The Income Tax Appellate Tribunal, Delhi, has clarified a critical procedural requirement for reopening assessments beyond the three-year window under the Income Tax Act. This ruling reinforces that statutory approvals for such reassessments are not discretionary but mandatory, and must be obtained from the correct higher authority. The decision provides much-needed doctrinal clarity for tax practitioners navigating the complexities of post-2021 amendments to Section 151.
Background & Facts
The Dispute
The dispute arose from the reopening of assessment for the year 2016-17 through a notice issued under Section 148 on 30 July 2022. The Assessing Officer (AO) initiated reassessment proceedings more than three years after the end of the relevant assessment year, triggering the enhanced approval requirement under Section 151 of the Income Tax Act, as amended by the Finance Act, 2021. The Revenue obtained approval from the Principal Commissioner of Income Tax, Delhi-10, but the First Appellate Authority (CIT(A)) quashed the reassessment proceedings on the ground that the approving authority was not the correct statutory authority.
Procedural History
- 2016-17: Original assessment completed
- 30 July 2022: Notice under Section 148 issued for reassessment
- 21 May 2023: AO passed reassessment order adding income of Rs. 11.80 crore and Rs. 10.34 lakh
- 24 July 2024: CIT(A) deleted additions, holding approval under Section 151 was invalid
- ITA No. 4534/Del/2024: Revenue appealed against CIT(A)'s order
- CO. No. 12/Del/2025: Assessee filed cross-objection challenging deletion of certain additions
Relief Sought
The Revenue sought to uphold the reassessment order, arguing that approval from the Principal Commissioner was valid under CBDT Instruction No. 1/2022 and Section 151A. The Assessee sought confirmation that the reassessment was void ab initio due to non-compliance with mandatory approval norms.
The Legal Issue
The central question was whether approval under Section 151 of the Income Tax Act, for reassessment initiated more than three years after the end of the relevant assessment year, must be obtained from the Principal Chief Commissioner of Income Tax or whether approval from the Principal Commissioner suffices.
Arguments Presented
For the Appellant (Revenue)
The Revenue contended that the approval obtained from the Principal Commissioner of Income Tax, Delhi-10, was valid under Section 151 as interpreted through CBDT Instruction No. 1/2022, issued in compliance with the Supreme Court’s judgment in Union of India v. Ashish Agarwal. It further argued that the Joint Assessment Officer (JAO) and NFAC had concurrent jurisdiction under Section 151A, and that the approval process was aligned with automated risk management protocols. Reliance was placed on the Kolkata High Court’s decision in WP No. WPO/1566/2023.
For the Respondent (Assessee)
The Assessee argued that the Finance Act, 2021, amended Section 151 to mandate approval from the Principal Chief Commissioner of Income Tax, Principal Director General, Chief Commissioner, or Director General when reassessment is initiated after three years. The approval obtained from the Principal Commissioner was not among the statutorily enumerated authorities. The Assessee relied on the Delhi Tribunal’s own precedent in Sampark Management Consultancy LLP v. DCIT and the Supreme Court’s ruling in Union of India v. Rajeev Bansal to establish that deviation from the prescribed authority renders the notice void.
The Court's Analysis
The Tribunal examined the statutory amendment introduced by the Finance Act, 2021, which substituted the language of Section 151 to specify four categories of authorities eligible to grant approval for reassessments beyond three years. The Court noted that the Principal Commissioner of Income Tax is not listed among these. The Revenue’s reliance on CBDT Instruction No. 1/2022 was rejected as it cannot override clear statutory mandates. The Court emphasized that statutory provisions prevail over administrative instructions.
"This approval is contrary to the provisions of section 151 of the Act as amended/substituted by the Finance Act, 2021 because, as per section 151 of the Act, if more than three years have lapsed from the end of the relevant assessment year, approval of Principal Chief Commissioner of Income-tax or Principal Director General or Chief Commissioner or Director General was required to be obtained."
The Tribunal distinguished the Kolkata High Court’s decision, noting it dealt with jurisdictional allocation under Section 151A, not the validity of approval under Section 151. The Court held that Section 151A governs the assignment of cases to JAOs, but does not alter the identity of the approving authority under Section 151. The Supreme Court’s ruling in Union of India v. Rajeev Bansal was affirmed as binding precedent. The Tribunal concluded that the approval obtained was legally invalid, rendering the notice under Section 148 void.
The Verdict
The Assessee won. The Tribunal held that Section 151 requires approval for reassessments initiated after three years to be obtained exclusively from the Principal Chief Commissioner of Income Tax or equivalent higher authorities. The approval from the Principal Commissioner was invalid, and the reassessment proceedings were quashed. The cross-objection was dismissed as infructuous.
What This Means For Similar Cases
Approval Authority Is Non-Negotiable
- Practitioners must verify the identity of the approving authority before challenging or defending any reassessment notice issued after three years
- Any approval granted by Principal Commissioner, Joint Commissioner, or other non-specified officers is legally defective
- File applications to quash notices where approval was obtained from an incorrect authority under Section 151
Statutory Amendments Override Administrative Instructions
- CBDT circulars or instructions cannot expand or contract the scope of statutory approval requirements
- Rely on Union of India v. Rajeev Bansal and Sampark Management Consultancy LLP as binding precedents in all similar cases
- Do not rely on automated systems or risk-based allocation as justification for procedural non-compliance
Reassessment Notices Are Void, Not Voidable
- A notice issued without valid approval under Section 151 is void ab initio, not merely irregular
- No subsequent ratification or curative action can cure the defect
- Taxpayers may seek refund of taxes paid under such invalid notices, even if time-barred under normal provisions
