Facts of the Case

Multiple writ petitions were filed before the Delhi High Court challenging reassessment proceedings initiated by the Income Tax Department for Assessment Years 2016-17 and 2017-18.

The assessees had originally filed their returns of income, which were processed under Section 143(1) of the Income Tax Act, 1961. Subsequently, after the decision of the Supreme Court in Union of India v. Ashish Agarwal, the Income Tax Department issued notices under Section 148A(b) alleging that certain income had escaped assessment.

After considering the replies of the assessees, the Assessing Officer passed orders under Section 148A(d) and issued consequential notices under Section 148 for reassessment.

The petitioners challenged these proceedings before the Delhi High Court contending that the reassessment notices were issued without approval of the “specified authority” as required under Section 151(ii) of the Income Tax Act.

Issues Involved

  1. Whether reassessment notices issued under Sections 148 and 148A are valid when prior approval is not obtained from the specified authority prescribed under Section 151(ii) of the Income Tax Act, 1961.
  2. Whether approval obtained from an authority specified under Section 151(i) is sufficient where more than three years have elapsed from the end of the relevant assessment year.
  3. Whether reassessment proceedings can continue where statutory sanction requirements under the amended reassessment provisions are not complied with.

Petitioner’s Arguments

  • The petitioners contended that prior approval of the specified authority is mandatory before issuing notice under Section 148.
  • In cases where more than three years have elapsed from the relevant assessment year, approval must be taken from authorities specified under Section 151(ii).
  • However, the department had obtained approval only from authorities falling under Section 151(i), which was not legally valid.
  • Consequently, the reassessment proceedings were vitiated due to lack of jurisdiction. 

Respondent’s Arguments

  • The reassessment proceedings were initiated pursuant to the Supreme Court decision in Union of India v. Ashish Agarwal (2023) 1 SCC 617.
  • The proceedings were supported by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No. 1 of 2022 dated 11.05.2022.
  • It was contended that approval obtained from the concerned authority was sufficient and reassessment notices were therefore valid.

 

Court Findings / Court Order

  • The first proviso to Section 148 makes it mandatory that prior approval of the specified authority must be obtained before issuing reassessment notices.
  • Section 151 clearly specifies the competent authority depending on the time elapsed since the relevant assessment year.
  • Where more than three years have elapsed, approval must be granted by the authority specified under Section 151(ii).
  • The approval had been taken from authorities mentioned in Section 151(i) instead of those prescribed under Section 151(ii).
  • Therefore, the statutory requirement of obtaining sanction from the correct specified authority was not satisfied.

 

Important Clarification by the Court

  • Prior approval of the specified authority is mandatory under the amended reassessment framework introduced by the Finance Act, 2021.
  • The authority granting approval must strictly correspond with the authority prescribed in Section 151 depending on the applicable time limit under Section 149.
  • Non-compliance with this statutory requirement renders reassessment proceedings invalid.  

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

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