Reassessment notices under Section 148 quashed as sanction not granted by authority under amended Section 151

The Madras HC quashed reassessment notices under Section 148 and orders under Section 148A(d) for assessment years 2016-17 and 2017-18. The court held that while the proviso to amended Section 149(1) applies the pre-amended four-year time limit for these assessment years, it does not incorporate pre-amended Section 151 by reference. Following precedents from Bombay and Delhi HCs, the court ruled that amended Section 151 applies for sanction validity. Since sanction was not granted by the authority specified under amended Section 151(ii), the reassessment proceedings were invalid. Consequently, draft assessment orders under Sections 144B/144C were also quashed.

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Issues Involved:
1. Validity of orders issued under Section 148A(d) and notices issued under Section 148 of the Income Tax Act, 1961.
2. Validity of draft assessment orders issued under Section 144B of the Income Tax Act, 1961.
3. Requirement of approval from the specified authority under Section 151 of the Income Tax Act, 1961.
4. Applicability and impact of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

Summary:

Issue 1: Validity of Orders and Notices under Sections 148A(d) and 148

Four writ petitions were filed challenging the orders issued under Section 148A(d) and notices issued under Section 148 for the assessment years 2016-2017 and 2017-2018. The petitioner contended that the approval of the specified authority, as mandated by Section 151 of the Income Tax Act, was not obtained. The court noted that the amendments to Sections 148, 148A, 149, and 151 were effected by the Finance Act 2021 with effect from 01.04.2021, and the orders and notices were issued thereafter with the prior approval of the Commissioner of Income Tax (International Taxes) Chennai.

Issue 2: Validity of Draft Assessment Orders under Section 144B

The petitioner also challenged the draft assessment orders issued under Section 144B for the same assessment years. The court held that since the orders under Section 148A(d) and the notices under Section 148 were quashed, the draft assessment orders under Section 144B/144C could not survive and were also quashed.

Issue 3: Requirement of Approval from Specified Authority under Section 151

The petitioner argued that the approval was not obtained from the specified authority as required under Section 151. The court examined the amended Section 151, which specifies that the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General must grant approval if more than three years have elapsed from the end of the relevant assessment year. The court found that the approval was granted by the Commissioner of Income Tax (International Taxes) Chennai, which was not the specified authority under the amended Section 151.

Issue 4: Applicability and Impact of TOLA

The court considered the applicability of TOLA, which extended the time limits for completion of proceedings, issuance of orders, sanctions, or approvals up to 31.03.2021. The court concluded that TOLA was immaterial to the challenge since the petitioner did not contest the sanction concerning the time limit.

Conclusion:

The court quashed the orders under Section 148A(d) and the notices under Section 148 due to the lack of approval from the specified authority under the amended Section 151. Consequently, the draft assessment orders under Section 144B/144C were also quashed. The writ petitions were allowed, and there was no order as to costs.

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