ADITYA ENTERPRISES vs. INCOME TAX OFFICER WARD 28(1) MUMBAI AND ORS

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WP/2501/2023HC BombayHCBM01008831202315 September 2023Bench: HON'BLE SHRI JUSTICE K.R. SHRIRAM,HON'BLE JUSTICE DR. NEELA KEDAR GOKHALE3 pages
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What did the High Court hold?

The High Court held that for Assessment Year 2016-2017, the sanction for issuing notices under Section 148 of the Income Tax Act, 1961, should have been obtained under Section 151(ii) and not Section 151(i). Consequently, the sanction was deemed invalid. The Court reasoned that an invalid sanction renders the notice issued under Section 148 invalid. Further, if an assessment order was passed relying on such an incorrect sanction, that assessment order would also have to be quashed. The Court extended this finding to Assessment Year 2017-2018, holding that the same principle regarding improper sanction would apply. Therefore, all notices, assessment orders, and consequential notices/demands (including those under Section 156 or 271) issued for both assessment years based on the improper sanction were quashed and set aside. The Court clarified that other grounds raised by the parties could be pursued in appropriate proceedings.

What were the facts?

The petitioners filed multiple writ petitions before the Bombay High Court challenging notices and assessment orders issued by the Income Tax Department. The assessment years involved were 2016-2017 and 2017-2018. The core issue raised by the petitioners was the improper sanction obtained by the Assessing Officer for issuing notices under Section 148 of the Income Tax Act, 1961. The petitioners argued that the sanction was obtained under the wrong sub-section of Section 151, rendering the subsequent proceedings invalid. The revenue's position on this specific procedural aspect is not explicitly recorded in the judgment.

What were the issues?

1. Whether the sanction obtained for issuing notices under Section 148 of the Income Tax Act, 1961, was improper for Assessment Year 2016-2017, and if so, what is the consequence on the notices and subsequent assessment orders? - Assessee's contention: The sanction should have been obtained under Section 151(ii) and not Section 151(i) of the Act, making the sanction invalid and consequently the notice and assessment order liable to be quashed. Reliance was placed on the decision in Siemens Financial Services Private Limited v. Deputy Commissioner of Income Tax and Others. - Revenue's contention: Not recorded in the judgment. 2. Whether the same principle regarding improper sanction applies to Assessment Year 2017-2018, and if so, what is the consequence on the notices and subsequent assessment orders? - Assessee's contention: The findings in the Siemens Financial Services Private Limited case would squarely apply to Assessment Year 2017-2018. - Revenue's contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 148,Section 151,Section 151(i),Section 151(ii),Section 156,Section 271

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Heard together (19 matters)

WP/9955/2022
WP/10555/2022
WP/11552/2022
WP/11866/2022
WP/11871/2022
WP/11915/2022
WP/12313/2022
WP/2501/2023
WP/5760/2023
WP/5858/2023
WP/7710/2023
WP/11121/2022
WP/11469/2022
WP/14525/2022
WP/317/2023
WP/2107/2023
WP/2536/2023
WP/2544/2023
WP/9037/2023

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

1/3 Corrected-907-aswp-3606-2022+.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NOS. 9955, 10555, 11121, 11469, 11552, 11866, 11871, 11915, 12313 & 14525 OF 2022 WITH WRIT PETITION NOS. 317, 2107, 2501, 2536, 2544, 5760, 5858, 7710 & 9037 OF 2023 Adil Aspi Engineer …Petitioner Versus Income Tax Officer, Ward 19(1)(1) & Ors. …Respondents Mr. Atul K. Jasani for Petitioner in WP/9955/2022. Ms. Ritika Agarwal a/w Ms. Rachna Bhanushali a/w Mr. Sandesh P. Salunkhe i/b ACE Legal for Petitioners in WP/10555/2022, WP/11552/2022,

WP/11866/2022,

WP/11871/2022, WP/11915/2022,

WP/12313/2022,

WP/2501/2023, WP/5760/2023, WP/5858/2023 and WP/7710/2023. Mr. Riyaz Padvekar a/w Mr. Tanzil Padvekar a/w Ms. Tejal Kharkar for Petitioner in WP/11121/2022. Mr. Rajesh Poojary i/b Mint and Confreres for Petitioner in WP/11469/2022. Mr. Devendra Jain a/w Mr. Ashwin Jain i/b Ms. Radha Halbe for Petitioner in WP/14525/2022. Mr. Anuj Kisnadwala i/b Mr. Govind G. Javeri for Petitioner in WP/317/2023. Mr. Suyog Bhave a/w Mr. Viraaj Y. Bhate i/b PDS Legal for Petitioner in WP/2107/2023. Dr. K. Shivram, Sr. Advocate a/w Mr. Rahul Hakani for Petitioners in WP/2536/2023 and WP/2544/2023. Ms. Ujjwala Chaturvedi for Petitioner in WP/9037/2023. Mr. Akhileshwar Sharma, Mr. Suresh Kumar, Mr. Ajeet Manwani, Mr. Manoj Shirsat, Ms. Swapna Gokhale, Ms. Sushma Nagaraj, Ms. Shilpa Goel, Ms. Samiksha Kanani and Ms. Kinjal Patel for Respondents-Revenue. CORAM: K. R. SHRIRAM & DR. N. K. GOKHALE, JJ. DATED: 15th September 2023 PC:- 1. These are the Petitions which relate to Assessment Year 2016- Gitalaxmi Note: This order is modified by a Suo-motu Speaking to Minutes Order dated 26th September 2023. Corrections are shown in bold and italic.

2/3 Corrected-907-aswp-3606-2022+.doc 2017 or 2017-2018. 2. Counsels state that in all these Petitions the issue of improper sanction having been obtained has been raised among other grounds. 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 even where 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. 1. Writ Petition No. 4888 of 2022 dated 25th August 2023. Gitalaxmi Note: This order is modified by a Suo-motu Speaking to Minutes Order dated 26th September 2023. Corrections are shown in bold and italic.

3/3 Corrected-907-aswp-3606-2022+.doc 5. Counsels further state that the findings in Siemens Financial 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. (DR. N. K. GOKHALE, J.) (K. R. SHRIRAM, J.) Gitalaxmi Note: This order is modified by a Suo-motu Speaking to Minutes Order dated 26th September 2023. Corrections are shown in bold and italic. GITALAXMI KRISHNA KOTAWADEKAR Digitally signed by GITALAXMI KRISHNA KOTAWADEKAR Date: 2023.09.27 10:56:35 +0545

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