The Delhi High Court quashed an income tax notice after finding that the Joint Commissioner of Income Tax (JCIT) approval for notices issued 3-4 years post-assessment was non-compliant with Section 151 of the Income Tax Act, 1961.
This batch of writ petitions challenges the validity of reassessment actions initiated by the respondents under Section 148 of the Income Tax Act, 1961, concerning the Assessment Year 2015-16. The primary ground for contesting these reassessments is a violation of the provisions in Section 151 of the Income Tax Act.
The petitioners argued that the approval for the initiation of reassessment actions was granted by the Joint Commissioner of Income Tax (JCIT), rather than by the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner as mandated by Section 151(1) of the Income Tax Act. They assert that since the impugned Section 148 notices were issued more than four years after the relevant Assessment Year, they required mandatory approval from one of the authorities specified in sub-section (1) of Section 151.
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Further contended that the impugned notices would be invalid even under the amended provisions of Section 151 following the Finance Act 2021. This amendment introduced the concept of “specified authority” as the designated officer responsible for granting approval for reassessment, as defined by Section 151. Under this amended Section 151, if reassessment notices are issued after three years from the end of the relevant Assessment Year, they must be approved by the Principal Commissioner or other specified authorities. Conversely, for reassessments initiated after four years, the approval must come from the Principal Chief Commissioner or equivalent authorities. Thus, they argue that the JCIT’s approval is not compliant with either the unamended or the amended Section 151.
Further asserted that the sanction requirement in Section 151 is crucial, as it clearly states that reassessment action cannot commence unless the designated authorities deem it appropriate for issuing a notice under Section 148 or 148A. They maintain that in the absence of approval from the competent authority, the entire reassessment action should be declared void.
On the other hand, the respondents urge the court to uphold the initiation of reassessment actions based on the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). They argue that TOLA enabled them to initiate reassessment actions even after the typical time frames had lapsed due to the difficulties posed by the COVID-19 pandemic. The respondents contend that the notices issued after the four-year period were valid under TOLA, thus the JCIT’s approval was compliant with the statutory scheme.
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However, the court emphasized that TOLA merely provided an extension for the initiation of actions that would ordinarily be constrained by the statutory timelines in the Act. It does not change the requirement for approval as stipulated in Section 151. The court highlighted that if the respondents’ argument were accepted, it would effectively disregard the timeframe tied to the end of the relevant Assessment Year. Given that the notices were issued four years after the end of the relevant Assessment Year, the JCIT’s approval did not meet the compliance requirements outlined in Section 151.
The division bench of Justice Yaswanth Varma and Justice Ravinder Dudeja dismissed the respondents’ attempt to interpret the term “sanction” in Section 3 of TOLA as supportive of their position, noting that the provisions concerning sanction do not prescribe a timeframe for approval in this context.
Ultimately, the court found the reassessment actions initiated by the respondents to be invalid. The impugned notices, based on the JCIT’s approval, were quashed. Accordingly, the writ petitions were allowed, and the notices issued under Section 148 of the Income Tax Act on March 31, 2024, were quashed. However, this ruling does not preclude the respondents from pursuing any further actions permitted by law
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