Facts of the Case

Multiple writ petitions were filed before the Delhi High Court challenging the validity of income tax reassessment notices issued under Sections 147 and 148 of the Income Tax Act, 1961.

The petitioners contended that the reassessment proceedings were initiated without obtaining approval from the competent “specified authority” as mandated under Section 151 of the Income Tax Act, 1961.

The reassessment notices related to assessment years where more than three years had elapsed from the end of the relevant assessment year, thereby requiring sanction from a higher authority under the statutory framework.

However, the approval was granted by an authority different from the one prescribed under the applicable provision of Section 151.

Consequently, the petitioners approached the High Court seeking quashing of the reassessment notices and consequential proceedings.

Issues Involved

  1. Whether reassessment notices issued under Section 148 of the Income Tax Act, 1961 are valid when the mandatory approval from the specified authority under Section 151(ii) has not been obtained.
  2. Whether approval granted by an incorrect authority renders reassessment proceedings invalid.
  3. Whether reassessment proceedings initiated without complying with statutory approval requirements are liable to be quashed.

Petitioner’s Arguments

  • The reassessment notices were issued without obtaining approval from the competent authority prescribed under Section 151(ii) of the Income Tax Act, 1961.
  • Under the amended provisions of Section 151, the authority competent to grant approval depends on the time elapsed from the end of the relevant assessment year.
  • Since more than three years had elapsed, the approval was required from Principal Chief Commissioner / Principal Director General / Chief Commissioner / Director General, and not from the lower authority.
  • The statutory requirement of approval is mandatory and jurisdictional, and any reassessment initiated without such approval is invalid.
  • Therefore, the reassessment notices and orders were liable to be quashed.

Respondent’s Arguments

  • The reassessment proceedings were initiated based on material indicating possible escapement of income.
  • The sanction granted by the authority was sufficient for initiating reassessment proceedings.
  • The procedural requirement of approval should not invalidate reassessment proceedings when there is material suggesting escaped income.
  • The Revenue argued that the reassessment proceedings were initiated in accordance with law.

Court Findings

  • Section 151 of the Income Tax Act clearly specifies the authority competent to grant approval for initiating reassessment proceedings.
  • The authority granting sanction depends on whether three years have elapsed from the end of the relevant assessment year.
  • When more than three years have elapsed, approval must be obtained from the Principal Chief Commissioner / Principal Director General / Chief Commissioner / Director General.
  • In the present case, approval had been obtained from an authority not competent under Section 151(ii). 

Court Order

  • Quashed the reassessment notices and related orders issued under Section 148 of the Income Tax Act, 1961.
  • Held that the reassessment proceedings were invalid due to absence of mandatory approval from the specified authority under Section 151(ii).
  • Granted liberty to the Revenue authorities to initiate fresh reassessment proceedings in accordance with law, if permissible.

Important Clarification by the Court

  • Compliance with statutory approval under Section 151 is mandatory for initiating reassessment proceedings.
  • The identity of the specified authority varies depending on the time elapsed from the end of the relevant assessment year.
  • Approval granted by an incorrect authority cannot validate reassessment proceedings.
  • Such procedural requirements are jurisdictional safeguards for taxpayers and must be strictly followed. 

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