Facts of the Case

The petitioners filed multiple 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 notices were issued following the Supreme Court judgment in Union of India v. Ashish Agarwal, where earlier reassessment notices were treated as notices under Section 148A(b) of the Income Tax Act.

However, the petitioners contended that the reassessment proceedings were initiated without obtaining approval from the “specified authority” as required under Section 151 of the Income Tax Act, 1961.

Issues Involved

  1. Whether reassessment notices issued under Section 148/148A of the Income Tax Act, 1961 are valid when approval is not obtained from the specified authority under Section 151.
  2. Whether approval obtained from an incorrect authority satisfies the statutory requirement under the amended reassessment provisions.
  3. Whether such procedural defect renders the reassessment proceedings liable to be quashed. 

Petitioner’s Arguments

  • The reassessment notices were issued without obtaining approval from the appropriate “specified authority” as mandated under Section 151 of the Income Tax Act.
  • Under the amended scheme of reassessment, the authority competent to grant approval depends on the time elapsed since the end of the relevant assessment year.
  • In cases where more than three years had elapsed, approval was required from higher authorities such as the Principal Chief Commissioner or Chief Commissioner.
  • The approval obtained by the Assessing Officer was from an authority not competent under the statute, making the reassessment notices legally unsustainable.
  • Since statutory approval is mandatory, the entire reassessment proceedings were liable to be set aside.

 

Respondent’s Arguments

  • The reassessment notices were issued in compliance with the reassessment framework after the decision in Union of India v. Ashish Agarwal.
  • The Assessing Officer had obtained approval before issuing the notices.
  • The reassessment proceedings were therefore valid and within the jurisdiction of the department. 

Court Findings

The Delhi High Court examined the statutory scheme under Sections 148 and 151 of the Income Tax Act and observed that the Act clearly specifies the authority whose approval is required before issuing reassessment notices.

  • If three years or less have elapsed from the end of the relevant assessment year, approval must be obtained from the Principal Commissioner/Commissioner.
  • If more than three years have elapsed, approval must be obtained from the Principal Chief Commissioner or Chief Commissioner.

In the present case, although more than three years had elapsed from the relevant assessment year, approval was obtained from an authority prescribed for cases within three years.

The Court held that the statutory requirement under Section 151 was mandatory and not procedural. Consequently, the reassessment notices and subsequent proceedings were invalid.

The Court therefore quashed the impugned reassessment notices and orders.

Court Order

  • The reassessment notices and consequential proceedings issued against the petitioners were quashed.
  • The Court granted liberty to the Revenue to initiate fresh reassessment proceedings in accordance with law, if permissible.

Important Clarification by the Court

  • Approval from the correct specified authority under Section 151 is mandatory before issuing reassessment notices.
  • Obtaining approval from an incorrect authority renders the reassessment proceedings invalid.
  • The statutory scheme governing reassessment must be strictly followed by the Revenue authorities.

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

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