TOLA Extension Does Not Waive Mandatory Approval u/s 151 for Reassessment Beyond 3 Years: Delhi HC sets aside Notice against H&M India [Read Order]
The Bench held that reassessment notices issued beyond three years must receive sanction from authorities designated under Section 151(ii), and not from those under clause (i), regardless of the TOLA extensions
TOLA Extension – Mandatory Approval – Not Waive Mandatory Approval – taxscan
TOLA Extension – Mandatory Approval – Not Waive Mandatory Approval – taxscan
In a recent ruling, the Delhi High Court has set aside a reassessment notice issued after 3 years without the statutory approval under Section 151 of the Income Tax Act, 1961 regardless of TOLA extensions. It does not waive the mandatory approval under the act.
The Bench comprising Justice Vibhu Bakhru and Justice Tejas Karia ruled in favour of the Swedish retail giant’s Indian subsidiary, holding that the reassessment proceedings initiated under Section 148 of the Act were legally unsustainable.
The issue originated when the Assessing Officer (AO) issued a notice on July 30, 2022, alleging that the company had made large unexplained cash deposits during the demonetization period, amounting to ₹35.53 crore, which had escaped assessment.
However, the reassessment notice was issued more than three years after the end of the relevant assessment year, necessitating prior approval from the Principal Chief Commissioner or equivalent authority, as mandated by Section 151(ii) of the Act, an approval that was not obtained in this case.
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The Court noted that H&M had already undergone detailed scrutiny for AY 2017-18 under Section 143(3), resulting in a prior assessment order. The attempt to reopen the case was based on allegations lacking new material evidence, and the procedural lapse in not securing proper approval rendered the entire exercise void.
The judgment relied on established precedents, including Abhinav Jindal HUF v. ITO and Twylight Infrastructure Pvt. Ltd. v. ITO, where the Court had clarified that the extended limitation period granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) does not alter the statutory requirement of approval hierarchy under the amended Section 151.
The Bench held that reassessment notices issued beyond three years must receive sanction from authorities designated under Section 151(ii), and not from those under clause (i), regardless of the TOLA extensions.
Since the notice issued to H&M lacked such sanction, the High Court declared it invalid and quashed all related proceedings. The Court allowed the petition and concluded that procedural compliance under reassessment laws is not a mere formality but a substantive safeguard against arbitrary taxation.
To Read the full text of the Order CLICK HERE
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