Facts of the Case

The petitioners, including Twylight Infrastructure Pvt. Ltd. and several other assessees, filed writ petitions before the Delhi High Court challenging reassessment proceedings initiated by the Income Tax Department for Assessment Years 2016-17 and 2017-18.

The reassessment proceedings were initiated through notices issued under Section 148 of the Income Tax Act, 1961, following orders passed under Section 148A(d). The petitioners contended that the reassessment notices and orders were issued without complying with the mandatory statutory procedure prescribed under the amended reassessment framework introduced by the Finance Act, 2021.

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

Issues Involved


  1. Whether reassessment proceedings initiated under Sections 147, 148 and 148A of the Income Tax Act were legally valid.
  2. Whether prior approval from the “specified authority” under Section 151 of the Income Tax Act was mandatory before issuing reassessment notices.
  3. Whether reassessment notices issued without proper sanction from the competent authority could be sustained in law.
  4. Whether the Revenue could rely upon the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) to justify the reassessment proceedings.

Petitioner’s Arguments


  • The petitioners argued that the reassessment notices were invalid because the Assessing Officer had not obtained approval from the “specified authority” as required under Section 151 of the Income Tax Act.
  • It was submitted that approval obtained from an authority not designated under the statute would render the reassessment proceedings void.
  • The petitioners further contended that statutory safeguards introduced after the Finance Act, 2021 must be strictly complied with before issuing notices under Section 148.
  • Therefore, the orders passed under Section 148A(d) and the consequential reassessment notices were liable to be quashed.

 

Respondent’s Arguments

  • The Income Tax Department contended that the reassessment proceedings were initiated in accordance with the provisions of the Income Tax Act, 1961.
  • It was argued that approvals obtained for initiating reassessment proceedings were valid.
  • The Revenue also relied upon the provisions of TOLA, 2020 and CBDT instructions to justify the reassessment notices.
  • It was further submitted that reassessment proceedings should not be invalidated on technical procedural grounds.

Court Findings

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

The Court observed that the amended provisions of Section 151 clearly specify the authority competent to grant approval for reassessment proceedings depending on the time period elapsed from the relevant assessment year.

The Court held that where more than three years have elapsed from the end of the relevant assessment year, approval must be obtained from the authority specified under Section 151(ii).

Since the approval for reassessment in the present case was obtained from an authority not designated under the statute, the reassessment proceedings suffered from a jurisdictional defect and could not be sustained in law.

Court Order

The Delhi High Court allowed the writ petitions and held that reassessment notices issued without proper approval from the specified authority are invalid.

Accordingly, the Court quashed the impugned notices issued under Section 148 as well as the orders passed under Section 148A(d) of the Income Tax Act.

Important Clarification by the Court

The Court clarified that compliance with the statutory requirement of obtaining prior approval from the specified authority under Section 151 of the Income Tax Act is mandatory before initiating reassessment proceedings.

Failure to obtain such approval from the competent authority renders the reassessment notices and consequential proceedings invalid.

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

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