SHATRUNJAY INVESTMENTS vs. INCOME TAX OFFICER WARD 3 (1) KALYAN AND RS

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WP/5928/2023HC BombayHCBM01020076202320 February 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 Assessment Year 2016-2017 was invalid because it was issued under Section 151(i) instead of Section 151(ii) of the Income Tax Act, 1961, as per its prior decision in Siemens Financial Services Private Limited. Consequently, the notice issued based on this improper sanction was deemed invalid and quashed. The Court reasoned that an assessment order passed relying on an incorrect sanction would also be invalid and must be quashed. Therefore, all notices, assessment orders, and consequential orders for Assessment Year 2016-2017 were quashed and set aside. The Court clarified that other grounds could be raised in future proceedings.

What were the facts?

The petitioner, Shatrunjay Investments, filed a writ petition before the Bombay High Court challenging actions taken by the Income Tax Officer, Ward-3(1), Kalyan, and others for Assessment Year 2016-2017. The core of the dispute revolved around the validity of the sanction obtained for issuing notices. The counsels for both the petitioner and respondents agreed that the issue of improper sanction had been raised. The High Court noted a previous decision in the case of Siemens Financial Services Private Limited V/s. Deputy Commissioner of Income Tax and Others, which dealt with a similar issue for the same assessment year.

What were the issues?

1. Whether the sanction obtained for issuing notices for Assessment Year 2016-2017 was invalid due to being issued under the wrong provision of Section 151 of the Income Tax Act, 1961. The petitioner argued that the sanction was improper. The respondents did not record any specific arguments against this point, but their presence indicates opposition. The High Court, referencing its prior ruling in Siemens Financial Services Private Limited, stated that for Assessment Year 2016-2017, sanction should have been obtained under Section 151(ii) and not Section 151(i) of the Act, rendering the sanction invalid. Consequently, the notice issued based on such invalid sanction would also be invalid and liable to be quashed. The Court further noted that if the notice is quashed, any subsequent assessment order relying on the incorrect sanction would also have to be quashed.

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

1/2 402-aswp-5928-2023.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 5928 OF 2023 Shatrunjay Investments …Petitioner Versus Income Tax Officer, Ward-3(1), Kalyan & Ors. …Respondents Mr. Dharan Gandhi for Petitioner. Mr. Ajeet Manwani a/w Ms. Samiksha Kanani for Respondents. CORAM: K. R. SHRIRAM & DR. NEELA GOKHALE, JJ. DATED: 20th February 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. Counsels further state that the issue of improper sanction has been decided by this Court in the case of Siemens Financial Services Private Limited V/s. 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”). Consequently, the sanction is invalid. The Court has stated that in view of the invalid sanction, the notice issued itself will be invalid 1. (2023) 457 ITR 647 (Bom.) Gitalaxmi

2/2 402-aswp-5928-2023.doc and has to be quashed. We would also add, if the notice has to be quashed, if there is an assessment order passed subsequently, the assessment order having been passed relying on an incorrect sanction, will also have to be quashed. Ordered accordingly. 3. Counsels further state that the findings in Siemens Financial Services Private Limited (supra) would squarely apply to this petition as well on the issue of sanction. 4. Therefore, all such notices issued for Assessment Year 2016- 2017, the assessment orders and the consequential orders are also quashed and set aside. 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.) Gitalaxmi GITALAXMI KRISHNA KOTAWADEKAR Digitally signed by GITALAXMI KRISHNA KOTAWADEKAR Date: 2024.02.22 11:18:56 +0545

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