Facts of the Case

The petitioners filed their respective returns of income for Assessment Years 2016-17 and 2017-18. The returns were processed by the Income Tax Department and intimations were issued under Section 143(1) of the Income Tax Act, 1961.

Subsequently, after the judgment of the Supreme Court in Union of India v. Ashish Agarwal, the Revenue issued notices under Section 148A(b) alleging that income chargeable to tax had escaped assessment. The petitioners submitted replies to these notices.

Thereafter, the Assessing Officer passed orders under Section 148A(d) holding that certain income had escaped assessment and consequently issued reassessment notices under Section 148 of the Income Tax Act.

The petitioners challenged these reassessment proceedings before the Delhi High Court, contending that the notices and orders were issued without approval from the “specified authority” as mandated under Section 151 of the Income Tax Act.

Issues Involved

  1. Whether reassessment notices issued under Sections 148 and 148A are valid when the approval is not obtained from the specified authority as required under Section 151 of the Income Tax Act, 1961.
  2. Whether approval obtained from an authority not specified under Section 151(ii) can sustain reassessment proceedings when more than three years have elapsed from the relevant assessment year.
  3. Whether reassessment proceedings initiated in such circumstances are liable to be quashed.

 

Petitioner’s Arguments

  • The reassessment proceedings were initiated without obtaining approval from the correct specified authority as required under Section 151(ii) of the Income Tax Act.
  • Since more than three years had elapsed from the end of the relevant assessment year, approval should have been taken from the Principal Chief Commissioner or Principal Director General / Chief Commissioner / Director General, as prescribed under Section 151(ii).
  • Instead, approval had been taken from an authority falling under Section 151(i), which was legally insufficient.
  • Consequently, the reassessment notices issued under Sections 148A(d) and 148 were without jurisdiction and invalid in law.

 

Respondent’s Arguments

  • The reassessment proceedings were valid and initiated after obtaining approval from the concerned authority.
  • Reliance was placed 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.
  • It was contended that the approval requirement should not invalidate reassessment proceedings in the present circumstances.

 

Court’s Findings

  • The first proviso to Section 148 clearly mandates that no notice shall be issued unless prior approval of the specified authority is obtained.
  • The amended Section 151 explicitly identifies the authority competent to grant approval depending upon the time elapsed from the end of the relevant assessment year.
  • If more than three years have elapsed, approval must be obtained from the authority specified in Section 151(ii).
  • In the present batch of cases, although more than three years had elapsed, approval was taken from an authority falling under Section 151(i).

Court Order

  • The impugned orders under Section 148A(d) and notices issued under Section 148 were invalid and unsustainable in law due to absence of approval from the specified authority under Section 151(ii).
  • Accordingly, the Court quashed the impugned notices and orders in all the connected writ petitions.
  • However, the Revenue was granted liberty to initiate fresh reassessment proceedings in accordance with law if permissible.

 

Important Clarification by the Court

  • Approval from the specified authority under Section 151 is mandatory for issuing reassessment notices.
  • The identity of the specified authority depends on the time elapsed since the relevant assessment year.
  • If the approval is obtained from the wrong authority, the reassessment notice becomes legally unsustainable.

 

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

 

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