2025 (2) TMI 1234 - HC - Income Tax

Reassessment for AY 2017-18 invalid where reopening after three years and only PCIT sanction under s.151

Appeal Kids Dream International Private Limited Versus Assistant Commissioner of Income Tax, Circle 1 (1), Delhi & Ors.

Appeal Kids Dream International Private Limited Versus Assistant Commissioner of Income Tax, Circle 1 (1), Delhi & Ors. - TMI 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the extension of timelines under the Taxation & Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ('TOLA') alters or confers jurisdiction upon an officer not specified by Section 151 of the Income-tax Act, 1961 ('Section 151') to grant sanction for initiation of reassessment proceedings under Section 148/148A when reassessment is proposed after the prescribed temporal threshold. 2. Whether a sanction accorded by the Principal Commissioner of Income-tax (PCIT) is valid where reassessment for the relevant assessment year was initiated after the lapse of the temporal threshold specified by Section 151 applicable at the relevant time. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework 1. Section 151 prescribes the class of 'specified authority' competent to grant sanction for reassessment under Section 148/148A, with allocation of authority determined by the lapse of time from the end of the relevant assessment year (different authorities if within/after specified years). TOLA provided statutory extensions of time for completion/issuance of notices/actions that fell within pandemic-affected periods. 2. Precedent Treatment 3. The Court relied upon and followed prior treatments that interpret TOLA as a remedial temporal extension statute (not as a provision that re-distributes substantive jurisdiction). Earlier decisions (as analysed by the Court) treated TOLA as not intended to create or enlarge substantive authority or alter the command structure under a specified Act; they were followed and applied to the instant facts. 4. Interpretation and reasoning 5. TOLA's express object is to extend timelines for performance of actions (completion, issuance, sanction, approval) falling within the notified pandemic period so as to preclude irreversible expiry of time-limits; it is a remedial measure to overcome pandemic-related disruption. 6. TOLA does not amend the substantive distribution of powers, the hierarchy or the classification of competent authorities under Section 151. The extension of time cannot be read as conferring or creating a new jurisdiction, or as altering which officer is empowered to accord sanction once the temporal threshold (three or four years as applicable) has been crossed. 7. The temporal point relevant for determining the competent authority under Section 151 is the lapse from the end of the relevant assessment year to the date when reassessment is proposed to be initiated (even if the operative date of issuance falls within an extended TOLA period). Thus, once the relevant lapse places the reassessment beyond the threshold that attracts a higher class of sanctioning authority, sanction by a lower/specified officer under the pre-amendment or amended Section 151 is not compliant. 8. The Court rejected the submission that the use of the term 'sanction' in TOLA could be read as implicitly broadening who may sanction; that interpretation is unsustainable where the specified Act itself (Section 151) fixes the competent authority and prescribes no timeframe for sanction separate from the temporal rule for assignment of authority. 9. Ratio vs. Obiter 10. Ratio - TOLA does not alter the distribution of sanctioning authority under Section 151; the competent authority is determined by the lapse from the end of the relevant assessment year irrespective of the temporal extension under TOLA. Any sanction by an authority not specified by Section 151 for the relevant temporal category is invalid. 11. Obiter - Observations concerning factual permutations of timeline calculations and ancillary discussions regarding particular earlier decisions are explanatory and illustrative of the ratio but not necessary to the core holding. 12. Conclusions (Issue 1) 13. The Court concluded that TOLA's extensions of time do not confer jurisdiction upon officers not recognized by Section 151; TOLA merely preserved the temporal window to initiate action but did not alter which officers can grant sanction for reassessment. Issue 2 - Legal framework 14. Section 151 designates the officer competent to grant sanction based on whether reassessment is proposed within or after the specified temporal threshold (three/four years as applicable at the relevant time). Reassessment for the assessment year in question was initiated after the lapse of three years from the end of the relevant assessment year. 15. Precedent Treatment 16. The Court applied its prior exposition that where reassessment is proposed after the temporal threshold, sanction must be accorded by the higher specified authority named in Section 151; sanction by a lower/specified authority (e.g., Joint Commissioner or PCIT depending on the temporal categorization) is not compliant. 17. Interpretation and reasoning 18. On undisputed facts, the sanction was accorded only by the PCIT while reassessment was proposed after the three-year threshold; given the statutory allocation in Section 151, the PCIT was not the competent authority to grant sanction in those circumstances. 19. Ratio vs. Obiter 20. Ratio - Sanction by the PCIT is invalid where Section 151 requires a different, higher authority because the reassessment was proposed after the applicable temporal threshold; such sanction cannot sustain the reassessment proceedings. 21. Conclusions (Issue 2) 22. The Court held that the sanction by the PCIT was not compliant with Section 151 and therefore the reassessment action could not be sustained; the impugned notice and reassessment order were quashed. Cross-reference: see Issue 1 conclusion that TOLA does not modify this outcome.