Facts of the Case

The petitioners filed several writ petitions challenging reassessment proceedings initiated by the Income Tax Department for Assessment Years 2016-17 and 2017-18.

The petitioners had originally filed their returns of income which were processed by the department and intimation was issued under Section 143(1) of the Income Tax Act, 1961. Later, the Revenue issued notices under Section 148A(b) alleging that certain income had escaped assessment.

After considering the replies submitted by the assessees, the Assessing Officer passed orders under Section 148A(d) holding that income had escaped assessment and subsequently issued reassessment notices under Section 148.

The petitioners challenged these actions before the High Court on the ground that the reassessment proceedings were initiated without obtaining approval from the “specified authority” as required under Section 151(ii) of the Income Tax Act, 1961.

Issues Involved

  1. Whether reassessment notices issued under Sections 148A(d) and 148 of the Income Tax Act, 1961 were valid without approval from the specified authority under Section 151(ii).
  2. Whether reassessment proceedings initiated on the basis of approval from an authority other than the prescribed authority could be sustained in law.
  3. Whether the Revenue could rely upon the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT instructions to justify the reassessment notices.

 

Petitioner’s Arguments

  • The reassessment proceedings were invalid as prior approval from the “specified authority” mandated under Section 151(ii) was not obtained.
  • The orders under Section 148A(d) and consequential notices under Section 148 were issued by relying on approval from an authority not prescribed by law.
  • The statutory requirement under Section 151 is mandatory and any reassessment initiated without such approval is void ab initio.
  • The reliance placed by the Revenue on TOLA and CBDT Instruction No.1/2022 could not override the statutory provisions of the Income Tax Act.

 

Respondent’s Arguments

  • The reassessment proceedings were triggered after the Supreme Court’s decision in Union of India v. Ashish Agarwal, which allowed earlier reassessment notices to be treated as notices under Section 148A(b).
  • The orders and notices had been issued after obtaining approval from the Principal Commissioner of Income Tax, which according to the Revenue was sufficient compliance.
  • The department relied upon provisions of TOLA and CBDT Instruction No.1/2022 dated 11.05.2022 to justify the reassessment process.

Court Order / Findings

  • Approval of the “specified authority” under Section 151(ii) of the Income Tax Act is mandatory before initiating reassessment proceedings.
  • In the present case, the reassessment notices and orders were issued without approval of the prescribed authority, making them legally unsustainable.
  • The Court relied upon its earlier judgment in Ganesh Dass Khanna v. Income Tax Officer while examining the legality of reassessment proceedings.
  • Consequently, the impugned orders under Section 148A(d) and the reassessment notices issued under Section 148 were quashed.

 

Important Clarification by the Court

  • Compliance with Section 151(ii) is a statutory pre-condition for reassessment proceedings.
  • Approval must be obtained from the “specified authority” as defined under the Income Tax Act, and approval by any other authority cannot cure the defect.
  • Even if reassessment is otherwise permissible, failure to obtain proper approval renders the proceedings invalid in law.

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

 

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