Facts of the Case

The petitioner, Twylight Infrastructure Pvt. Ltd., challenged the reassessment notices issued by the Income Tax Department under the provisions of the Income-tax Act, 1961.

The reassessment proceedings were initiated for certain assessment years on the basis that income chargeable to tax had allegedly escaped assessment. Notices were issued under the reassessment regime introduced after the amendments to Sections 147–151 of the Income-tax Act.

The petitioner contended that the reassessment notices were invalid because the mandatory approval of the “specified authority” under Section 151 had not been obtained before issuing the notices.

Several similar writ petitions raising the same legal issue were heard together by the Delhi High Court.

 

Issues Involved

  1. Whether reassessment notices issued under the Income-tax Act were valid without obtaining approval from the specified authority under Section 151.
  2. Whether the approval granted by an authority not prescribed under the statute would render the reassessment proceedings invalid.
  3. Whether the provisions of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA) changed the requirement regarding the competent sanctioning authority. 

Petitioner’s Arguments

  • The reassessment notices were issued without obtaining the mandatory approval from the specified authority as required under Section 151 of the Income-tax Act.
  • The authority that granted approval was not the competent authority prescribed by law, and therefore the notices were legally unsustainable.
  • The relaxation provisions under TOLA did not alter the statutory requirement regarding who must grant sanction for reassessment.
  • Since the sanction requirement is a jurisdictional condition, failure to comply with it invalidates the entire reassessment process.

Respondent’s Arguments

  • The reassessment proceedings were initiated in accordance with the statutory provisions.
  • The approvals granted for issuance of reassessment notices were valid under the applicable legal framework.
  • The relaxation provisions enacted through TOLA justified the procedure adopted by the Department.

Court Findings / Court Order

  • Approval from the correct “specified authority” under Section 151 of the Income-tax Act is a mandatory requirement before issuing reassessment notices.
  • In the present case, the approval had been granted by an authority not competent under the statute, thereby violating the statutory mandate.
  • The provisions of TOLA did not change the identity of the sanctioning authority prescribed under Section 151.
  • Consequently, the reassessment notices issued without proper approval were invalid and liable to be set aside.

Important Clarification by the Court

  • The requirement of prior approval under Section 151 is a jurisdictional safeguard intended to prevent arbitrary reopening of assessments.
  • Any reassessment notice issued without approval from the statutorily designated authority is liable to be struck down.
  • The relaxation provisions under TOLA cannot be interpreted to alter the statutory requirement regarding the competent sanctioning authority.

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

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