Facts of the Case

The petitioners in several writ petitions challenged reassessment proceedings initiated by the Income Tax Department concerning 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. Subsequently, the Revenue issued notices under Section 148A(b) alleging that certain income had escaped assessment.

After receiving replies from the petitioners, the Income Tax Department passed orders under Section 148A(d) and issued consequential notices under Section 148 to reopen the assessments.

The petitioners approached the Delhi High Court contending that the reassessment notices and orders were invalid because they were issued without obtaining approval from the “specified authority” as mandated under the amended provisions of the Income Tax Act.

 Issues Involved


  1. Whether reassessment notices issued under Sections 148 and 148A of the Income Tax Act, 1961 are valid if prior approval from the specified authority under Section 151 is not obtained.
  2. Whether reliance placed by the Revenue on the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT instructions could override the statutory requirement of approval from the specified authority.

Petitioner’s Arguments


The reassessment proceedings were initiated without obtaining approval from the specified authority as required under Section 151(ii) of the Income Tax Act.

  • Under the amended provisions introduced by the Finance Act, 2021, obtaining prior approval from the specified authority is mandatory before issuing a notice under Section 148.
  • The approval obtained from an authority not designated as the specified authority renders the reassessment proceedings invalid.
  • Reliance placed by the Revenue on TOLA and CBDT Instruction No.1 of 2022 cannot override statutory provisions of the Income Tax Act.

Respondent’s Arguments


  • The reassessment notices were issued in accordance with the framework laid down by the Supreme Court in Union of India v. Ashish Agarwal.
  • The department relied on provisions of TOLA, 2020 and CBDT Instruction No.1/2022 dated 11.05.2022 to justify the issuance of notices.
  • According to the Revenue, the approval obtained from the authority concerned was sufficient and the requirement of approval from the specified authority should not invalidate the proceedings.

Court Findings


  • The statutory provisions clearly require prior approval of the “specified authority” under Section 151 before issuance of reassessment notices under Section 148.
  • The requirement of approval is mandatory and not merely procedural.
  • The argument advanced by the Revenue that such approval is not necessary is contrary to the provisions of the Income Tax Act.
  • Instructions issued by the CBDT or provisions under TOLA cannot override the express statutory mandate contained in the Act.

Court Order


  • The impugned reassessment notices and consequential proceedings were set aside.
  • The writ petitions filed by the assessees were allowed.

 Important Clarification

  • The statutory requirement of approval from the specified authority under Section 151 is mandatory before issuing reassessment notices.
  • Administrative instructions or relaxations under TOLA cannot dilute or bypass the statutory safeguards provided under the Income Tax Act.

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

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.