CIPLA PHARMA AND LIFE SCIENCES LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1 (1) (1) AND 3 ORS

931-WP 149-23.DOC Prajakta Vartak IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 149 OF 2023 Cipla Pharma and Life Sciences Limited ...Petitioner Vs. Deputy Commissioner of Income Tax Circle 1(1)(1) & Ors. ...Respondents _________ Mr. Madhur Agarwal, Mr. Rahul Sanghvi and Mr. Netaji Gawde i/b. M/s. Sanjay Udeshi & Co. for Petitioner. Mr. Suresh Kumar for Respondents. __________ CORAM: G. S. KULKARNI & SOMASEKHAR SUNDARESAN, JJ. DATE: 02 JULY, 2024. Oral Judgment (Per G. S. Kulkarni, J.):- 1. Rule. Rule returnable forthwith. By consent of the parties, heard finally. 2. The challenge in the present proceedings instituted under Article 226 of the Constitution of India arises from an action as resorted by the respondents against the petitioner which has culminated into issuance of a notice under Section 148 of the Income Tax Act (for short, “the Act”). 3. The assessment year in question is 2016-17. We may refer to the reliefs the petitioner has prayed for, which read thus:- ““a. that this Hon’ble Court be pleased to issue a Writ of Certiorari or any other writ order or direction under Article 226 of the Constitution of India calling for the records of the case leading Page 1 of 9 02 July, 2024 PRAJAKTA SAGAR VARTAK Digitally signed by PRAJAKTA SAGAR VARTAK Date: 2024.07.10 11:36:59 +0530 CNR No : HCBM020380452022 Uploaded on - 10/07/2024 Downloaded on - 31/10/2026 00:34:18 2024:BHC-OS:10063-DB 931-WP 149-23.DOC to the issue of the impugned initial notice (Exhibit AA) dated May 28, 2022, passing of the impugned order (Exhibit CC) dated July 30, 2022 and the issue of the impugned notice (Exhibit DD) dated July 30, 2022 and after going through the same and examining the question of legality thereof quash, cancel and set aside the impugned initial notice (Exhibit AA) dated May 28, 2022, passing of the impugned order (Exhibit CC) dated July 30, 2022 and the issue of the impugned notice (Exhibit DD) dated July 30, 2022; b. that this Hon’ble Court may be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus, or any other appropriate Writ, Order or Direction under Article 226 of the Constitution of India, ordering and directing the Respondents to withdraw the impugned initial notice (Exhibit AA) dated May 28, 2022, the impugned order (Exhibit CC) dated July 30, 2022 and the impugned notice (Exhibit DD) dated July 30, 2022; c. that this Hon’ble Court be pleased to issue a Writ of Prohibition or any other writ order or direction under Article 226 of the Constitution of India ordering and directing the Respondents not to take any action in furtherance to the impugned initial notice (Exhibit AA) dated May 28, 2022, the impugned order (Exhibit CC) dated July 30, 2022 and the impugned notice (Exhibit DD) dated July 30, 2022.” 4. Mr. Agarwal, learned counsel for the petitioner at the outset, would submit that although the petitioner has a strong case on merits in assailing the impugned order as also against the impugned notice issued under Section 148A of the Act, his contention is that the petition needs to succeed on the primary ground that the impugned notice has been issued in breach of the provisions of Section 151 of the Act, which provides for a sanction by the specified authority before issuance of notice. It is his submission that in the present case, such sanction to issue the impugned notice dated 30 July, 2022 was issued by the Principal Commissioner which itself is contrary to the provisions of Section 151 (ii), in as much as admittedly the impugned notice Page 2 of 9 02 July, 2024 Uploaded on - 10/07/2024 Downloaded on - 31/10/2026 00:34:18 931-WP 149-23.DOC was issued after a period of more than 3 years having elapsed from that of the relevant assessment year 2016-17, hence, such sanction ought to have been issued by the Specified Authority as set out in Section 151(ii) and not by an authority falling under clause (i) of the said provision. It is his submission that once such compliance itself was lacking, the impugned notice issued under Section 148 would be rendered illegal, and on such count, would be required to be quashed and set aside. In supporting his contention, Mr. Agarwal has placed reliance on the decision of the Division Bench of this Court in Siemens Financial Services Pvt. Ltd. Vs. Deputy Commissioner of Income Tax, Circle 8 (2)(1), Mumbai & Ors. (Writ Petition No.4888 of 2022, decided on 25 August, 2023). It is Mr. Agarwal’s submission that if the petition succeeds on this preliminary issue, the other grounds need not be gone into and the same can be agitated as and when the need so arises in future proceedings, if any. 5. Mr. Sureshkumar, learned counsel for the respondent although would support the stand of the department as taken in the reply affidavit, Mr. Sureshkumar would not dispute the requirement of law as urged on behalf of the petitioner and as to what has been held by the Division Bench of this Court in Siemens Financial Services Pvt. Ltd. (supra) to hold that in such circumstances, the Section 148 notice would be rendered bad and illegal, as the same is issued in breach of the provisions of Section 151 of the Act. Page 3 of 9 02 July, 2024 Uploaded on - 10/07/2024 Downloaded on - 31/10/2026 00:34:18 931-WP 149-23.DOC 6. With the assistance of the learned counsel for the parties, we have gone through the impugned order. We have also perused the decision of the Division Bench of this Court in Siemens Financial Services Pvt. Ltd. (supra). 7. To appreciate the contentions as urged on behalf of the petitioner, we may refer to the provisions of Section 151 and Section 148A of the Act as it stood at the relevant time i.e. when the impugned notice was issued, which read thus:- “148A - Conducting inquiry, providing opportunity before issue of notice under section 148 The Assessing Officer shall, before issuing any notice under section 148,— (a) ---------- (b) provide an opportunity of being heard to the assessee, [***] by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a); (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority , within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,- Page 4 of 9 02 July, 2024 Uploaded on - 10/07/2024 Downloaded on - 31/10/2026 00:34:18 931-WP 149-23.DOC (a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, [relate to, the assessee; or (d) the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.] 151. Sanction for issue of notice 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.” (emphasis supplied) 8. On a plain reading of Section 148A it is clear that the Assessing officer before issuing any notice under section 148 is required to follow the procedure as set out in clauses (a) to (d) of Section 148A. One of the pre-conditions as ordained by clause (d) of Section 148A is that an order under such provision Page 5 of 9 02 July, 2024 Uploaded on - 10/07/2024 Downloaded on - 31/10/2026 00:34:18 931-WP 149-23.DOC can be passed by the Assessing Officer only with the approval of “Specified Authority”. Thus, necessarily when clause (d) of Section 148A provides for prior approval of specified authority, it relates to the provisions of Section 151 of the Act providing for ‘Specified authority for the purposes of Section 148 and Section 148A of the Act’. In the present case, Section 151 as amended by the Finance Act, 2021 and Section 148A as also introduced by Finance Act, 2021 have become applicable, as although the assessment year in question is 2016-17 in respect of which the assessment is sought to be reopened by issuance of notice under section 148, which is dated 30 July, 2022. Such amended provision would squarely become applicable the date of notice under section 148 itself being 30 July, 2022. 9. The record clearly indicates that the sanction in the present case was issued by the Principal Commissioner which can only be in respect of cases if three years or less than three years have elapsed from the end of the relevant assessment year, as would fall under the provisions of clause (i) of Section 151 of the Act. As in the present case the assessment year in question is 2016-17 and the impugned notice itself has been issued on 30 July, 2022, it is issued after a period more than 3 years having elapsed from the end of the said assessment year, hence, clause (ii) of Section 151 of the Act was applicable, which required the sanction to be issued by either Principal Chief Commissioner or Principal Director General or where there is no Principal Page 6 of 9 02 July, 2024 Uploaded on - 10/07/2024 Downloaded on - 31/10/2026 00:34:18 931-WP 149-23.DOC Chief Commissioner or Principal Director General, Chief Commissioner or Director General for issuance of notice under Section 148 of the Act. 10. As rightly pointed out at the bar, such issue fell for consideration of the Division Bench of this Court in Siemens Financial Services Pvt. Ltd. (supra), wherein the Division Bench considered the provisions of Section 151 of the Act read with the provisions of Section 148A(b), the latter provision clearly providing that prior to issuance of any notice under Section 148 of the Act, the assessing officer shall provide an opportunity of being heard to the assessee only after considering the cumulative effect of Section 148A(b) read with Section 151 of the Act and as provided under sub-clause (d), the assessing officer shall decide on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under Section 148 by passing an order, with the prior approval of specified authority within one month from the end of the month in which the reply is received. It is held that the sanction of the specified authority has to be obtained in accordance with the law existing when the sanction is obtained and, therefore, the sanction is required to be obtained by applying the amended section 151(ii) of the Act and since the sanction has been obtained in terms of section 151(i) of the Act, the impugned order and impugned notice are bad in law and should be quashed and set aside. Page 7 of 9 02 July, 2024 Uploaded on - 10/07/2024 Downloaded on - 31/10/2026 00:34:18 931-WP 149-23.DOC 11. Insofar as the respondent’s case based on the notification dated 31 March, 2020 issued under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short, ‘TOLA’) was concerned, the Court held that such notification was a subordinate legislation and it could not override the statute enacted by the Parliament and in that regard, the position in law was discussed by the Division Bench in paragraph 27 of the said decision. 12. In the present case, it is not in dispute that an appropriate sanction of the specified authority as per the provisions of Section 151(ii) of the Act was not obtained and for such reason, certainly, as held by this Court in Siemens Financial Services Pvt. Ltd. (supra), the impugned notices would be rendered bad and illegal. The petition accordingly needs to succeed on such ground of the Court requiring to delve on such issues of challenge as raised by the petitioner as also prior procedure adopted in that regard. 13. In the light of the above discussion, the petition needs to succeed. It is accordingly allowed by the following order:-