Reassessment notices under Section 148 quashed due to improper approval hierarchy by JCIT instead of higher authorities

Delhi HC quashed reassessment notices issued under Section 148 of the Income Tax Act. The court held that notices issued after four years from the end of the relevant assessment year required approval from Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner, not JCIT. Although TOLA extended time limits for initiating reassessment proceedings, it did not alter the approval hierarchy established under Section 151. The JCIT's approval was deemed non-compliant with statutory requirements, rendering the reassessment proceedings invalid.

---

---

Issues Involved:
1. Validity of reassessment action under Section 148 of the Income Tax Act, 1961.
2. Compliance with the provisions of Section 151 of the Income Tax Act, 1961.
3. Applicability of the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA).
4. Determination of the date of issuance of reassessment notices.
5. Impact of amendments introduced by Finance Act 2021 and Finance Act 2023 on the reassessment process.

Issue-wise Detailed Analysis:

1. Validity of reassessment action under Section 148 of the Income Tax Act, 1961:
The batch of writ petitions challenged the validity of reassessment actions initiated by the respondents under Section 148 of the Income Tax Act, 1961, pertaining to Assessment Year (AY) 2015-16. The primary ground for challenging the reassessments was the alleged violation of Section 151 of the Act. The petitioners argued that the reassessment notices were issued without the necessary sanction from the competent authority as mandated by Section 151.

2. Compliance with the provisions of Section 151 of the Income Tax Act, 1961:
The petitioners contended that the sanction for initiating reassessment action was granted by the Joint Commissioner of Income Tax (JCIT) instead of the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner as required by Section 151(1) of the Act. They argued that since the notices were issued after the expiry of four years from the concerned AY, they required mandatory approval from the higher authorities specified in Section 151(1). The petitioners asserted that the entire reassessment action was invalid due to the absence of sanction from the competent authority.

3. Applicability of the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA):
The respondents defended the reassessment actions by invoking the provisions of TOLA, which extended the timelines for issuing notices and obtaining sanctions due to the COVID-19 pandemic. They argued that TOLA allowed them to initiate reassessment actions even after the expiry of the ordinary time frames. The respondents claimed that the approval by the JCIT was compliant with the statutory scheme under Section 151(2) of the Act, as extended by TOLA.

4. Determination of the date of issuance of reassessment notices:
The court examined the date of issuance of the reassessment notices to determine the applicable version of Section 151. The petitioners argued that the notices, although dated 31 March 2021, were digitally signed and dispatched after 01 April 2021, making the amended regime of reassessment applicable. The court referred to the decision in Suman Jeet Agarwal vs. Income Tax Officer & Ors. and concluded that the notices were issued after 01 April 2021, based on the date of digital signing and dispatch.

5. Impact of amendments introduced by Finance Act 2021 and Finance Act 2023 on the reassessment process:
The court analyzed the provisions of Section 151 before and after the amendments introduced by Finance Act 2021 and Finance Act 2023. It noted that the amended Section 151, effective from 01 April 2021, specified different authorities for granting approval based on whether reassessment was proposed within three years or after three years from the end of the relevant AY. The court emphasized that TOLA did not alter the structure for approval and sanction under Section 151. The court concluded that the approval granted by the JCIT was not compliant with the scheme of Section 151, as the reassessment was initiated after the expiry of four years from the end of the relevant AY.

Conclusion:
The court quashed the impugned reassessment notices issued under Section 148 of the Act dated 31 March 2024, due to the lack of sanction from the competent authority as required by Section 151. The court held that TOLA extended the timelines for initiating reassessment actions but did not amend the distribution of powers for granting approval under Section 151. The court allowed the writ petitions but granted the respondents the liberty to initiate further action as permissible by law.

---