DOMBIVLI NAGARI SAHAKARI BANK LTD. vs. INCOME TAX OFFICER, WARD 3(1) , KALYAN AND ORS

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WP/14805/2022HC BombayHCBM01043549202218 December 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 sanction obtained for the notice issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2016-2017 was invalid. The Court applied its prior ruling in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., which established that for AY 2016-2017, the sanction ought to have been granted under Section 151(ii) of the Act, not Section 151(i). Consequently, the Court found the sanction to be invalid. The reasoning was that an invalid sanction renders the notice issued based upon it invalid. The Court further reasoned that if the notice is invalid, any subsequent assessment order passed relying on such an incorrect sanction would also be liable to be quashed. The operative direction was to quash and set aside the impugned notice dated 4th May 2021 (deemed under Section 148A(b)), the impugned order dated 26th July 2022 (under Section 148A(d)), and the impugned notice dated 26th July 2022 (under Section 148). All consequential notices were also quashed. The Court clarified that other grounds could be raised in future proceedings.

What were the facts?

The petitioner, Dombivli Nagari Sahakari Bank Ltd., filed a writ petition challenging notices and an order related to Assessment Year 2016-2017. The core of the challenge was an alleged improper sanction obtained by the revenue. The petitioner argued that the sanction was invalid. The revenue contested this. The High Court referred to its prior decision in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., which dealt with a similar issue for the same assessment year. The procedural history involves a notice dated 4th May 2021 under Section 148 (deemed under Section 148A(b)), an order dated 26th July 2022 under Section 148A(d), and a further notice dated 26th July 2022 under Section 148.

What were the issues?

1. Whether the sanction obtained for issuing the notice under Section 148 of the Income Tax Act, 1961, for Assessment Year 2016-2017 was improper and invalid? (Question of law) Assessee's Contention: The sanction obtained was improper. The petitioner relied on the High Court's 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), rendering the sanction invalid. Revenue's Contention: The judgment records no specific contentions from the revenue regarding the validity of the sanction, but they were represented by counsel.

Which sections of the Income-tax Act were involved?

Section 151,Section 148,Section 148A

AI-generated summary — verify with the full judgment below

1/2 405.WP-14805-2022.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION

WRIT PETITION NO.14805 OF 2022 Dombivli Nagari Sahakari Bank Ltd. ….Petitioner V/s. Income Tax Officer, Ward 3(1) & Ors. ....Respondents ---- Mr. Kumar Kale for petitioner. Mr. Ajeet Manwani a/w. Ms. Samiksha Kanani for respondents – Revenue. ---- CORAM : K. R. SHRIRAM & DR. NEELA GOKHALE, JJ.

DATED : 18th DECEMBER 2023 P.C. : 1 This petition relates to Assessment Year 2016-2017. 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 assessment orders having been passed relying on an incorrect sanction, will also have to be quashed. Ordered accordingly. 1 (2023) 457 ITR 647 (BOM) Gauri Gaekwad GAURI AMIT GAEKWAD Digitally signed by GAURI AMIT GAEKWAD Date: 2023.12.20 09:41:12 +0530

2/2 405.WP-14805-2022.doc 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. 3 Therefore, impugned notice dated 4th May 2021 issued under Section 148 of the Act (now deemed to be notice under Section 148A(b), impugned order dated 26th July 2022 passed under Section 148A(d) of the Act and impugned notice dated 26th July 2022 issued under Section 148 of the Act are hereby quashed and set aside. 4 In view of the above, all consequential notices will also have to be quashed. Ordered accordingly. 5 Petition disposed. 6 We clarify that all other grounds could be raised by the parties at appropriate stage in any other proceeding.

(DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) Gauri Gaekwad

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