EKATI TRADERS PVT. LTD. vs. ASST. COMMISSIONER OF INCOME TAX , CIRCLE -15 (3) (2) , MUMBAI AND ORS

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WP/14367/2022HC BombayHCBM01042585202226 September 2023Bench: HON'BLE SHRI JUSTICE K.R. SHRIRAM,HON'BLE JUSTICE KAMAL KHATA2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the issue of improper sanction raised by the petitioner should be decided in their favor, squarely applying the findings from the case of Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors. The court reiterated the principle that if sanction is obtained under the wrong sub-section of Section 151, it is invalid. Consequently, the notice issued based on such invalid sanction is also invalid and liable to be quashed. The court found that the impugned notice dated 25th July 2022 was issued with improper sanction. Therefore, the notice and any consequential orders passed were quashed and set aside. The ratio decidendi is that a notice issued without proper sanction under the relevant provision of Section 151 of the Income Tax Act, 1961, is void ab initio.

What were the facts?

The petitioner, Ekati Traders Private Limited, filed a writ petition challenging an action by the Assistant Commissioner of Income Tax, Circle – 15(3) (2) Mumbai, for Assessment Year 2017-2018. The core of the challenge, as presented by the petitioner's counsel, concerns the improper sanction obtained for issuing a notice. The petitioner relies on a previous decision by the Bombay High Court in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors. for Writ Petition No.4888 of 2022, dated 25th August 2023. In that case, the court held that for AY 2016-2017, sanction should have been obtained under Section 151(ii) of the Income Tax Act, 1961, and not Section 151(i), rendering the sanction invalid and consequently the notice invalid.

What were the issues?

1. Whether the sanction obtained for issuing the notice under challenge was improper, thereby rendering the notice invalid, in light of the provisions of Section 151 of the Income Tax Act, 1961? Assessee's Contention: The petitioner argued that the sanction obtained was improper and invalid. They relied on the Bombay High Court's decision in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors. (Writ Petition No.4888 of 2022, dated 25th August 2023), which held that for AY 2016-2017, sanction under Section 151(ii) was required, not Section 151(i). The petitioner contended that this finding should squarely apply to their case for AY 2017-2018, leading to the invalidity of the impugned notice. Revenue's Contention: The judgment does not record any specific arguments or contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 151

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.14367 OF 2022 Ekati Traders Private Limited .. Petitioner v/s. Assistant Commissioner of Income Tax Circle – 15(3) (2) Mumbai & Ors. .. Respondents … Mr. Prakash Kumar a/w Rupinder Kumar Aggarwal, Tanmay P. Bidkar i/b. Shreyas Shrivastava for the petitioner. Mr. Akhileshwar Sharma for the respondents. …

CORAM : K. R. SHRIRAM & KAMAL KHATA, JJ. DATED : 26TH SEPTEMBER 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 1 Writ Petition No.4888 of 2022 dated 25th August 2023. 1/2 438-wp-14367-2022.doc Sumedh SUMEDH NAMDEO SONAWANE Digitally signed by SUMEDH NAMDEO SONAWANE Date: 2023.09.29 17:16:24 +0530

have been given under Section 151(ii) and not under Section 151(i) of the Income Tax Act 1961. 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. 2 Counsel state that the findings in Siemens Financial Services Pvt Ltd. (Supra) should squarely apply to this petition as well on the issue of sanction. Therefore, impugned notice dated 25 th July 2022 is hereby quashed and set aside. Any consequential orders passed shall stand quashed and set aside. 3 Petition disposed. (KAMAL KHATA, J.) (K.R. SHRIRAM, J.) 2/2 438-wp-14367-2022.doc Sumedh

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