Delhi HC upholds Section 147 reassessment powers but invalidates post-April 2021 Joint Commissioner approvals

Delhi HC rejected challenges to reopening of assessment under Section 147. The court held that jurisdictional Assessing Officers retain concurrent jurisdiction with National Faceless Assessment Centre to issue notices under Section 148, despite faceless assessment schemes. However, approvals granted by Joint Commissioner post-April 2021 are invalid. The court directed individual evaluation of each notice considering limitation periods under Section 149 and compliance with Sections 153A/153C where search-based reassessment applies. Assessing Officers must pass reasoned orders determining validity of each reassessment notice based on established precedents.

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The judgment addresses several legal issues concerning the reassessment actions initiated by the Income Tax Department under the Income Tax Act, 1961. The Court considers various petitions challenging the validity of notices issued under Section 148 of the Act, particularly in light of amendments introduced by the Finance Act, 2021, and the implications of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

Issues Presented and Considered:

The Court identifies seven principal issues for determination:

A. Legality of notices under Section 148 due to amendments in Section 149 by the Finance Act, 2021.

B. Validity of CBDT Instruction No. 01/2022 in light of Supreme Court's decision in Union of India vs. Ashish Agarwal and Section 119 of the Act.

C. Validity of notices issued by jurisdictional Assessing Officers contrary to the faceless assessment procedure under Section 151A and the E-Assessment Scheme, 2022.

D. Absence of approval under Section 151 from the prescribed authority.

E. Issuance of Section 148 notices without a Document Identification Number (DIN) as mandated by CBDT Circular No. 19/2019.

F. Scope and applicability of Explanation 1 to Section 148 and the term "information" as introduced by the Finance Act, 2021.

G. Whether reassessment following a search must adhere strictly to the procedure under Sections 153A/153C, excluding Section 148.

Issue-wise Detailed Analysis:

Issue C:

The Court examines whether jurisdictional Assessing Officers can issue reassessment notices under Section 148 despite the faceless assessment scheme. The Court refers to its prior decision in T.K.S. Builders (P) Ltd. v. Income Tax Officer, concluding that Section 144B is procedural, not substantive, and does not exclusively govern reassessment initiation. The jurisdictional Assessing Officer retains concurrent jurisdiction, allowing reassessment based on information directly obtained or through the faceless system. The Court emphasizes the complementary roles of jurisdictional and faceless assessments, ensuring procedural integrity and accountability.

Issue D:

The Court addresses the requirement of approval under Section 151, referencing its decision in Abhinav Jindal HUF v. Commissioner of Income Tax. The Court holds that approvals granted by Joint Commissioners post-01 April 2021 are unsustainable, as the amended Section 151 requires approval from higher authorities for reassessments initiated after the specified period.

Issue G:

The Court considers whether reassessment following a search must adhere to Sections 153A/153C exclusively. Citing Pr. Commissioner of Income Tax-7 v. Naveen Kumar Gupta, the Court holds that reassessment under Section 147 is permissible even when Section 153C conditions are unmet, provided all conditions for Section 147 are satisfied. The Court clarifies that the non obstante clause in Section 153C does not preclude Section 147 proceedings unless Section 153C jurisdiction is assumed.

Significant Holdings:

The Court concludes that jurisdictional Assessing Officers retain concurrent jurisdiction with the faceless system, allowing reassessment initiation based on independent information. The Court affirms that approvals under Section 151 must comply with the amended regime, requiring higher authority sanction for reassessments initiated post-amendment. The Court also clarifies that reassessment under Section 147 is viable alongside Section 153C, provided jurisdictional conditions are met.

On the issue of time limits for reassessment notices, the Court refers to the Supreme Court's decision in Rajeev Bansal, which outlines the periods to be excluded when computing limitation under Section 149, considering TOLA and subsequent judicial directions. The Court directs Assessing Officers to evaluate reassessment notices in light of these principles, allowing petitioners to challenge any adverse orders subsequently.

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