The Delhi High Court, in quashing the contested notices and orders, directed the income tax officers to commence new reassessment proceedings against the assessee, adhering to the prescribed legal procedures.
The bench, composed of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju, noted that the authorities had obtained approval for reassessment proceedings from improper authority. That is, the income tax officers have taken approval from the authorities mentioned in Section 15(i) instead of Section 15(ii) of Income Tax Act, 1961.
The High Court collectively considered 101 writ petitions due to their common issues. The central question raised in these petitions revolves around the legal viability of the challenged notices and orders. This hinges on whether these actions are legally defensible, given the petitioners’ argument that they lack approval from the designated authority.
In the context of the common issue raised in the mentioned writ petitions, specific details from one case (WP(C) 7289/2023) involving Rajesh Gupta HUF v Assistant Commissioner of Income Tax and Ors are outlined. The Hindu Undivided Family ( HUF ) submitted its income tax return for the assessment year 2017-18 on 09.06.2017, declaring an income of Rs.66,88,500/-. Following the processing of the return, an intimation was issued under Section 143(1) of the Income Tax Act on 21.11.2017.
Subsequently, the revenue issued a notice dated 26.05.2022 under Section 148A(b) of the Act, leading to the petitioner’s response on 14.06.2022. The revenue then passed an order under Section 148A(d) on 29.07.2022, determining that an additional income of Rs.4,37,56,000/- had escaped assessment.
It is crucial to note that both the order under Section 148A(d) and the notice under Section 148 were issued after obtaining prior approval from the Principal Commissioner of Income Tax-10, Delhi.
The petitioner approached the court through the mentioned writ petition primarily raising concerns about the absence of approval from the specified authority. Counsel for the parties acknowledged that the reassessment proceedings were initiated by an authority not specified under Section 151(ii) of the Income Tax Act, 1961. The current batch of writ petitions involves an escaped income exceeding Rs.50,00,000/-.
The revenue argued that the approval of the specified authority is not mandatory, contrary to the provisions of the Act. This argument is refuted by referring to the old Section 151 and the amended version post the Finance Act 2021. The amended Section 151, particularly the first provision to Section 148, emphasises the mandatory nature of the specified authority’s approval.
The specified authorities, as outlined in Section 151, depend on the applicable timeframe. The argument of interlinkage between limitation and ascertaining the specified authority, based on the language of the amended Section 151, is presented by the revenue.
The Section 151 states that :
“Specified authority for the purposes of section 148 and section 148A shall be,—
(i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;
(ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year…”
A careful examination of the clauses (i) and (ii) of Section 151 of Income Tax Act clarified that the specified authority granting approval depends on whether three years or more have elapsed from the end of the relevant assessment year.
If three years or less have passed, the authority can be the Principal Commissioner or Principal Director or Commissioner or Director. If more than three years have elapsed, the specified authority for approval shall be the Principal Chief Commissioner or Principal Director General or, in their absence, the Chief Commissioner or Director General.
The court noted that in these instances, there is consensus that even though three (3) years had passed from the conclusion of the relevant assessment year, approval was sought from authorities specified in clause (i) rather than clause (ii) of Section 151 of the Income Tax Act.
Considering the aforementioned circumstances, the contested notices and orders in each of the mentioned writ petitions are invalidated on the basis that they lack approval from the specified authority, as stipulated in Section 151(ii) of the Income Tax Act.
It was also added that “The direction is issued with the caveat that the revenue will have liberty to take steps, if deemed necessary, albeit as per law. the rights and contentions of both the sides will remain open, in the event the revenue triggers reassessment proceedings.”
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