ESDS SOFTWARE SOLUTION LITD vs. ACIT CIRCLE 1 NASHIK AND ORS

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WP/3714/2024HC BombayHCBM01012841202418 March 2024Bench: 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 raised by the petitioner, was squarely covered by its prior decision in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors. In that case, the Court had ruled that for a particular assessment year, the sanction ought to have been granted under Section 151(ii) of the Income Tax Act, 1961, and not under Section 151(i). Consequently, the sanction was deemed invalid, leading to the invalidity of the notice issued. The Court reasoned that if the notice is invalid, any subsequent assessment order passed relying on that incorrect sanction would also be invalid and liable to be quashed. Therefore, all notices and orders impugned in the present petition, along with any consequential notices and assessment orders, were quashed and set aside. The Court clarified that other grounds could be raised in future proceedings.

What were the facts?

The petitioner, ESDS Software Solution Ltd., filed a writ petition before the Bombay High Court challenging certain notices and orders related to Assessment Year 2017-2018. The core of the dispute, as presented by both counsels, revolved around the issue of improper sanction obtained by the revenue authorities. The petitioner argued that the sanction was invalid, rendering subsequent notices and orders void. The revenue was represented by ACIT Circle 1 Nashik and others. The High Court was asked to decide on the validity of the sanction and its consequential impact on the assessment proceedings.

What were the issues?

1. Whether the sanction obtained by the revenue for issuing notices was improper, thereby invalidating the notices and subsequent assessment orders, as per Section 151 of the Income Tax Act, 1961? Assessee's Contention: The assessee contended that the sanction was improper. They relied on the High Court's decision in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., which held that for Assessment Year 2016-2017, sanction should have been under Section 151(ii) and not Section 151(i), making the sanction invalid and the notice void. Revenue's Contention: The judgment records that counsels for both sides stated the issue of improper sanction was raised and that the findings in Siemens Financial Services Private Limited would squarely apply. No specific arguments were recorded for the revenue other than their participation in the proceedings.

Which sections of the Income-tax Act were involved?

Section 151

AI-generated summary — verify with the full judgment below

1/2 405-aswp-3714-2024.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.3714 OF 2024 ESDS Software Solution Ltd. …Petitioner Versus ACIT Circle 1 Nashik and Ors. …Respondents Ms. Radha Halbe, for Petitioner. Mr. A.K.Saxena, for Respondents-Revenue. CORAM: K. R. SHRIRAM & DR. NEELA GOKHALE, JJ. DATED: 18th March, 2024 PC:- 1. This petition relates to Assessment Year 2017-2018. 2. Counsels state that in this petition 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 Vs. Deputy Commissioner of Income Tax & Ors.1 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 1. (2023) 457 ITR 647 (BOM) Shivgan SHAMBHAVI NILESH SHIVGAN Digitally signed by SHAMBHAVI NILESH SHIVGAN Date: 2024.03.19 12:41:05 +0530

2/2 405-aswp-3714-2024.doc the notice has to be quashed, if there is an assessment order passed subsequently, that assessment order having been passed relying on an incorrect sanction, will also have to be quashed. 3. Counsels further state that the findings in Siemens Financial Services Private Limited (supra) will squarely apply to this petition. Therefore, all notices and orders impugned in this petition are quashed and set aside. All consequential notices, assessment order and the consequential orders, if any, are also hereby quashed and set aside. 4. Petition disposed. 5. 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.) Shivgan

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