JCIT has No Power to Issue Sanction for Reassessment u/s 151(1) of Income Tax Act: Delhi HC [Read Order]

The Delhi High Court ruled that the Joint Commissioner of Income Tax is not authorized to authorize the start of a reassessment action against an assessee under the proviso to Section 151(1) of the Income Tax Act 1957.

In 2013, after four years had passed, JCIT granted permission to take Section 148 action against Sukhbir S. Dagar, the petitioner-assessee for AY 2006-07. The petitioner argued that prior approval under Section 151 was not acquired because they had already undertaken scrutiny assessment for the AY in question. In contrast to the Assessee's claimed ₹21,87,500, the AO added ₹5,18,27,005 due to the long-term capital gain from the sale of agricultural land at ₹5,46,23,012/-.

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The AO reasoned that the action was based on an excel sheet that was found on a device used for a search under Section 132 regarding a third party and that showed a partial cash payment for the purchase of the agricultural land in question. The assessee went to the High Court after ITAT supported the AO's ruling. The Court's main concerns were whether the start of the review process was unlawful due to a lack of required approval.

According to the proviso to Section 151(1), "no notice under Section 148 of the Act could be issued unless, the Commissioner of Income Tax [CIT] or the Chief Commissioner of Income Tax [CCIT] were satisfied on the reasons recorded by the AO that it was a fit case for issuance of such notice," the High Court observed, since the scrutiny assessment had resulted in an assessment order.

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According to Section 151(1), JCIT may grant permission to begin a reassessment proceeding under Section 148 against an assessee who has previously undergone a scrutiny assessment. However, if the reassessment action is to be started after four years have passed since the end of the relevant assessment year, the proviso to Section 151(1) states that no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, based on the reasons documented by the Assessing Officer.

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According to the division bench of Justices Vibhu Bakhru and Tejas Karia, neither the CIT nor the CCIT gave their consent. The JCIT, not the CCIT or CIT, approved the notification issued under Section 148 of the Act. It is obvious that the notice issued under Section 148 of the Act was illegal because it violated Section 151(1) of the Act.

To Read the full text of the Order CLICK HERE

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