Facts of the Case

The petitioners challenged reassessment proceedings initiated by the Income Tax Department through notices issued under Section 148 of the Income-tax Act, 1961.

These notices were issued after the introduction of the new reassessment regime under the Finance Act, 2021, which amended the provisions relating to reassessment under Sections 147 to 151 of the Income-tax Act.

The Revenue contended that the reassessment notices were valid because the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) extended the limitation period for issuing such notices.

However, the petitioners argued that the notices were issued without obtaining approval from the appropriate statutory authority under Section 151, which was a mandatory requirement under the amended law.

Accordingly, the petitioners approached the Delhi High Court seeking quashing of the reassessment notices and the consequent proceedings.

 

Issues Involved

  1. Whether reassessment notices issued under Section 148 of the Income-tax Act, 1961 are valid when the mandatory sanction under Section 151 is not obtained from the competent authority.
  2. Whether the extension of limitation under TOLA, 2020 can override statutory requirements regarding the competent sanctioning authority.
  3. Whether reassessment proceedings initiated under the amended provisions of the Income-tax Act, 1961 complied with mandatory procedural requirements.

 

Petitioner’s Arguments

  • The petitioners submitted that the reassessment notices were issued without obtaining approval from the competent authority as mandated under Section 151 of the Income-tax Act.
  • It was argued that the extension of time under TOLA does not alter the statutory requirement regarding sanction by the specified authority.
  • Since the reassessment proceedings were initiated without the legally required approval, the entire proceedings were without jurisdiction and liable to be quashed.

Respondent’s Arguments


  • The Revenue contended that the reassessment notices were valid because TOLA extended the limitation period for issuing notices under Section 148.
  • It was argued that the procedural objections raised by the petitioners should not invalidate the reassessment proceedings.
  • The Department also suggested that approval from the specified authority was not mandatory in the manner contended by the petitioners.

 Court Findings


  • The statutory framework clearly requires mandatory approval from the specified authority under Section 151 before issuing reassessment notices.
  • The argument that such approval was not necessary was contrary to the scheme of the Act.
  • The extension of limitation under TOLA, 2020 does not override or dilute the mandatory procedural requirements prescribed under the Income-tax Act.

Court Order

The Delhi High Court allowed the writ petitions and held that reassessment notices issued without obtaining proper sanction under Section 151 of the Income-tax Act, 1961 are invalid.

The Court therefore quashed the impugned notices issued under Section 148 and all consequential reassessment proceedings.

 Important Clarification by the Court

  • Approval of the specified authority under Section 151 is mandatory before issuing reassessment notices.
  • The extension of limitation under TOLA cannot override statutory procedural safeguards prescribed under the Income-tax Act.
  • The provisions of Sections 148, 149, and 151 must be read together, and compliance with the sanction requirement is a jurisdictional condition.

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

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