BKS GALAXY REALTORS PVT. LTD. vs. DY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(2) AND ORS

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WP/12314/2022HC BombayHCBM01035657202204 October 2023Bench: HON'BLE SHRI JUSTICE K.R. SHRIRAM,HON'BLE JUSTICE DR. NEELA KEDAR GOKHALE3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that for Assessment Year 2016-2017, the sanction for issuing notices should have been obtained under Section 151(ii) of the Income Tax Act, 1961, and not under Section 151(i). Consequently, the sanction was deemed invalid. The Court reasoned that an invalid sanction renders the notice issued based upon it invalid, and therefore, such notices must be quashed. Furthermore, if assessment orders were passed relying on these invalid sanctions, they too must be quashed. The Court also ordered that all consequential notices/demands issued under Section 156 or 271 of the Act would also be quashed. The Court further held that the findings in the Siemens Financial Services Private Limited case would squarely apply to Assessment Year 2017-2018, leading to the quashing and setting aside of all notices, assessment orders, and consequential orders for that year. The ratio is that a procedurally flawed sanction invalidates subsequent actions taken under the Act.

What were the facts?

The petitioners, Zentest Software Private Limited and others, filed multiple writ petitions before the Bombay High Court concerning Assessment Years 2016-2017 and 2017-2018. The core issue in these petitions revolved around the validity of the sanction obtained by the revenue authorities for issuing notices under the Income Tax Act, 1961. The petitioners contended that the sanction was improperly obtained. The revenue authorities are the respondents, including the Assistant Commissioner of Income Tax, Circle 12. The procedural history involves the filing of writ petitions challenging notices and subsequent assessment orders.

What were the issues?

1. Whether the sanction obtained for issuing notices under Section 151 of the Income Tax Act, 1961, was improper for Assessment Year 2016-2017, and if so, whether the notice and subsequent assessment order are invalid. The assessee argued that the sanction should have been under Section 151(ii) and not Section 151(i), rendering it invalid. The revenue's arguments are not recorded. 2. Whether the principle laid down in the case of Siemens Financial Services Private Limited v. Deputy Commissioner of Income Tax and Others, concerning improper sanction, would also apply to Assessment Year 2017-2018. The assessee contended that the findings in the Siemens case squarely apply to AY 2017-2018. The revenue's arguments are not recorded.

Which sections of the Income-tax Act were involved?

Section 151,Section 156,Section 271

AI-generated summary — verify with the full judgment below

Heard together (6 matters)

WP No.9954/2022
WP No. 11183/2022
WP No. 11566/2022
WP No. 11860/2022
WP No. 11916/2022
WP No. 12314/2022

Read from the judgment's own cause title. This page is filed under one of them.

1/3 945 to 950-WP-9954-2022 @ Ors.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 9954 OF 2022 Zentest Software Private Limited ….Petitioner V/s. Assistant Commissioner of Income Tax, Circle 12 and Anr. …Respondents ALONGWITH WRIT PETITION NO. 11183 OF 2022 ALONGWITH WRIT PETITION NO. 11566 OF 2022 ALONGWITH WRIT PETITION NO. 11860 OF 2022 ALONGWITH WRIT PETITION NO. 11916 OF 2022 ALONGWITH WRIT PETITION NO. 12314 OF 2022 ---- Mr. Niraj Sheth i/b Mr. Atul K. Jasani for Petitioner in WP No.9954/2022. Ms. Ritika Agarwal a/w Mr. Sandesh Salunkhe i/b Ace Legal for Petitioners in WP No. 11183/2022, WP No. 11566/2022, WP No. 11860/2022, WP No. 11916/2022 and WP No. 12314/2022. Mr. Suresh Kumar for Respondents in WP No.9954/2022, WP No. 11183/ 2022, WP No. 11566/2022, WP No. 11860/2022, WP No. 11916/2022. Mr. Akhileshwar Sharma for Respondent in WP No. 12314/2022. ---- CORAM : K.R. SHRIRAM & NEELA GOKHALE, JJ.

DATED : 4th OCTOBER 2023 P.C. : 1. These are Petitions which relate to Assessment Year 2016- 2017 or 2017-2018. Purti Parab PURTI PRASAD PARAB Digitally signed by PURTI PRASAD PARAB Date: 2023.10.07 18:03:18 +0530

2/3 945 to 950-WP-9954-2022 @ Ors.doc 2. Counsels state that in all these Petitions the issue of improper sanction having been obtained has been raised among other grounds, in the petition as well as during the hearing. Counsels state that the issue of improper sanction has been decided by this Court in the case of Siemens Financial Services Private Limited v. Deputy Commissioner of Income Tax and Others1, wherein the Court has held that for Assessment Year 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”) and 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 assessment orders having been passed relying on an incorrect sanction, will also have to be quashed. Ordered accordingly. 3. In view of the above, all consequential notices/demands issued under Section 156 or 271 of the Act will also have to be quashed. Ordered accordingly. 4. All Petitions disposed. 5. Counsels further state that the findings in Siemens Financial 1 Writ Petition No. 4888 of 2022 Dated 25th August 2023. Purti Parab

3/3 945 to 950-WP-9954-2022 @ Ors.doc Services Private Limited (supra) will squarely apply to the Assessment Year 2017-2018 as well. Therefore, all such notices issued for Assessment Year 2017-2018, the assessment orders and the consequential orders are also quashed and set aside. 6. We clarify that all other grounds could be raised by the parties at appropriate stage in any other proceeding. 7. In view of disposal of Petitions, pending interim application, if any, also stands disposed of accordingly (NEELA GOKHALE, J.) (K.R. SHRIRAM, J.) Purti Parab

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