Facts of the Case

The petitions were filed by several assessees including Twylight Infrastructure Pvt. Ltd. challenging reassessment proceedings initiated by the Income Tax Department.

The Assessing Officer issued notices under Section 148A(b) followed by orders under Section 148A(d) and subsequent notices under Section 148 of the Income Tax Act, 1961 alleging that income chargeable to tax had escaped assessment for certain assessment years.

The petitioners contended that the reassessment notices were issued without obtaining approval from the specified authority required under Section 151 of the Income Tax Act, especially in cases where more than three years had elapsed from the end of the relevant assessment year.

According to the statutory scheme after the Finance Act, 2021, the approval of the correct specified authority is mandatory before issuance of reassessment notice.

The petitioners therefore approached the Delhi High Court challenging the validity of the notices and the reassessment proceedings.

Issues Involved

  1. Whether reassessment proceedings initiated under Sections 148A and 148 of the Income Tax Act, 1961 are valid when approval is obtained from an authority not specified under Section 151.
  2. Whether approval from the correct “specified authority” is mandatory when more than three years have elapsed from the end of the relevant assessment year.
  3. Whether reassessment notices issued without proper sanction under the amended statutory framework are liable to be quashed. 

Petitioner’s Arguments

  • The reassessment notices were issued without obtaining approval from the correct specified authority under Section 151(ii) of the Income Tax Act.
  • Under the amended provisions introduced by the Finance Act, 2021, the law clearly distinguishes the authority whose approval is required depending on the time elapsed from the relevant assessment year.
  • Where more than three years have elapsed, approval must be obtained from Principal Chief Commissioner/Principal Director General/Chief Commissioner/Director General and not from lower authorities.
  • Since the impugned notices were issued without the mandatory approval, the reassessment proceedings were void and without jurisdiction. 

Respondent’s Arguments

  • The reassessment notices were issued based on information suggesting escapement of income.
  • The Assessing Officer followed the procedure under Section 148A, including issuing show cause notices and passing orders before initiating reassessment.
  • According to the department, approval had been obtained from a competent authority and therefore the proceedings were valid.

Court Findings

  • The statutory scheme after the Finance Act, 2021 clearly mandates that prior approval of the specified authority is a mandatory precondition before issuing a notice under Section 148.
  • Section 151 specifies the competent authority whose approval must be obtained depending upon the limitation period.
  • Where more than three years have elapsed from the relevant assessment year, approval must be obtained from authorities mentioned in Section 151(ii).
  • In the present cases, approval had been obtained from authorities falling under Section 151(i) instead of the higher authority required under Section 151(ii).
  • This constituted a jurisdictional defect which invalidated the entire reassessment proceedings.

Court Order / Decision

  • Quashed the reassessment notices and orders issued under Sections 148A(b), 148A(d), and 148 of the Income Tax Act.
  • Held that the reassessment proceedings were invalid due to absence of approval from the correct specified authority under Section 151(ii).
  • Granted liberty to the Revenue to initiate reassessment proceedings afresh in accordance with law, if permissible.

Important Clarification by the Court

  • Approval of the specified authority is mandatory and jurisdictional in reassessment proceedings.
  • The authority granting approval must strictly correspond to the time limits prescribed under Section 151 of the Income Tax Act.
  • Any reassessment initiated without such approval is liable to be quashed.

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

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