The Delhi High Court has held that the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA) does not alter or amend the structure for Income Tax Reassessment approval and sanction which stands erected by virtue of Section 151 of the Income Tax Act.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed 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 (JCIT) would not be compliant with the scheme of Section 151. The grant of approval by the JCIT was not sustainable.
Background
The batch of writ petitions were filed assailing the validity of the reassessment action initiated by the respondent/departmnet under Section 148 of the Income Tax Act, 1961 and pertaining to Assessment Year 2015- 16.
The writ petitioners/assessee submitted that the sanction for initiation of reassessment action rests on an approval granted by the Joint Commissioner of Income Tax3 as opposed to the Principal Chief Commissioner /Chief Commissioner/ Principal Commissioner/ Commissioner as mandated by Section 151(1) of the Income Tax Act. It is contended that since all the impugned Section 148 notices have come to be issued after the expiry of a period of four years from the concerned AY, they were liable to be mandatorily approved by the Principal Chief Commissioner or the other authorities specified in sub-section (1) of Section 151.
Arguments
The writ petitioners submitted that the notices would not sustain even if they were tested on the basis of Section 151 as it came to exist on the statute book after Finance Act 2021. After the passing of the Finance Act 2021, Sections 148 and 148A introduced the concept of “specified authority” as the designated officer which would be liable to accord sanction for reassessment and which expression was defined by Section 151.
In terms of Section 151(i) after the passing of the Finance Act 2021, if the notices for reassessment were issued where “three years or less than three years” had elapsed from the end of the relevant AY, the action would have to be based on the approval of the Principal Commissioner/Principal Director/Commissioner/Director. In all other cases, and which would relate to those reassessments which were proposed to be commenced “if more than three years” had elapsed from the end of the concerned AY, the authorities empowered to accord approval were specified to be the Principal Chief Commissioner/ Principal Director General/ Chief Commissioner/ Director General.
The petitioners contended that viewed from any angle and irrespective of whether the unamended Section 151 or the provision as it came to form part of the statute post Finance Act 2021, the approval of reassessment by the JCIT would not sustain.
The petitioners asserted that the provision for sanction which stands engrafted in Section 151 assumes significance in light of the statute clearly stipulating that a reassessment action would not be commenced unless the authorities mentioned in that provision are satisfied that it is a fit case for issuance of notice under Section 148/148A. In the absence of sanction being accorded by the competent authority, the entire action for reassessment is liable to be set aside.
The department contended that the initiation of action in light of the provisions contained in the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 and which enabled them to initiate action for reassessment notwithstanding the time frames ordinarily applicable having expired was right. Since the impugned notices, by virtue of TOLA, came to be validly issued after the expiry of four years, the sanction was liable to be obtained in accordance with sub-section (2) of Section 151 and consequently, the approval accorded by the JCIT would be compliant with the statutory scheme of that provision.
The petitioners contended that the provisions of TOLA cannot be construed as having amended the procedure for approval as contemplated under Section 151 of the Income Tax Act.
Relevant Provisions
TOLA had come to be promulgated to overcome the insurmountable difficulties which beset the initiation of action and compliance with statutory timelines on account of the COVID-19 pandemic which had broken out in March 2020 and raged across the country. The provisions of TOLA thus provided an extended lifeline for the issuance of notices, the grant of sanction and other statutory compliances contemplated under the Act.
Section 151, pre-Finance Act 2021, categorised the approval liable to be accorded based upon the period within which a reassessment action was proposed to be initiated when computed from the end of the relevant AY. While sub-section (1) catered to situations where a notice for reassessment was sought to be issued after the expiry of four years from the end of the relevant AY and thus required that action be preceded by approval being obtained from the Principal Chief Commissioner and the other authorities, sub-section (2) constituted the residuary clause and pertained to cases falling within its ambit where approval was to be obtained from the JCIT.
Subsequently, by virtue of Finance Act 2023, the phrase “where there is no Principal Chief Commissioner or Principal Director General” was deleted from Section 151 as it exists and a proviso had been inserted clarifying that the period of three years for the purpose of Section 151(i) would be computed in light of the Third, Fourth, Fifth and Sixth Provisos to Section 149(1) of the Act.
Section 151 has been further reframed by virtue of Finance Act 2024 to define the ‘specified authority’ for sanction for issuance of notice to be the Additional Commissioner/ Additional Director/ Joint Commissioner/ Joint Director. However, in the present batch of writ petitions, we are concerned with the provisions of Section 151 as it stood immediately before and after the promulgation of Finance Act 2021.
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Conclusion
The court while allowing the petitions held that TOLA 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 virtually ignoring the date when reassessment is proposed to be initiated and the same being indelibly tied to the end of the relevant AY.
The court quashed the reassessment notices issued by the income tax department.
Case Title: Abhinav Jindal HUF Versus ITO
Case No.: W.P.(C) 2698/2022
Date: 20/09/2024
Counsel For Petitioner: Salil Kapoor, Ananya Kapoor, Sumit Lalchandani
& Tarun Chanana
Counsel For Respondent: Puneet Rai
