Facts of the Case

The petitioners filed their income-tax returns for Assessment Years 2016-17 and 2017-18, which were processed under Section 143(1) of the Income Tax Act, 1961.

Later, the Income Tax Department initiated reassessment proceedings on the allegation that income chargeable to tax had escaped assessment. Accordingly, the Assessing Officer issued show cause notices under Section 148A(b).

After considering the replies filed by the petitioners, the Assessing Officer passed orders under Section 148A(d) and issued reassessment notices under Section 148 of the Act.

The petitioners challenged these notices before the Delhi High Court contending that mandatory approval of the specified authority under Section 151(ii) had not been obtained before issuing the reassessment notices.

 Issues Involved


1.      Whether reassessment notices issued under Sections 148A(d) and 148 of the Income Tax Act are valid without obtaining prior approval from the specified authority under Section 151(ii).

2.      Whether approval granted by an authority mentioned 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 beyond three years from the end of the relevant assessment year.
  • Under Section 151(ii) of the Income Tax Act, where more than three years have elapsed, approval must be obtained from Principal Chief Commissioner / Principal Director General / Chief Commissioner / Director General.
  • However, the approval was obtained from the Principal Commissioner of Income Tax, which falls under Section 151(i).
  • Since approval was obtained from the wrong authority, the reassessment proceedings were without jurisdiction and liable to be quashed.
  • Reliance was placed on the judgment of the Delhi High Court in Ganesh Dass Khanna vs ITO, which dealt with similar issues regarding approval under Section 151.

 Respondent’s Arguments

  • The Revenue argued that reassessment proceedings were initiated in accordance with the new reassessment regime introduced by the Finance Act, 2021.
  • It was contended that approval had been obtained from the competent authority before issuing reassessment notices.
  • The Revenue also relied on the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) to justify the initiation of reassessment proceedings.

Court Order / Findings

  • The first proviso to Section 148 makes prior approval of the specified authority mandatory before issuing a reassessment notice.
  • Section 151 specifies 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 mentioned under Section 151(ii).

Important Clarification

  • The sanction requirement under Section 151 is mandatory and acts as a procedural safeguard against arbitrary reassessment proceedings.
  • The determination of the specified authority depends on the time elapsed from the end of the relevant assessment year.
  • Extension of limitation under TOLA does not alter the hierarchy of authorities prescribed under Section 151.

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


Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.