WINDSOR MACHINES LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE AND ORS

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WP/577/2023HC BombayHCBM01052752202226 September 2023Bench: HON'BLE SHRI JUSTICE K.R. SHRIRAM,HON'BLE JUSTICE KAMAL KHATA4 pages
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What did the High Court hold?

The High Court held that for Assessment Year 2016-2017, 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. The Court reasoned that an invalid sanction renders the notice issued based upon it invalid. Furthermore, if the notice is invalid, any subsequent assessment order passed relying on such an incorrect sanction must also be quashed. The Court also directed that all consequential notices/demands issued under Section 156 or Section 271 of the Act would also stand quashed. The petitions concerning the invalid sanction were disposed of accordingly. The other petitions were adjourned with ad-interim relief continuing.

What were the facts?

These are multiple writ petitions concerning various assessment years. In Writ Petition No. 577 of 2023, relating to Assessment Year 2016-2017, and Writ Petition No. 576 of 2023, relating to Assessment Year 2017-2018, the primary issue raised by the petitioners is the improper sanction obtained by the revenue. The petitioners argue that the sanction for issuing notices was invalid. The judgment also mentions Writ Petition No. 593 of 2023, Writ Petition No. 459 of 2023, and Writ Petition No. 462 of 2023, which were listed for further hearing, with earlier granted ad-interim relief to continue.

What were the issues?

1. Whether the sanction obtained for issuing notices under Section 151 of the Income Tax Act, 1961, was improper and invalid for Assessment Year 2016-2017, thereby rendering the notices and subsequent assessment orders invalid? (Question of law, turning on Section 151(i) and 151(ii)). Assessee's Contention: The sanction obtained was improper. The revenue relied on the decision in *Siemens Financial Services Private Limited v. Deputy Commissioner of Income tax and Others*, 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 consequently invalid. Revenue's Contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.593 OF 2023 Sainath Shankar Mhatre .. Petitioner v/s. Income Tax Officer Ward-3(2) Kalyan& Ors. .. Respondents WITH WRIT PETITION NO.459 OF 2023 Windsor Machines Ltd. .. Petitioner v/s. Deputy Commissioner of Income Tax Central Circle 1 & Ors. .. Respondents WITH WRIT PETITION NO.577 OF 2023 Windsor Machines Ltd. .. Petitioner v/s. Deputy Commissioner of Income Tax Central Circle 1 & Ors .. Respondents WITH WRIT PETITION NO.576 OF 2023 Windsor Machines Ltd. .. Petitioner v/s. Deputy Commissioner of Income Tax Central Circle 1 & Ors .. Respondents WITH WRIT PETITION NO.462 OF 2023 Ganesh Shankar Mhatre .. Petitioner v/s. Income Tax Officer Ward-3(2), Kalyan & Ors. .. Respondents 1/4 441-wp-593-2023.doc Sumedh This order has been modified by speaking to the minutes of order dated 11/10/2023. SUMEDH NAMDEO SONAWANE Digitally signed by SUMEDH NAMDEO SONAWANE Date: 2023.10.13 09:59:48 +0530

… Ms. Aanchal Vyas for the Petitioner. Mr. Ajeet Manwani a/w Ms Samiksha Kanai for Respondents. …

CORAM : K. R. SHRIRAM & KAMAL KHATA, JJ. DATED : 26TH SEPTEMBER 2023. P.C. : WRIT PETITION NO.577 OF 2023 1. This Petition relates to Assessment Year 2016-2017. 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 Others 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 consequentially the sanction is invalid. The Court has stated that in view of the invalid sanction, the notice issued itself will be invalid have 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 1 Writ Petition No. 4888 of 2022 dated 25th August 2023. 2/4 441-wp-593-2023.doc Sumedh This order has been modified by speaking to the minutes of order dated 11/10/2023.

relying on an incorrect sanction, will also have to be quashed. Ordered accordingly. 3. In view of the above, all consequential notice/demands issued under Section 156 or 271 of the Act will also have to be quashed. Ordered accordingly. 4. Petition disposed. WRIT PETITION NO.576 OF 2023 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. 2 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. 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 2 . Writ Petition No.4888 of 2022 dated 25th August 2023. 3/4 441-wp-593-2023.doc Sumedh This order has been modified by speaking to the minutes of order dated 11/10/2023.

quashed and set aside. Any consequential orders passed shall also stand quashed and set aside. 3. Petition disposed. WRIT PETITION NO.593 OF 2023 WITH WRIT PETITION NO.459 OF 2023 WITH WRIT PETITION NO.462 OF 2023 1. Stand over to 30th October 2023. 2. Ad-interim relief granted earlier to continue until the next date. (KAMAL KHATA, J.) (K.R. SHRIRAM, J.) 4/4 441-wp-593-2023.doc Sumedh This order has been modified by speaking to the minutes of order dated 11/10/2023.

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