Facts of the Case

The petitioners received reassessment notices under Section 148 of the Income-tax Act, 1961, along with orders passed under Section 148A(d). These notices were issued for reopening completed assessments on the ground that income had allegedly escaped assessment.

The petitioners contended that the reassessment proceedings were initiated based on approval granted by an authority who was not the competent authority prescribed under Section 151 of the Income-tax Act.

According to the petitioners, the approval required under the statute must be granted by the specified authority as prescribed under Section 151(ii) depending on the relevant assessment year and statutory framework. Since the sanction had been obtained from an incorrect authority, the initiation of reassessment proceedings was challenged before the Delhi High Court under Article 226 of the Constitution of India seeking quashing of the notices and consequential proceedings.

Issues Involved

  1. Whether reassessment notices issued under Section 148 of the Income-tax Act are valid when the mandatory sanction under Section 151 is granted by an authority not competent under the statute.
  2. Whether reassessment proceedings initiated pursuant to such invalid sanction can be sustained in law.
  3. Whether the provisions relating to sanctioning authority were altered or affected by statutory changes or by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA).

Petitioner’s Arguments

  • The reassessment notices issued under Sections 147 and 148 were invalid as the mandatory prior approval required under Section 151(ii) had not been obtained from the competent authority.
  • The sanction was granted by an authority who was not legally empowered to grant approval under the applicable statutory provision.
  • The requirement of sanction under Section 151 is mandatory and jurisdictional in nature, and any deviation renders the reassessment proceedings void.
  • The provisions of TOLA did not alter or substitute the statutory requirement regarding the identity of the sanctioning authority.

 Respondent’s Arguments

  • The reassessment proceedings were initiated in accordance with the statutory scheme governing reassessment under the Income-tax Act, 1961.
  • The approvals obtained prior to issuance of notices were valid and complied with the statutory requirements.
  • The reassessment proceedings were undertaken based on information suggesting that income had escaped assessment.

The respondents therefore contended that the writ petitions were liable to be dismissed.

Court Findings

  • The requirement of obtaining prior approval from the specified authority under Section 151 is a mandatory jurisdictional condition for initiating reassessment proceedings.
  • Approval granted by an authority not prescribed under the statute cannot validate the initiation of proceedings.
  • If the sanction is granted by an incorrect or incompetent authority, the reassessment proceedings become legally unsustainable.

Court Order

The Delhi High Court held that the reassessment notices issued under Section 148 of the Income-tax Act were invalid as they were issued without obtaining approval from the competent authority under Section 151.

Accordingly, the Court quashed the reassessment notices and the consequential proceedings initiated against the petitioners.

Important Clarification

  • Sanction under Section 151 is a jurisdictional prerequisite for reopening an assessment.
  • Approval obtained from an authority not specified under the statute renders the entire reassessment proceedings invalid.
  • Relaxation provisions such as TOLA do not override the statutory requirement regarding the competent authority for granting sanction.

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


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