Facts of the Case

The present appeals were filed by the Revenue challenging a common order of the Income Tax Appellate Tribunal (ITAT) dated 21 December 2018. The Tribunal had allowed the assessee’s appeals on the ground that reassessment proceedings were invalid due to improper sanction under Section 151 of the Income Tax Act.

The Assessing Officer had issued notices under Section 148 for reopening assessments pertaining to multiple assessment years. However, the sanction for issuing such notices was obtained from the Commissioner of Income Tax (CIT), whereas, as per statutory requirements, the approval ought to have been taken from the Joint Commissioner of Income Tax (JCIT).

The ITAT held that such defect in sanction goes to the root of jurisdiction and invalidates the reassessment proceedings.

Issues Involved

  1. Whether reassessment notices issued under Section 148 are valid when sanction under Section 151 is obtained from an incorrect authority.
  2. Whether sanction by a higher authority (CIT) can substitute the requirement of sanction by the prescribed authority (JCIT).
  3. Whether such defect can be cured under Section 292B of the Act.
  4. Whether new arguments not raised before lower authorities can be entertained at the High Court stage.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that there was no requirement to obtain sanction from the Joint Commissioner since assessments were originally completed under Section 143(1) and notices were issued within four years.
  • It was argued that approval had been obtained from the Additional Commissioner of Income Tax, who is of equivalent rank to the Joint Commissioner.
  • The Revenue further argued that even if approval was taken from the CIT, being a higher authority, the reassessment should not be invalidated.
  • It was also submitted that there was no lack of satisfaction or application of mind by the competent authority.

Respondent’s Arguments (Assessee)

  • The assessee contended that Section 151 clearly mandates sanction from a specific authority depending on the facts of the case.
  • Since the original assessments were processed under Section 143(1), sanction ought to have been obtained from the Joint Commissioner as per Section 151(2).
  • Approval from CIT instead of JCIT is a jurisdictional defect and renders the notice under Section 148 invalid.
  • Reliance was placed on judicial precedent including CIT vs Soyuz Industrial Resources Ltd (58 taxmann.com 336).

Court Findings / Order

  • The Delhi High Court upheld the findings of the ITAT and dismissed all appeals filed by the Revenue.
  • The Court observed that:
    • The statutory requirement under Section 151 must be strictly complied with.
    • If the law requires sanction from a particular authority, it must be obtained from that authority alone.
    • Approval from a higher authority does not cure the defect.
  • The Court relied on the principle that if a statute prescribes a manner of doing something, it must be done in that manner or not at all.
  • It was further held that:
    • Section 292B cannot cure a jurisdictional defect.
    • The Revenue cannot raise new factual arguments before the High Court that were not raised before lower authorities.
  • Consequently, the reassessment proceedings were held invalid and all appeals of the Revenue were dismissed.

Important Clarification

  • Sanction under Section 151 is not a procedural formality but a jurisdictional requirement.
  • Approval must be obtained from the correct authority as prescribed under the Act, not merely a higher authority.
  • Defects in sanction cannot be cured under Section 292B.
  • New arguments inconsistent with earlier pleadings cannot be entertained at appellate stage.

Sections Involved

  • Section 147 – Income Escaping Assessment
  • Section 148 – Issue of Notice for Reassessment
  • Section 151 – Sanction for Issue of Notice
  • Section 143(1) & 143(3) – Assessment Provisions
  • Section 260A – Appeal to High Court
  • Section 292B – Return of Income, etc., not to be invalid

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:2064-DB/MMH15072021ITA12020_223205.pdf

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