Facts of the Case

The petitioners had filed their income tax returns for Assessment Years 2016-17 and 2017-18, which were processed under Section 143(1) of the Income Tax Act, 1961.

Subsequently, the Income Tax Department initiated reassessment proceedings alleging that income chargeable to tax had escaped assessment. For this purpose, show cause notices under Section 148A(b) were issued to the petitioners.

After considering the replies submitted by the petitioners, the Assessing Officer passed orders under Section 148A(d) and issued reassessment notices under Section 148 of the Act.

The petitioners challenged the reassessment notices before the Delhi High Court on the ground that the mandatory approval from the “specified authority” under Section 151(ii) was not obtained, rendering the proceedings invalid.

Issues Involved

  1. Whether reassessment notices issued under Sections 148A(d) and 148 are valid without obtaining prior approval of the specified authority under Section 151(ii) of the Income Tax Act.
  2. Whether approval obtained from an authority mentioned under Section 151(i) is valid when more than three years have elapsed from the end of the relevant assessment year.

Petitioner’s Arguments


  • The reassessment notices were issued after the expiry of three years from the end of the relevant assessment year.
  • As per Section 151(ii), approval in such cases must be obtained from Principal Chief Commissioner / Principal Director General / Chief Commissioner / Director General.
  • However, in the present case, the approval was granted by the Principal Commissioner of Income Tax, which falls under Section 151(i).
  • Since the sanction was obtained from an incorrect authority, the entire reassessment proceedings were without jurisdiction and liable to be quashed.
  • Reliance was placed on the judgment in Ganesh Dass Khanna vs ITO, where similar reassessment notices were set aside.

 Respondent’s Arguments


  • The Revenue contended that reassessment proceedings were initiated in accordance with the amended reassessment framework introduced by the Finance Act, 2021.
  • It was argued that the department had obtained approval from the competent authority and therefore the reassessment notices were valid.
  • The Revenue also relied upon the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) to justify the reassessment action.

 Court Order / Findings


  • The first proviso to Section 148 mandates that prior approval of the specified authority is mandatory before issuing a reassessment notice.
  • Section 151 of the Income Tax Act specifies different authorities depending upon the time elapsed from the end of the relevant assessment year.
  • If three years or less have elapsed, approval must be obtained from authorities specified under Section 151(i).
  • If more than three years have elapsed, approval must be obtained from authorities mentioned in Section 151(ii).

In the present case, although the reassessment notices were issued beyond three years, approval was obtained from the Principal Commissioner, which is not the authority prescribed under Section 151(ii).

Accordingly, the Court held that the reassessment proceedings were invalid in law, and therefore orders passed under Section 148A(d) and notices issued under Section 148 were quashed.

 

Important Clarification

  • The authority granting sanction for reassessment must strictly correspond with the time limits prescribed under Section 151.
  • TOLA does not alter or override the hierarchy of authorities prescribed under Section 151 for granting approval.
  • If approval is obtained from an authority below the rank specified in Section 151(ii), the reassessment proceedings become void and without jurisdiction

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


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