Facts of the Case

The petitioners challenged reassessment proceedings initiated by the Income Tax Department for Assessment Years 2016-17 and 2017-18.

The Assessing Officer issued a notice under Section 148A(b) alleging that certain income had escaped assessment. The petitioners submitted replies to the notice.

Subsequently, the Assessing Officer passed an order under Section 148A(d) concluding that income had escaped assessment and issued a notice under Section 148 to reopen the assessment.

The petitioners approached the Delhi High Court under Article 226 of the Constitution of India, contending that the reassessment proceedings were initiated without obtaining approval from the proper “specified authority” as mandated under the amended provisions of the Income-tax Act, 1961.

Issues Involved

  1. Whether reassessment proceedings initiated under Sections 148A(d) and 148 of the Income-tax Act, 1961 are valid without obtaining approval from the “specified authority”.
  2. Whether approval obtained from an authority not prescribed under Section 151(ii) satisfies the statutory requirement for reopening an assessment beyond three years.
  3. Whether the impugned reassessment notices and orders were liable to be quashed for non-compliance with statutory procedure.

Petitioner’s Arguments

  • The petitioners argued that the reassessment notices were invalid because the Assessing Officer had not obtained approval from the correct specified authority under Section 151(ii) of the Income-tax Act.
  • They contended that where more than three years have elapsed from the end of the relevant assessment year, approval must be obtained from the higher authority specified under Section 151(ii).
  • The approval in the present case was taken from an authority mentioned in Section 151(i), which was not competent in situations where the reassessment was initiated after three years.
  • Therefore, the reassessment proceedings were initiated in violation of the statutory provisions and were liable to be quashed. 

Respondent’s Arguments

  • The Income Tax Department argued that the reassessment proceedings were validly initiated based on information suggesting that income had escaped assessment.
  • It was contended that approval had indeed been obtained prior to issuance of the notice under Section 148.
  • The respondents relied on administrative instructions and provisions introduced after the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 to justify the reassessment proceedings. 

Court Order / Findings

  • The approval of the specified authority is mandatory before issuing a notice under Section 148.
  • Under the amended Section 151, the competent authority depends on the time elapsed from the relevant assessment year.
  • If more than three years have elapsed, approval must be taken from the authority specified under Section 151(ii).
  • In the present case, the approval was obtained from an authority mentioned under Section 151(i) instead of Section 151(ii).
  • Therefore, the reassessment proceedings were initiated without valid sanction and were legally unsustainable.

Important Clarification by the Court

  • The requirement of approval from the specified authority under Section 151 is mandatory and cannot be treated as a procedural formality.
  • The amended scheme of reassessment under the Finance Act, 2021 clearly distinguishes between the authorities competent to grant approval depending on the limitation period.
  • Failure to obtain approval from the correct authority renders the reassessment proceedings invalid.

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

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