TOLA, 2020 does not affect Sanction Powers for  Income Tax Reassessment: Delhi HC [Read Order]

In a recent ruling of Delhi High Court it cleared that the Taxation and Other Laws [ TOLA ( Relaxation and Amendment of Certain Provisions ) Act, 2020 ] authorisation only enables the competent authority to take action within the extended time period regulated by Section 148 and 149, of Income Tax Act and does not amend the structure for approval.

A batch of writ petitions were filed in the Delhi High Court challenging the reopening notices. The petitioners counsel submitted that after the passing of Finance Act 2021, the sectionS 148 and 148A introduced the concept of “ specified authority.” In which the designated officer would be liable to accord sanction for reassessment under section 151.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

After the passing of finance Act in 2021, if the notices for reassessment were issued where 3 or less than 3 years from the end of the relevant Assessment Year ( AY ) the action would have to be based on the approval of the Principal Commissioner/Principal Director/Commissioner/Director.

In this case the petitioners contended that irrespective of whether the unamended Section 151 or the provision that came to form part of the statute post Finance Act 2021, the approval of reassessment can’t sustain.

The bench referred to the submissions of the respondents and stated that although the DSC was “executed for signing” on 31 March 2021, due to system delay the digital signature bears the time stamp of 12:42 AM, and since the notice was not being processed on the portal, it was manually dispatched vide Speed Post on 07 April 2021.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The Finance Act enacted in 2021 came into force on 1st of April 2021, the respondents had admitted that the terminal point of reassessment for AY 2015-16 in ordinary circumstances would have been  31 March 2020, which is clearly within the period mentioned in the Section 3 of TOLA.

Section 3 of TOLA extended the time period prescribed for initiation and compliance to the dates notified by the Union Government. The bench added that the extension of timelines applies to all statutes included in the expression “ specified Act” u/s 2(b) of TOLA.

The issue of approval should be answered based on the fact that whether the reassessment was commenced after or within a period of four years from the end of the relevant AY or as per the amended regime, based on whether the action was proposed within 3 years of the end of the relevant AY or thereafter.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The TOLA authorisation merely enables the competent authority to take within the extended time period and irrespective of the closure. It does not alter or amend the structure of approval and sanction u/s 151.

Acceptance of contentions of respondent would result in virtually ignoring the date when reassessment is proposed to be initiated and the same being indelibly tied to the end of the relevant AY. Hence the grant of approval by JCIT cant be sustained.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The division bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that even if the reassessment was proposed to be initiated with the aid of TOLA after the expiry of 4 years from the end of the relevant AY.

Therefore the court allowed the assessee’s petition and quashed the issued notices.

To Read the full text of the Order CLICK HERE

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