Facts of the Case

The petitioners had filed their returns of income for the relevant Assessment Years including AY 2016-17 and AY 2017-18. The returns were processed under Section 143(1) of the Income Tax Act, 1961.

Subsequently, following 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.

The petitioners responded to the notices. Thereafter, the Assessing Officer passed orders under Section 148A(d) holding that income had escaped assessment and issued consequential reassessment notices under Section 148.

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

The matters were heard together as a batch since the same legal issue arose in several writ petitions.

 

Issues Involved

  1. Whether reassessment notices issued under Sections 148A(d) and 148 of the Income Tax Act are valid when the approval is obtained from an authority not specified under Section 151(ii).
  2. Whether approval of the specified authority is mandatory before issuing reassessment notices.
  3. Whether reliance on TOLA and CBDT Instruction No.1/2022 can validate reassessment proceedings where approval from the correct authority is absent.

 

Petitioner’s Arguments

  • The reassessment proceedings were initiated without obtaining approval from the specified authority as required under Section 151(ii) of the Income Tax Act.
  • Since more than three years had elapsed from the end of the relevant assessment year, approval ought to have been taken from the authority prescribed under Section 151(ii).
  • Instead, the approval was obtained from an authority falling under Section 151(i), which is applicable only when reassessment is initiated within three years.
  • Therefore, the reassessment notices and orders were void and without jurisdiction.

 

Respondent’s Arguments

  • The Revenue contended that reassessment proceedings were valid and relied upon the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
  • It also relied on CBDT Instruction No. 1 of 2022 dated 11.05.2022 to justify the reassessment proceedings.
  • The Revenue further argued that approval from the specified authority was not mandatory in the manner contended by the petitioners.

 

Court Findings

  1. The first proviso to Section 148 clearly mandates that a notice under Section 148 cannot be issued unless prior approval of the specified authority is obtained.
  2. Section 151 of the Income Tax Act determines the authority competent to grant approval depending on the time elapsed from the end of the relevant assessment year.
  3. Where more than three years have elapsed, approval must be obtained from the authority specified under Section 151(ii).
  4. In the present batch of petitions, although more than three years had elapsed, approval had been taken from authorities falling under Section 151(i) instead of Section 151(ii).
  5. Such approval was therefore not legally valid.
  6. The Court relied upon its earlier decision in Ganesh Dass Khanna v. Income Tax Officer (2023) which dealt with similar issues relating to reassessment and limitation.

 

Court Order

  • Quashed the reassessment notices and orders issued under Sections 148A(d) and 148 of the Income Tax Act.
  • Held that the proceedings were invalid due to absence of approval from the 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

  • The approval of the specified authority is mandatory before issuing a reassessment notice under Section 148.
  • The authority granting approval must be determined strictly in accordance with Section 151 of the Income Tax Act, depending on the time elapsed from the relevant assessment year.
  • If the approval is obtained from an incorrect authority, the reassessment proceedings become invalid and liable to be quashed.

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

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