  • If more than three years have elapsed, approval must be obtained from Principal Chief Commissioner / Principal Director General / Chief Commissioner / Director General.
  • In the present cases, approval had been obtained from an authority mentioned under Section 151(i) instead of the authority required under Section 151(ii).

Court Order

  • Reassessment notices and orders issued without approval from the specified authority under Section 151(ii) are invalid in law.
  • Consequently, the impugned notices and orders issued under Sections 148A(d) and 148 were quashed.
  • However, the Court granted liberty to the Income Tax Department to initiate fresh reassessment proceedings in accordance with law.

Important Clarification

  • Approval of the “specified authority” under Section 151 of the Income Tax Act is mandatory for issuing reassessment notices under Section 148.
  • If reassessment proceedings are initiated after three years from the relevant assessment year, approval must come from the higher authority prescribed under Section 151(ii).
  • Any reassessment initiated with approval from an incorrect authority is liable to be set aside.

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

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