Facts of the Case

The petitioners challenged reassessment proceedings initiated by the Income Tax Department under Section 148A(d) followed by issuance of notice under Section 148 of the Income Tax Act, 1961.

The Assessing Officer issued orders stating that certain income had escaped assessment and consequently initiated reassessment proceedings for relevant assessment years. The orders and notices were passed after obtaining approval from the Principal Commissioner of Income Tax.

The petitioners approached the Delhi High Court contending that the reassessment proceedings were initiated beyond the permissible time and that the approval required under the statutory framework had not been obtained from the correct “specified authority.”

 

Issues Involved

  1. Whether reassessment proceedings initiated under Section 148A(d) and Section 148 were valid when approval was obtained from an authority not prescribed under law.
  2. Whether approval under Section 151(ii) of the Income Tax Act, 1961 was mandatory where the reassessment notice was issued after the prescribed period.
  3. Whether the reassessment proceedings could survive when the statutory requirement of approval from the “specified authority” was not complied with.

 

Petitioner’s Arguments

  • The petitioners argued that the reassessment proceedings were initiated after the lapse of three years from the relevant assessment year, and therefore approval must be obtained from the specified authority under Section 151(ii).
  • It was contended that the approval was incorrectly obtained from an authority falling under Section 151(i) instead of the competent authority prescribed under Section 151(ii).
  • Due to this procedural defect, the order passed under Section 148A(d) and the consequent notice issued under Section 148 were legally unsustainable.

 

Respondent’s Arguments

  • The Income Tax Department contended that the reassessment proceedings were initiated in accordance with law and that necessary approval had been obtained prior to issuing the notice.
  • It was argued that the Assessing Officer had reason to believe that income chargeable to tax had escaped assessment, which justified reopening of the assessment proceedings.

 

Court Findings / Order

  • Where more than three years have elapsed from the end of the relevant assessment year, the approval must be obtained from the specified authority mentioned under Section 151(ii).
  • In the present case, approval had been obtained from the wrong authority, which rendered the reassessment proceedings legally invalid.
  • Consequently, the impugned notices and orders were liable to be set aside.

 

Important Clarification

The Court emphasized that compliance with the statutory approval requirement under Section 151 of the Income Tax Act is mandatory and not merely procedural.

Any reassessment proceedings initiated without obtaining approval from the correct specified authority will be liable to be quashed.


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


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