Facts of the Case

Sabharwal Apartments Private Limited filed a writ petition challenging the validity of reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961 for Assessment Year 2015-16.

The impugned notice under Section 148 had been issued after expiry of four years from the end of the relevant assessment year. The reassessment proceedings were approved by the Joint Commissioner of Income Tax.

The petitioner challenged the reassessment solely on the ground that the mandatory sanction under Section 151 of the Act had not been obtained from the competent authority, namely the Principal Chief Commissioner / Chief Commissioner / Principal Commissioner / Commissioner, as required by law.

The Revenue sought to justify the approval by relying on the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA), contending that extended timelines permitted approval by the Joint Commissioner.

 

Issues Involved

Whether reassessment notices issued after expiry of four years are invalid for want of sanction by the competent authority under Section 151.

Whether approval granted by the Joint Commissioner of Income Tax satisfies the statutory requirement of Section 151.

Whether TOLA alters or overrides the requirement of sanction by the specified authority.

Whether reassessment proceedings initiated without proper sanction are liable to be quashed.

 

Petitioner’s Arguments

The petitioner contended that Section 151 mandates sanction by higher specified authorities where reassessment is initiated after expiry of four years from the end of the relevant assessment year.

It was argued that approval by the Joint Commissioner was jurisdictionally invalid and rendered the entire reassessment proceedings void ab initio. The petitioner further submitted that TOLA merely extended timelines and did not amend or dilute the statutory requirement relating to the authority competent to grant sanction.

 

Respondent’s Arguments

The Revenue contended that by virtue of TOLA, reassessment notices could validly be issued within the extended time period and that approval by the Joint Commissioner was sufficient under Section 151(2) as it stood prior to the Finance Act, 2021.

It was further argued that the reassessment proceedings were validly initiated and should not be interfered with on technical grounds.

 

Court Order / Findings

The Delhi High Court allowed the writ petition and quashed the reassessment notice and all consequential proceedings. The Court held that:

Section 151 clearly stipulates the authority competent to grant sanction depending upon the time elapsed from the end of the relevant assessment year.

Where reassessment is initiated after expiry of four years, sanction must be granted by the authorities specified under Section 151(1).

Approval by the Joint Commissioner is insufficient and invalid in such cases.

TOLA only extends limitation periods and does not amend or override the statutory requirement regarding the authority empowered to grant sanction.

Absence of sanction by the competent authority is a jurisdictional defect that vitiates the reassessment proceedings in their entirety.

 

Important Clarification

The judgment authoritatively clarifies that:

Sanction under Section 151 is a mandatory jurisdictional requirement.

Approval by an authority not specified under Section 151 renders reassessment proceedings void ab initio.

TOLA does not dilute or modify the statutory scheme governing sanction for reassessment.

Reassessment notices issued without valid sanction are liable to be quashed without examination of merits.

This decision reinforces strict adherence to statutory safeguards governing reassessment under the Income-tax Act and strengthens taxpayer protection against jurisdictionally invalid reopening.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770203294_SABHARWALAPARTMENTSPRIVATELIMITEDVsASSISTANTCOMMISSIONEROFINCOMETAXCIRCLE222DELHIANDANR..pdf  

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