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 petitioners had originally filed their returns of income which were processed by the department under Section 143(1) of the Income Tax Act, 1961. Subsequently, notices were issued by the revenue under Section 148A(b) alleging that certain income had escaped assessment.

After considering the responses of the assessees, the department passed orders under Section 148A(d) and issued consequential notices under Section 148 for reassessment. The petitioners challenged these proceedings on the ground that the mandatory approval from the “specified authority” required under the Income Tax Act was not properly obtained before issuing the reassessment notices.

Since identical issues were involved, several writ petitions were heard together by the High Court.

 

Issues Involved

  1. Whether reassessment notices issued under Section 148 read with Section 148A are valid without approval of the “specified authority”.
  2. Whether the Income Tax Department could rely upon TOLA, 2020 and CBDT Instruction No. 1/2022 to justify reassessment proceedings.
  3. Whether prior approval under Section 151 of the Income Tax Act is mandatory for initiating reassessment proceedings.

 

Petitioner’s Arguments

  • The petitioners contended that reassessment proceedings were invalid because they were initiated without approval of the “specified authority” as required under Section 151(ii) of the Income Tax Act.
  • It was argued that approval obtained from an authority not designated under the statute would render the proceedings void.
  • The petitioners also submitted that statutory safeguards introduced after the Finance Act, 2021, especially under Sections 148A and 151, must be strictly complied with before issuing reassessment notices.
  • The reassessment proceedings therefore suffered from lack of jurisdiction.

Respondent’s Arguments

  • The Income Tax Department relied upon the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and CBDT Instruction No. 1/2022 dated 11.05.2022 to justify the reassessment notices.
  • The revenue contended that the approvals obtained were sufficient and that the procedural requirement should not invalidate the reassessment proceedings.
  • It was also argued that approval of the specified authority was not mandatory in the manner suggested by the petitioners.

Court’s Findings

The Delhi High Court examined the statutory framework governing reassessment proceedings under the Income Tax Act and emphasized that prior approval of the “specified authority” is a mandatory requirement before issuing notices under Section 148.

The Court observed that the statutory provisions clearly require that the Assessing Officer must obtain prior sanction from the designated authority before initiating reassessment proceedings.

The argument raised by the revenue that such approval was not mandatory was rejected by the Court. The Court held that such a contention was contrary to the express provisions of the Income Tax Act.

The Court also compared the provisions of Sections 148, 149 and 151 before and after the Finance Act, 2021, noting that the amended framework strengthened procedural safeguards for taxpayers.

Court Order

The Delhi High Court ruled in favour of the assessees, holding that reassessment notices issued without proper approval of the specified authority are unsustainable in law.

Consequently, the impugned reassessment notices and proceedings were liable to be set aside where statutory requirements were not complied with.

 

Important Clarification by the Court

  • Approval of the specified authority is a mandatory jurisdictional requirement before issuing a notice under Section 148.
  • Any reassessment initiated without such approval violates the statutory mandate and cannot be sustained.
  • Administrative instructions or relaxations cannot override the express provisions of the Income Tax Act.

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

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