ESDS SOFTWARE SOLUTION LTD vs. ACIT CIRLE 1 NASHIK INCOME TAX OFFICE AND ORS

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WP/3715/2024HC BombayHCBM01012853202418 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 sanction obtained for issuing notices was improper. Following its own precedent in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., the Court found that for Assessment Year 2016-2017, the sanction 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 liable to be quashed. Furthermore, any subsequent assessment order passed relying on such an incorrect sanction would also have to be quashed. The petition was disposed of by quashing all impugned notices and orders, including any consequential assessment orders. 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 actions taken by the ACIT Circle 1 Nashik and others for Assessment Year 2016-2017. The core of the dispute revolved around the validity of the sanction obtained for issuing notices. The petitioner argued that the sanction was improper. The respondents are the revenue authorities. The procedural history involves the filing of the writ petition and the subsequent hearing before the High Court.

What were the issues?

1. Whether the sanction obtained for issuing notices was improper, specifically concerning the correct provision of Section 151 of the Income Tax Act, 1961, to be invoked for Assessment Year 2016-2017. This is a question of law. Assessee's contention: The sanction obtained was improper. The petitioner relies 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), rendering the sanction invalid. Revenue's contention: The judgment records no specific contention from the revenue on this issue.

Which sections of the Income-tax Act were involved?

Section 151,Section 151(i),Section 151(ii)

AI-generated summary — verify with the full judgment below

1/2 406-aswp-3715-2024.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.3715 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 2016-2017. 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 12:41:08 +0530

2/2 406-aswp-3715-2024.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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