Facts of the Case

The Revenue (Principal Commissioner of Income Tax) filed multiple appeals before the Delhi High Court challenging a common order of the Income Tax Appellate Tribunal (ITAT) dated 21 December 2018.

The ITAT had allowed the assessee’s appeals on the ground that reassessment proceedings initiated under Section 148 were invalid due to improper sanction under Section 151 of the Income Tax Act.

The Assessing Officer had obtained sanction from the Commissioner of Income Tax (CIT), whereas, as per law, sanction ought to have been obtained from the Joint Commissioner of Income Tax (JCIT) for the relevant assessment years.

Issues Involved

  1. Whether reassessment notices issued under Section 148 are valid when sanction is obtained from an incorrect authority under Section 151?
  2. Whether sanction by a higher authority (CIT) can substitute the statutory requirement of sanction by the Joint Commissioner?
  3. Whether procedural defect in sanction can be cured under Section 292B?
  4. Whether new factual arguments can be raised before the High Court under Section 260A when not raised before lower authorities?

Petitioner’s Arguments (Revenue)

  • The Revenue contended that:
    • There was no requirement for sanction of the Joint Commissioner in the relevant assessment years since assessments were initially completed under Section 143(1).
    • Notices under Section 148 were issued within four years.
    • Sanction was obtained from the Additional Commissioner of Income Tax, who is equivalent in rank to the Joint Commissioner.
    • Even if sanction was taken from the CIT, it should not invalidate the proceedings as it is a higher authority.
    • The ITAT erred in relying on precedent without considering factual differences.

Respondent’s Arguments (Assessee)

  • The assessee argued that:
    • Section 151 clearly mandates sanction by the competent authority depending on the nature of the original assessment.
    • In the present case, sanction should have been obtained from the Joint Commissioner, not the CIT.
    • Wrong sanction strikes at the root of jurisdiction and renders the reassessment invalid.
    • Such defect cannot be cured under Section 292B.
    • The issue is already settled by judicial precedents.

Court Findings / Judgment

The Delhi High Court upheld the ITAT’s decision and dismissed the Revenue’s appeals.

  • The Court relied on the statutory interpretation of Section 151 and earlier precedent.
  • It held that:
    • The law clearly specifies the competent authority for granting sanction.
    • If the statute requires a particular authority, approval must be obtained strictly from that authority.
    • Approval by a higher authority (CIT) cannot substitute approval by the Joint Commissioner.
  • The Court emphasized the principle:

“If a statute mandates something to be done in a particular manner, it must be done in that manner or not at all.”

  • The Court also noted that:
    • The Revenue attempted to raise new arguments before the High Court which were not taken before lower authorities.
    • Such inconsistent positions cannot be entertained under Section 260A.
  • Therefore:
    • No substantial question of law arose.
    • Appeals were dismissed.

Important Clarification

  • Jurisdictional defect in sanction under Section 151 is fatal and cannot be cured by:
    • Higher authority approval
    • Section 292B (procedural irregularity)
  • Strict compliance with statutory hierarchy is mandatory.
  • New factual arguments cannot be introduced at the High Court stage if not raised earlier.

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

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


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