Facts of the Case

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

The assessees had originally filed their returns of income which were processed by the department 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 Income Tax Department issued notices under Section 148A(b) alleging that certain income had escaped assessment.

The petitioners filed replies to the notices, but the department passed orders under Section 148A(d) holding that income had escaped assessment and issued reassessment notices under Section 148 of the Act.

The petitioners approached the Delhi High Court contending that the reassessment notices were invalid as the statutory requirement of obtaining prior approval from the specified authority under Section 151 had not been complied with.

 Issues Involved


  1. Whether reassessment notices issued under Sections 148 and 148A of the Income Tax Act, 1961 are valid without approval of the specified authority under Section 151.
  2. Whether the approval granted by an authority other than the statutorily specified authority satisfies the legal requirement under the Act.
  3. Whether reliance on provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT instructions can override statutory provisions of the Income Tax Act.

Petitioner’s Arguments


  • The reassessment proceedings were initiated without obtaining valid approval from the specified authority mandated under Section 151(ii) of the Income Tax Act, 1961.
  • Approval granted by a Principal Commissioner or Commissioner who was not the specified authority under the amended provisions was legally insufficient.
  • The statutory framework after the Finance Act, 2021 mandates strict compliance with procedural safeguards before issuing reassessment notices.
  • Reliance by the revenue on TOLA and CBDT Instruction No.1/2022 dated 11.05.2022 cannot override the mandatory provisions of the Act.

Respondent’s Arguments

  • The reassessment proceedings were initiated in compliance with the framework laid down after the decision of the Supreme Court in Union of India v. Ashish Agarwal (2023) 1 SCC 617.
  • The notices and orders were issued after obtaining approval from competent authorities.
  • The procedural requirements should be interpreted in light of TOLA and CBDT Instructions, which clarified the reassessment procedure during the transition to the amended regime.

Court Findings


The Delhi High Court examined the statutory provisions governing reassessment, including Sections 148, 149, and 151 of the Income Tax Act, 1961, both before and after the amendments introduced by the Finance Act, 2021.

The Court observed that the law clearly mandates that prior approval of the specified authority is required before issuing a reassessment notice.

The Court rejected the contention of the revenue that such approval was not mandatory and held that the statutory requirement must be strictly complied with.

The Court also referred to its earlier judgment in Ganesh Dass Khanna v. Income Tax Officer & Anr. (2023: DHC: 8187-DB) where similar reassessment issues were considered.

 

Court Order

  • Reassessment notices issued without valid approval of the specified authority under Section 151 of the Income Tax Act, 1961 are legally unsustainable.
  • Statutory requirements relating to reassessment cannot be diluted by administrative instructions or circulars.
  • Consequently, the impugned reassessment proceedings in the concerned writ petitions were liable to be set aside.

Important Clarification

  • The approval of the specified authority under Section 151 is a mandatory statutory safeguard in reassessment proceedings.
  • Administrative instructions issued by CBDT or relaxation statutes such as TOLA cannot override express provisions of the Income Tax Act.
  • Reassessment notices issued in violation of these mandatory provisions are liable to be quashed.

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

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