Delhi High Court Invalidates Reassessment Where Sanction Under Section 151 Was Granted by Wrong Authority

The Delhi High Court in Appeal Kids Dream International Private Limited Vs ACIT (Delhi High Court) examined the legality of reassessment proceedings initiated for Assessment Year 2017-18, focusing exclusively on whether the sanction mandated under Section 151 of the Income Tax Act 1961 was granted by the correct authority. The ruling reiterates and applies the Court’s earlier interpretation of Section 151 and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (commonly referred to as TOLA), as laid down in Abhinav Jindal HUF v. Commissioner of Income Tax and Ors. [2024 SCC OnLine Del 6585].

The High Court ultimately held that since the reassessment for AY 2017-18 was initiated beyond three years from the end of the relevant assessment year, the approval could not lawfully be granted by the Principal Commissioner of Income Tax (PCIT) alone under the regime applicable at the relevant time. On that ground, the reassessment proceedings were quashed, including the order passed under Section 148A(d) and the corresponding Section 148 notice, both dated 30 July 2022.

Background of the Dispute

Nature of Challenge

The assessee, Appeal Kids Dream International Private Limited, approached the Delhi High Court by way of a writ petition challenging:

• The initiation of reassessment proceedings for AY 2017-18, and
• The validity of the sanction obtained under Section 151 for issuance of notice under Section 148.

The central contention was that the sanction for reassessment had been accorded by an authority not contemplated as the “specified authority” under Section 151 of the Income Tax Act 1961 as it stood at the relevant point of time.

Statutory Framework: Section 151

The Court reproduced and relied on the text of Section 151 as applicable on the date when the notice under Section 148A(d) was issued. That provision, as relevant, specified the “specified authority” for the purposes of Section 148 and Section 148A 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 o f the releva nt 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 o f the releva nt assessment year.]”

This bifurcation is crucial: the competent authority to grant approval is determined strictly with reference to how much time has elapsed from the end of the relevant assessment year.

Issue Before the Court

Sole Question Considered

By its earlier order dated 10 February 2025, the Court had crystallised the dispute into a single legal issue, namely:

• Whether the Principal Commissioner of Income Tax-01 could be treated as the competent “specified authority” to grant sanction for issuance of a notice under Section 148 for AY 2017-18, given that more than three years had elapsed from the end of the relevant assessment year when the reassessment proceedings were initiated.

The Court made it clear that the only question argued and considered was the competence of the sanctioning authority under Section 151.

Reliance on Abhinav Jindal HUF and Earlier Precedent

Reference to Abhinav Jindal HUF v. Commissioner of Income Tax and Ors.

To resolve the controversy, the Bench relied extensively on its detailed discussion in Abhinav Jindal HUF v. Commissioner of Income Tax and Ors. [2024 SCC OnLine Del 6585], where it had previously examined:

• The scope and effect of TOLA, and
• The manner in which Section 151 is to be applied in the context of extended limitation periods arising due to pandemic-related relaxations.