Reassessment quashed for invalid s.151(1) sanction; appellate authority upholds CIT(A), dismissing Revenue's appeal in full

ITAT Delhi dismissed the Revenue's appeal and upheld the order of CIT(A). The Tribunal held that for reopening an assessment beyond four years under s.151(1), mandatory approval must be obtained from the CIT. Since the AO had instead obtained approval from the JCIT, Central Circle-IV, Delhi, the sanction was held invalid. Consequently, the reassessment proceedings were declared bad in law and quashed. The Tribunal found no infirmity in the CIT(A)'s conclusion and sustained the annulment of the reassessment, rejecting all grounds raised by the Revenue.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, for reassessment proceedings initiated in relation to assessment year 2015-16 after expiry of four years from the end of the relevant assessment year, approval granted by the Joint Commissioner of Income Tax under section 151 of the Income-tax Act, 1961 was valid.

1.2 Whether the relaxation of limitation by virtue of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and related Government circulars had the effect of altering the statutory requirement regarding the competent authority for sanction under section 151 for reassessment beyond four years.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Validity of sanction by Joint Commissioner under section 151 after expiry of four years; effect of Relaxation Act and circulars

Legal framework (as discussed)

2.1 The Court noted that under section 151(1) of the Income-tax Act, 1961, where four years have elapsed from the end of the relevant assessment year, approval for initiation of reassessment proceedings can be accorded only by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner of Income Tax.

2.2 The Court referred to the judicial precedent wherein it was held that after expiry of four years from the end of the relevant assessment year, the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 does not alter the requirement under section 151(1) regarding the competent sanctioning authority and that sanction by a Joint Commissioner in such circumstances is invalid. It was also noticed that the special leave petition against this view had been dismissed by the Supreme Court.

Interpretation and reasoning

2.3 It was found as a matter of fact that: (i) reasons to believe were recorded by the Assessing Officer on 19.10.2020; (ii) notice under section 148 was issued on 04.01.2021; and (iii) approval for initiation of reassessment proceedings was obtained from the Joint Commissioner of Income Tax, Central Range-IV, New Delhi.

2.4 The relevant assessment year being 2015-16, the period of four years from the end of the assessment year expired on 31.03.2020. Therefore, at the time of recording of reasons and issuance of notice under section 148, the reassessment was being initiated after the lapse of four years.

2.5 The first appellate authority held, and the Court agreed, that in such a situation the requirement under section 151(1) was that approval must be obtained from the Principal Commissioner of Income Tax, and that approval granted by the Joint Commissioner of Income Tax was not in accordance with law.

2.6 Relying on the cited High Court decision, as affirmed by the Supreme Court, the Court accepted that the Relaxation Act and the related Government circular extending limitation for issuance of reassessment notices up to 31.03.2021 did not expand or modify the category of the "competent authority" prescribed under section 151(1). The extended period of limitation could not validate a sanction granted by an authority not statutorily empowered to accord approval once four years had elapsed.

2.7 Consequently, it was held that the Assessing Officer had assumed jurisdiction under sections 147/148 without obtaining valid approval from the competent authority, rendering the reassessment proceedings void ab initio.

Conclusions

2.8 Approval under section 151(1) for reassessment of assessment year 2015-16, initiated after expiry of four years from the end of that year, was required to be granted by the Principal Commissioner of Income Tax; sanction by the Joint Commissioner of Income Tax was invalid.

2.9 The relaxation of limitation under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and related circulars did not alter the statutory requirement as to the competent sanctioning authority under section 151(1) for reassessments initiated after four years.

2.10 The reassessment proceedings initiated under sections 147/148 on the basis of sanction by the Joint Commissioner were without valid jurisdiction, void ab initio, and liable to be quashed; the first appellate authority's order quashing the reassessment was correct and was upheld; the Revenue's grounds were rejected and the appeal dismissed.

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