DESAI BROTHERS LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX AND ORS

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WP/11184/2022HC BombayHCBM01034473202223 October 2023Bench: HON'BLE SHRI JUSTICE K.R. SHRIRAM,HON'BLE JUSTICE DR. NEELA KEDAR GOKHALE2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the issue of improper sanction, as decided in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., squarely applies to the present petition. The Court reiterated its finding in the cited case that for AY 2016-2017, sanction should have been under Section 151(ii) and not Section 151(i) of the Income Tax Act, 1961, rendering the sanction invalid. Consequently, the notice issued based on this invalid sanction is also invalid and must be quashed. If an assessment order was passed relying on such an incorrect sanction, it too must be quashed. The impugned notice dated May 31, 2022, issued under Section 148A(b), and the impugned order and notice dated July 29, 2022, issued under Section 148, were quashed and set aside. The petition was disposed of, with a clarification that other grounds could be raised in appropriate proceedings.

What were the facts?

The petitioner, Desai Brothers Ltd., filed a writ petition before the Bombay High Court concerning Assessment Year 2017-2018. The petition challenged the validity of a notice issued under Section 148A(b) dated May 31, 2022, and an order and notice issued under Section 148 dated July 29, 2022. The core of the challenge was an alleged improper sanction obtained by the revenue. The petitioner argued that the sanction was invalid, rendering the subsequent notices and orders invalid. The High Court was presented with the procedural history leading to these challenges.

What were the issues?

1. Whether the sanction obtained for issuing the notice under Section 148A(b) and Section 148 of the Income Tax Act, 1961, was improper, thereby invalidating the notice and subsequent assessment order? (Mixed question of law and fact, turning on Section 151 of the Income Tax Act, 1961). Assessee's Contention: The sanction obtained was improper. The petitioner relied on the decision in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., which held that for AY 2016-2017, sanction should have been under Section 151(ii) and not Section 151(i), making the sanction invalid and the notice liable to be quashed. Revenue's Contention: The judgment records no specific argument from the revenue on this issue.

Which sections of the Income-tax Act were involved?

Section 151,Section 148A,Section 148

AI-generated summary — verify with the full judgment below

1/2 424-wp-11184-22.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.11184 OF 2022 Desai Brothers Ltd.

...Petitioner Versus Assistant Commissioner of Income Tax 7 Ors. ...Respondents ---- Mr. Deepa Khare a/w Mr. Upendra Lokegaonkar i/b Mint & Confreres for Petitioner. Mr. Suresh Kumar for Respondents. ---- CORAM : K. R. SHRIRAM & NEELA GOKHALE, JJ.

DATED : 23rd OCTOBER 2023 P.C. : 1 This petition relates to A.Y.2017-2018. Counsel states that in this petition the issue of improper sanction having been obtained has been raised amongst other grounds. Counsel state that the issue of improper sanction has been decided by this court in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors.1 wherein the court has held that for A.Y. 2016-2017 the sanction should have been given under Section 151(ii) and not under Section 151(i) of the Income Tax Act 1961 (the Act). Consequently, the sanction is invalid. The court has stated that in view of the invalid sanction, the notice issued itself will be invalid and has to be quashed. We would also add, if the notice has to be quashed, if there is an assessment order passed subsequently, those 1 (2023) 457 ITR 647 (BOM) Meera Jadhav MEERA MAHESH JADHAV Digitally signed by MEERA MAHESH JADHAV Date: 2023.10.26 11:18:17 +0530

2/2 424-wp-11184-22.doc assessment orders having been passed relying on an incorrect sanction, will also have to be quashed. Ordered accordingly. 2 Counsel further state that the findings in Siemens Financial Services Pvt Ltd. (Supra) would squarely apply to this petition as well on the issue of sanction. Therefore, impugned notice dated 31st May 2022 issued under Section 148A(b) of the Act and impugned order and impugned notice both dated 29th July 2022 issued under Section 148 of the Act, are hereby quashed and set aside. 3 Petition disposed. 4 We clarify that all other grounds could be raised by the parties at appropriate stage in any other proceeding. (NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) Meera Jadhav

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