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Income Tax Appellate Tribunal, DELHI
Before: SHRI YOGESH KUMAR U.S. & SHRI NAVEEN CHANDRA
ORDER
PER YOGESH KUMAR, U.S. JM:
The captioned appeals are filed by the Assessee against the orders of Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 17/02/2025 and 21/02/2025 pertaining to the Assessment Years2016-17 and 2017-18 respectively. As similar issues are involved in the captioned Appeals both the Appeals are heard together.
Brief facts of the case are that, the Assessee is a non-filer for the years under consideration. During the assessment proceedings for Assessment Year 2016-17, the A.O. had reasons to believe that the Assessee has unexplained money of Rs. 46,40,000/- and for Assessment Year 2017-18, the A.O. had reasons to believe that the Assessee had Short Term Capital Gain of Rs. 1,40,47,500/- .Subsequently, a notice u/s 148 of the Act was issued on 05/07/2022 (for Assessment Year 2016-17) and 21/07/2022 (for Assessment Year 2017-18). Assessment order came to be passed on 13/05/2023 u/s 147 r.w. Section 147B of the Act for Assessment Year 2016-17 by assessing the total income of the Assessee at Rs. 46,40,000/- and for Assessment Year 2017-18, A.O. passed the assessment order on 25/03/2023 u/s 147 r.w. Section 147B of the Act by computing the total income of the Assessee at Rs. 1,40,47,500/-.
3. Aggrieved by the assessment orders dated 13/05/2023 and 25/03/2023 for Assessment Years 2016-17 and 2017-18 respectively, Assessee preferred the Appeals before the Ld. CIT(A). The Ld. CIT(A) vide orders dated 17/02/2025 and 21/02/2025 for Assessment Years 2016-17 & 2017-18, dismissed the Appeals of the Assessee. As against the orders of the Ld. CIT(A), the Assessee preferred the above Appeals.
4. The Ld. Counsel for the Assessee vehemently submitted that the notices u/s 148 of the Act dated 15/07/2022 and 21/07/2022 have been issued after three years form the end of relevant Assessment Years, therefore, approval of Pr. Chief Commissioner/Pr. Director General/Chief Commissioner/Director General under Section 151(ii) of the Act (Finance Act, 2021) was mandatory. However, in both the Assessment Years the approval has been obtained from PCIT, therefore, relying on the Judgment of Hon'ble High Court of Delhi in the case of Rajesh Gupta (HUF) Vs. ACIT in Writ Petition (C) No. 6057/2023, sought for quashing the assessment orders.
Per contra, the Ld. Department's Representative relying on the orders of the Lower Authorities, submitted that the approvals have been obtained from the competent/specified authority and the assessment proceedings have been initiated strictly in accordance with law, therefore, sought for rejecting the contention of the Ld. Assessee's Representative.
We have heard both the parties and perused the material available on record. The assessment years under consideration are2016-17 and 2017-18. As per Section 151 (ii) of the Act as applicable in the relevant point of time, any notice issued u/s 148 of the Act after lapse of three years from the end of relevant Assessment Years, it is incumbent upon the A.O. to obtain prior approval of Pr.
Chief Commissioner/Pr. Director General/Chief Commissioner/Director General under Section 151(ii) of the Act (as amended in Finance Act, 2021). However, in the present case, the approval has been accorded by Principal Commissioner of Income Tax, which is evident from the notices issued u/s 148 of the Act which are placed in the paper book.
7. The Hon'ble High Court of Delhi in the case of Rajesh Gupta HUF (supra) held that where reassessment is initiated after the expiry of three years, the Principal Chief Commissioner is the competent authority; therefore, sanction by PCIT would not sustain, accordingly, quashed the and the assessment order in following manners:
“2. Before us the solitary argument which is addressed today is with respect to the validity of the sanction which was accorded to the reassessment action by the Principal Commissioner of Income Tax.
Learned counsel for the writ petitioner, draws our attention to the provisions of Section 151 of the Income Tax Act, 1961 as they stood at the relevant time and which read as follows:-
“151. Specified authority for the purposes of section 148 and section 148A shall be,— (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;
(ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.”
4. Undisputedly, we are in this writ petition concerned with Assessment Year 2016-17 and in respect of which the notice under Section 148 of the Act ultimately came to be issued on 29 July 2022. It is thus apparent that the action has come to be initiated after the expiry of three years from the end of the relevant AY. It is in the aforesaid context that the petitioner contends that the sanction accorded by the PCIT would not sustain.
5. In cases where reassessment is sought to be commenced after the lapse of three years from the end of the relevant AY, undisputedly, it would be the Principal Chief Commissioner who would be liable to be recognised as being the competent authority.
Viewed in that light, it is apparent that the reassessment action would not sustain.
6. Dealing with an identical question, we had in Abhinav Jindal HUF v. Commissioner of Income Tax and Ors held as under:-
“30. Tested on the principles which were enunciated in SumanJeet Agarwal v. ITO [(2022) 449 ITR 517 (Delhi); 2022 SCC OnLine Del 3141], the petitioners would appear to be correct in their submission of the date liable to be ascribed to the impugned notices and those being viewed as having been issued and dispatched after April 1, 2021. However, and in our considered opinion, the same would be of little relevance or significance when one bears in mind the indubitable fact that all the notices were approved by the Joint Commissioner of Income-tax and which was an authority recognised under the unamended section
The answer to the argument based on the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions] Act would also largely remain unimpacted by our finding on this score as would become evident from the discussion which ensues. xxxxxxxxxxxx 33. A plain reading of section 3 establishes that where the time limit for the completion or compliance of any action under a specified Act were to fall between March 20, 2020 to December 31, 2020, the period for completion and compliance would stand extended up to March 31, 2021 or such other date thereafter as may be specified by the Union Government by way of a notification. Undisputedly, the date of March 31, 2021 came to be extended thereafter up to April 30, 2021 and lastly up to June 30, 2021.
Concededly, the Finance Act. 2021 was enacted thereafter and came into effect from April 1. 2021. It is admitted by the respondents that the terminal point for initiation of reassessment for the assessment year 2015- 2016 in ordinary circumstances would have been March 31, 2020 and that date clearly fell within the period spoken of in section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions') Act. The period for issuance of notice for the assessment year 2015-2016, thus and principally speaking, stood extended up to June 30. 2021.
However, the key to answering the argument which was canvassed on behalf of the respondents is contained in section 3 itself and which purported to extend the period for completion of proceedings, passing of an order, issuance of a notice, intimation, notification, sanction or approval. The provision extended the time limit for such action, notwithstanding anything contained in the specified Act, initially up to March 31. 2021 and which date was extended subsequently to April 30. 2021 and lastly up to June 31. 2021.
Section 3 thus essentially extended the time period statutorily prescribed for initiation and compliance up to the dates notified by the Union Government from time to time. The extension of these timelines was intended to apply to all statutes which were included in the expression “specified Act” as defined in section 2(b) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act.
The Taxation and Other Laws ('Relaxation and Amendment of Certain Provisions) Act was thus concerned with overcoming the statutory closure and eclipse which would have otherwise descended upon the authority to act and take action under the specified statutes. It was essentially concerned with tiding over the insurmountable hurdles which arose due to the pandemic and the disruption that followed in its wake. The Taxation and Other Laws ("Relaxation and Amendment of Certain Provisions) Act, viewed in that light, was neither aimed at nor designed or intended to confer a new jurisdiction or authority upon an officer under a specified enactment. On a fundamental plane, it was a remedial measure aimed at overcoming a position of irretrievable and irreversible consequences which were likely to befall during the nationwide lockdown. It was principally aimed at enabling authorities to take and commence action within the extended timelines that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act introduced. However, it neither altered nor modified or amended the distribution of functions, the command structure or the distribution of powers under a specified Act. It was in that light that we had spoken of the carving or conferral of a new or altered jurisdiction.
It would therefore be wholly incorrect to read the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act as intending to amend the distribution of power or the categorisation envisaged and prescribed by section 151. The additional time that the said statute provided to an authority cannot possibly be construed as altering or modifying the hierarchy or the structure set up by section 151 of the Act. The issue of approval would still be liable to be answered based on whether the reassessment was commenced after or within a period of four years from the end of the relevant assessment year or as per the amended regime dependent upon whether action was being proposed within three years of the end of the relevant assessment year or thereafter. The bifurcation of those powers would continue unaltered and unaffected by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act.
The fallacy of the submission addressed by the respondents becomes even more evident when we weigh in consideration the fact that even if the reassessment action were initiated, as per the extended Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act timelines, and thus after the period of four years, section 151 incorporated adequate measures to deal with such a contingency and in unambiguous terms identified the authority which was to be moved for the purposes of sanction and approval. Section 151 distributed the powers of approval amongst a set of specified authorities based upon the lapse of time between the end of the relevant assessment year and the date when reassessment was proposed. Thus even if the reassessment was proposed to be initiated with the aid of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act after the expiry of four years from the end of the relevant assessment year, the authority statutorily empowered to confer approval would be the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner. It would only be in a case where the reassessment was proposed to be initiated before the expiry of four years from the end of the relevant assessment year that approval could have been accorded by the Joint Commissioner of Income- tax. Similar would be the position which would emerge if the actions were tested on the basis of the amended section 151 and which divides the power of sanction amongst two sets of authorities based on whether reassessment is commenced within three years or thereafter.
What we seek to emphasise is that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act authorisation merely enables the competent authority to take action within the extended time period and irrespective of the closure which would have ordinarily come about by virtue of the provisions contained in the Act. It does not alter or amend the structure for approval and sanction which stands erected by virtue of section 151. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions') Act merely extended the period within which action could have been initiated and which would have otherwise and ordinarily been governed and regulated by sections 148 and 149 of the Act. If the contention of the respondents were to be accepted it would amount to us virtually ignoring the date when reassessment is proposed to be initiated and the same being indelibly tied to the end of the relevant assessment year. Once it is conceded that the notice came to be issued four or three years after the end of the relevant assessment year, the approval granted by the Joint Commissioner of Income- tax would not be compliant with the scheme of section 151. We thus find ourselves unable to sustain the grant of approval by the Joint Commissioner of Income-tax.
It is pertinent to note that the respondents had feebly sought to urge that the use of the expression “sanction” in section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act also merits due consideration and is liable to be read as supportive of the contentions that were addressed on their behalf. The argument is however clearly meritless when one bears in consideration the indisputable fact that the set of provisions with which we are concerned nowhere prescribe a timeframe within which sanction is liable to be accorded. “Sanction” when used in section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act caters to those contingencies where a specified Act may have prescribed a particular time limit within which an action may be approved. That is clearly not the position which obtains here. We thus find ourselves unable to sustain the impugned action of reassessment. The impugned notices which rest on a sanction obtained from the Joint Commissioner of Income-tax would thus be liable to be quashed.”
Consequently, and for the aforesaid reasons, we find ourselves unable to sustain the reassessment action on this short score alone.
Accordingly, the writ petition is allowed. The impugned order referable to Section 148A(d) and notice under Section 148, both dated 29 July 2022 are quashed. However, the present order shall be without prejudice to the right of the respondent to draw such other proceedings as may be permissible in law.”
6. Similarly in the case of Appeal Kids Dream International Pvt. Ltd. vs. ACIT in WP(c) 2814/2023 dated 24.02.2025 the Jurisdictional High Court held as under:
“2. As is evident from the above, the solitary question which was canvassed for our consideration was the issue of sanction as contemplated under Section 151 of the Income Tax Act, 1961 [“Act”].
3. The reassessment action for Assessment Year [“AY”] 2017-18 came to be commenced admittedly after a lapse of three years from the end of the relevant AY. It is in the aforesaid backdrop that Mr. Kantoor, learned counsel, had submitted that the said sanction accorded by the Principal Commissioner of Income Tax [“PCIT”] would not sustain.
We note that while dealing with the said question we had in Abhinav Jindal HUF v. Commissioner of Income Tax and Ors [2024 SCC Online Del 6585] duly enunciated the legal position which would obtain. We had ultimately in Abhinav Jindal held that the Taxation & Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [“TOLA”] provisions would have no bearing on the identification of the competent authority under Section 151 for according sanction.
5. In view of the aforesaid, and since undisputedly in the facts of the present case the sanction was accorded only by the PCIT, the reassessment action would not sustain.
6. Accordingly and for all the aforesaid reasons, we allow the instant writ petition and quash the impugned order referable to Section 148A(d) dated 30 July 2022 and notice u/s 148 of even date.”
The ratio laid down in the above judgments is squarely applies to the facts of the Assessee’s case in both the Assessment Years.
Therefore, by respectfully following the above judgments, we hold that notices issued u/s 148 of the Act are bad in law and consequently the assessments made pursuant to the said notices are also bad in law and void ab-initio. Accordingly, we quash the assessment orders for Assessment Year 2016-17 and 2017-18.
Since we have quashed the assessment on the legal point, we are not inclined to decide the rest of the grounds of Appeals as they become only academic in nature at this stage.
In the result, appeals of the assessee are partly allowed as indicated above Order pronounced in the open court on 26th September, 2025