AMIT GAS AGENCY vs. INCOME TAX OFFICER WARD 5 AND ORS

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WP/670/2024HC BombayHCBM01000192202416 January 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 the notice was improper. Following its own precedent in Siemens Financial Services Private Limited V/s. Deputy Commissioner of Income Tax and Others, the Court ruled 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. Therefore, the notice, any subsequent assessment order passed relying on that incorrect sanction, and all consequential orders were quashed and set aside. The principle established is that a procedural defect in obtaining sanction under Section 151, specifically the wrong sub-section being invoked for a particular assessment year, invalidates the consequential notice and assessment. The Court clarified that other grounds could be raised in future proceedings. The petition was disposed of.

What were the facts?

The petitioner, Amit Gas Agency, filed a writ petition before the Bombay High Court challenging actions taken by the Income Tax Officer, Ward 5, Panvel, for Assessment Year 2016-2017. The primary issue raised was the improper sanction obtained for issuing a notice. The petitioner argued that the sanction was invalid. The revenue did not contest this specific point. The Court noted that a bank account attached earlier had been released by the respondent on January 10, 2024, and consequently, no demand for AY 2016-17 would survive. The petition was disposed of.

What were the issues?

1. Whether the sanction obtained for issuing the notice under Section 151 of the Income Tax Act, 1961 was improper, rendering the notice invalid for Assessment Year 2016-2017? (Question of law and mixed fact and law, turning on Section 151). Assessee's Contention: The sanction obtained was improper. The petitioner relied on the decision in Siemens Financial Services Private Limited V/s. Deputy Commissioner of Income Tax and Others, which held that for AY 2016-2017, sanction should have been under Section 151(ii) and not Section 151(i), making the sanction invalid. Revenue's Contention: The judgment records no specific argument from the revenue on the issue of improper sanction. However, the revenue acknowledged that no demand for AY 2016-17 would survive after the bank account was released.

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

1/2 910-aswp-670-2024.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 670 OF 2024 Amit Gas Agency …Petitioner Versus Income Tax Officer Ward 5, Panvel & Ors. …Respondents Mr. Tanzil R. Padvekar with Ms. Tejal P. Kharkar, for Petitioner. Ms. Samiksha Kanani, with Ms. Prasanna Pawar, for Respondents- Revenue. CORAM: K. R. SHRIRAM & DR. NEELA GOKHALE, JJ. DATED: 16th January 2024 PC:- 1 The 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 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”) 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 1. (2023) 457 ITR 647 (Bom.) Gaikwad RD 2024:BHC-AS:2282-DB

2/2 910-aswp-670-2024.doc quashed. We would also add, if 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. Ordered accordingly. 3 Counsels further state that the findings in Siemens Financial Services Private Limited (supra) will squarely apply to this petition. Therefore, all consequential notices, the assessment order and the consequential orders are 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. 6 In view of disposal of Petitions, pending interim application, if any, also stands disposed of accordingly. 7. Mr. Padvekar states that after the petition was filed, Respondent has issued a communication dated 10th January 2024 releasing the bank account which was attached earlier. A copy of the communication is taken on record and marked ‘X’ for identification. 8. In view of above, Ms. Kanani states that no demand for AY 2016-17 would survive. (DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) Gaikwad RD Signed by: Raju D. Gaikwad Designation: PS To Honourable Judge Date: 18/01/2024 11:26:52

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