Rajesh Gupta HUF Vs ACIT & Ors (Delhi High Court)
Delhi High Court, in the case of Rajesh Gupta HUF Vs ACIT & Ors, has set aside a reassessment proceeding initiated by the Income Tax Department for the Assessment Year (AY) 2016-17. The court’s decision hinged on a finding that the sanction for the reassessment, accorded by the Principal Commissioner of Income Tax (PCIT), was invalid as per the statutory requirements of Section 151 of the Income Tax Act, 1961.
The petitioner had challenged the notice issued under Section 148A(b) of the Act (for conducting inquiry before issuing notice under Section 148), the subsequent order passed under Section 148A(d) (deciding on whether a case for reassessment exists), and the final notice under Section 148 (for income escaping assessment), all dated July 29, 2022. The sole argument presented by the petitioner was concerning the validity of the sanction for the reassessment action.
Statutory Provisions and Contention
At the heart of the dispute was Section 151 of the Income Tax Act, 1961, as it stood at the relevant time. This section specifies the authority competent to grant sanction for reassessment proceedings, distinguishing based on the time elapsed from the end of the relevant assessment year:
- If three years or less have elapsed from the end of the relevant assessment year, sanction can be granted by the Principal Commissioner or Principal Director or Commissioner or Director.
- If more than three years have elapsed from the end of the relevant assessment year, sanction must be granted by the Principal Chief Commissioner or Principal Director General or, where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General.
For Assessment Year 2016-17, the reassessment notice under Section 148 was issued on July 29, 2022. This date is clearly more than three years from the end of AY 2016-17 (which concluded on March 31, 2017). Therefore, according to Section 151, the competent authority to grant sanction should have been the Principal Chief Commissioner or a higher equivalent authority, not the Principal Commissioner (PCIT). The petitioner argued that the sanction accorded by the PCIT was thus invalid.
