Facts of the Case

The petitioners challenged reassessment proceedings initiated by the Income Tax Department for Assessment Years 2016-17 and 2017-18.

The Revenue issued notices under Section 148A(b) proposing reassessment on the ground that income had allegedly escaped assessment. The petitioners contended that the reassessment notices and subsequent orders were issued without proper statutory approval from the specified authority, as required under the Income-tax Act.

The petitions were filed before the Delhi High Court seeking quashing of the impugned notices and orders on the ground that the statutory procedure mandated under the Act was not complied with.

The matter involved several connected writ petitions raising a common legal issue concerning the validity of reassessment proceedings initiated by the Income Tax Department.

Issues Involved

  1. Whether the reassessment proceedings initiated under Sections 147/148 and Section 148A were legally valid.
  2. Whether the mandatory approval of the specified authority under Section 151 was obtained before issuing the reassessment notice.
  3. Whether the reassessment notices issued by the Revenue could survive in the absence of proper statutory sanction. 

Petitioner’s Arguments

  • The reassessment notices and consequential proceedings were invalid in law as they were not backed by the approval of the specified authority as required under Section 151 of the Income-tax Act.
  • Compliance with the statutory requirement of obtaining sanction from the competent authority is mandatory before issuing a notice under Section 148.
  • The Revenue failed to demonstrate that proper approval was granted by the competent authority prior to initiating reassessment proceedings.
  • Therefore, the impugned notices and orders were liable to be quashed for non-compliance with statutory requirements. 

Respondent’s Arguments

  • The reassessment proceedings were initiated following the statutory framework introduced by the Finance Act, 2021 and the procedure prescribed under Section 148A.
  • The impugned notices were issued after considering relevant information and in accordance with the law governing reassessment proceedings.
  • According to the Revenue, the notices were valid and the reassessment process had been initiated lawfully.
  • The Department further contended that the statutory provisions did not render the proceedings invalid in the manner alleged by the petitioners. 

Court Findings

The Delhi High Court examined whether the reassessment notices were issued after obtaining the mandatory approval from the specified authority.

The Court observed that the statutory scheme under the Income-tax Act requires that before issuing a notice under Section 148, the Assessing Officer must obtain sanction from the competent authority as prescribed under Section 151.

The Court held that where such approval is not properly obtained, the reassessment proceedings cannot be sustained in law.

The Court emphasized that compliance with the procedural safeguards provided under the statute is essential to ensure that reassessment powers are exercised lawfully.

 

Court Order

  • The reassessment proceedings initiated against the petitioners were not sustainable in law if the mandatory approval of the specified authority was not obtained.
  • Consequently, the impugned notices and proceedings were liable to be set aside in cases where statutory requirements were not fulfilled.

Important Clarification by the Court

  • Approval of the specified authority under Section 151 is a mandatory statutory requirement before issuing a reassessment notice under Section 148.
  • Failure to comply with the statutory sanction requirement would render the reassessment proceedings legally vulnerable.  

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

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