Facts of the Case

Multiple writ petitions were filed by various assessees including Twylight Infrastructure Pvt. Ltd. and others challenging reassessment proceedings initiated by the Income Tax Department for Assessment Years 2016-17 and 2017-18.

In one representative case, the assessee (Rajesh Gupta HUF) filed its return of income declaring income of ₹66,88,500, which was processed under Section 143(1) of the Income Tax Act. Subsequently, following the decision of the Supreme Court in Union of India v. Ashish Agarwal, the Income Tax Department issued a notice dated 26.05.2022 under Section 148A(b) alleging that certain income had escaped assessment.

The assessee submitted a reply to the notice. Thereafter, the Assessing Officer passed an order under Section 148A(d) concluding that income amounting to ₹4,37,56,000 had escaped assessment and issued a consequential notice under Section 148 to reopen the assessment.

The assessees challenged these notices before the High Court on the ground that the reassessment proceedings were initiated without the approval of the “specified authority” as mandated under Section 151 of the Income Tax Act.

 

Issues Involved

  1. Whether reassessment notices issued under Sections 148A(d) and 148 of the Income Tax Act are valid if they are not backed by approval of the “specified authority” under Section 151 of the Act.
  2. Whether reliance by the Revenue on the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No. 1/2022 can cure the absence of such approval.
  3. Whether reassessment proceedings initiated in these cases were legally sustainable.

 

Petitioner’s Arguments

  • The petitioners argued that the reassessment proceedings were initiated without obtaining the mandatory approval from the “specified authority” as required under Section 151 of the Income Tax Act.
  • It was contended that such approval is a jurisdictional requirement and absence of it renders the reassessment proceedings invalid.
  • The petitioners further argued that statutory provisions cannot be overridden by administrative instructions issued by the CBDT.
  • They also relied upon earlier judgments of the Delhi High Court including Ganesh Dass Khanna v. Income Tax Officer, where similar reassessment actions were examined.

 

Respondent’s Arguments

  • The Income Tax Department argued that the reassessment proceedings were valid and were initiated in accordance with the provisions of the Income Tax Act.
  • It was contended that the approval had been obtained from competent authorities such as the Principal Commissioner of Income Tax.
  • The Revenue further relied upon the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No. 1/2022 to justify the reassessment process.
  • According to the Department, these provisions and instructions allowed reassessment notices to be issued in the present circumstances.

 

Court Findings / Court Order

The Delhi High Court held that approval of the “specified authority” under Section 151 of the Income Tax Act is a mandatory requirement before issuing reassessment notices.

The Court rejected the argument of the Revenue that such approval was not necessary. It observed that the statutory scheme clearly requires prior sanction of the specified authority before reassessment proceedings can be initiated.

The Court further held that administrative instructions or reliance on TOLA cannot override statutory requirements contained in the Income Tax Act.

Accordingly, the High Court ruled in favour of the assessees and held that reassessment proceedings initiated without the proper approval of the specified authority cannot be sustained in law.

 

Important Clarification by the Court

  • The requirement of approval under Section 151 of the Income Tax Act is mandatory.
  • Reassessment notices issued without such approval suffer from jurisdictional defect.
  • Administrative instructions issued by CBDT cannot override statutory provisions.
  • Compliance with statutory safeguards is essential before reopening completed assessments.   

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

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