Facts of the Case

The petitioners had filed their income tax returns for the relevant assessment years, which were processed under Section 143(1) of the Income Tax Act, 1961.

Subsequently, the Income Tax Department initiated reassessment proceedings alleging that income chargeable to tax had escaped assessment. Accordingly, the Assessing Officer issued show-cause notices under Section 148A(b) and thereafter passed orders under Section 148A(d) followed by issuance of notices under Section 148 for reopening the assessment.

The petitioners challenged these reassessment proceedings before the Delhi High Court primarily on the ground that prior approval was not obtained from the “specified authority” as mandated under Section 151(ii) of the Income Tax Act.

 

Issues Involved

  1. Whether reassessment notices issued under Sections 148A(d) and 148 are valid without obtaining prior approval of the specified authority under Section 151(ii) of the Income Tax Act.
  2. Whether approval granted by an authority falling under Section 151(i) is valid when more than three years have elapsed from the end of the relevant assessment year.

Petitioner’s Arguments

  • The reassessment notices were issued after the expiry of three years from the end of the relevant assessment year.
  • As per Section 151(ii) of the Income Tax Act, in such cases approval must be obtained from Principal Chief Commissioner / Principal Director General / Chief Commissioner / Director General.
  • However, in the present case the approval was granted by the Principal Commissioner of Income Tax, which falls within the scope of Section 151(i).
  • Since approval was obtained from the wrong authority, the reassessment proceedings were without jurisdiction and liable to be quashed.
  • The petitioners relied upon the decision of the Delhi High Court in Ganesh Dass Khanna vs ITO, which dealt with a similar issue relating to sanction under Section 151. 

Respondent’s Arguments

  • The Revenue contended that reassessment proceedings were initiated in accordance with the revised reassessment framework introduced by the Finance Act, 2021.
  • It was argued that the department had obtained the necessary approval before issuing the reassessment notices.
  • The Revenue also relied upon the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) to justify the reopening proceedings.

 

Court Order / Findings

  • The sanction of the specified authority under Section 151 is mandatory before issuance of notice under Section 148.
  • Section 151 prescribes different authorities depending upon the time elapsed from the end of the relevant assessment year.
  • If three years or less have elapsed, approval must be obtained from authorities mentioned under Section 151(i).
  • If more than three years have elapsed, approval must be obtained from authorities specified under Section 151(ii).

Important Clarification

  • The validity of sanction for reassessment must be tested with reference to the amended provisions of Section 151 introduced by the Finance Act, 2021.
  • Extension of limitation under TOLA does not alter the statutory requirement regarding approval from the correct specified authority.
  • If approval is granted by an authority not specified under Section 151(ii), the reassessment proceedings are void in law.


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

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