Facts of the Case

The appeals were filed by the Principal Commissioner of Income Tax challenging a common order of the Income Tax Appellate Tribunal (ITAT) dated 21 December 2018. The ITAT had allowed the assessee’s appeals and quashed reassessment proceedings for multiple assessment years.

The reassessment notices under Section 148 were issued after obtaining sanction from the Commissioner of Income Tax (CIT). However, as per statutory provisions, the sanction should have been obtained from the Joint Commissioner of Income Tax (JCIT).

The ITAT held that such incorrect sanction vitiated the reassessment proceedings. Consequently, the Revenue approached the Delhi High Court under Section 260A.

Issues Involved

  1. Whether reassessment notices issued under Section 148 are valid when sanction is obtained from the CIT instead of the competent authority (JCIT) under Section 151?
  2. Whether approval by a higher authority (CIT) can substitute the statutory requirement of approval by the prescribed authority?
  3. Whether such defect can be cured under Section 292B of the Income Tax Act?

Petitioner’s Arguments (Revenue)

  • The Revenue contended that sanction by the CIT should be considered valid as the CIT is a higher authority than the JCIT.
  • It was argued that in certain assessment years, no sanction was required as the original assessment was under Section 143(1) and reassessment was within four years.
  • The Revenue also claimed that approval had been obtained from the Additional Commissioner, who is equivalent in rank to JCIT.
  • It was further argued that there was no lack of satisfaction and thus reassessment should not be invalidated on technical grounds.

Respondent’s Arguments (Assessee)

  • The assessee argued that the statutory mandate under Section 151 must be strictly followed.
  • Since the law specifically requires sanction from the JCIT, obtaining approval from CIT renders the proceedings invalid.
  • The defect is jurisdictional in nature and cannot be cured by invoking Section 292B.
  • Reliance was placed on judicial precedents, including CIT vs Soyuz Industrial Resources Ltd, to support the argument that incorrect sanction vitiates reassessment.

Court’s Findings / Order

  • The Delhi High Court upheld the ITAT’s decision and dismissed the appeals filed by the Revenue.
  • The Court emphasized that statutory provisions must be followed strictly, and approval must be obtained from the designated authority.
  • It held that sanction by a higher authority (CIT) cannot substitute the requirement of sanction by the JCIT when specifically mandated by law.
  • The Court also noted that the Revenue had taken inconsistent positions before different authorities.
  • Since the foundational facts argued before the High Court were different from those before lower authorities, the appeals were not maintainable.
  • No substantial question of law arose for consideration.

Important Clarification by Court

  • If a statute prescribes a specific manner for doing an act, it must be done in that manner alone or not at all.
  • Jurisdictional defects, such as improper sanction under Section 151, cannot be cured under Section 292B.
  • Approval by an incorrect authority invalidates reassessment proceedings entirely.
  • Courts cannot reinterpret provisions in a way that renders statutory requirements redundant.

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
  • Section 260A – Appeal to High Court
  • Section 292B – Return of Income, etc., not to be invalid on certain grounds

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