ZENTEST SOFTWARE PRIVATE LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 12 AND ANR

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WP/9955/2022HC BombayHCBM01034267202215 September 2023Bench: HON'BLE SHRI JUSTICE K.R. SHRIRAM,HON'BLE JUSTICE DR. NEELA KEDAR GOKHALE3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that for Assessment Year 2016-2017, the sanction for issuing notices 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 under Section 148 invalid, and therefore, such notices must be quashed. Furthermore, if an assessment order was passed relying on an incorrect sanction, that assessment order would also have to be quashed. The Court extended this finding to Assessment Year 2017-2018, stating that the principles established in the Siemens Financial Services Private Limited case would squarely apply. Therefore, all notices, assessment orders, and consequential orders for both assessment years were quashed and set aside. The Court clarified that other grounds raised by the parties could be pursued in appropriate proceedings.

What were the facts?

These writ petitions concern Assessment Years 2016-2017 and 2017-2018. The petitioners, represented by various counsels, challenged actions of the Income Tax Officer and other respondents. A central issue raised in all petitions was the alleged improper sanction obtained by the revenue authorities. The petitioners argued that the sanction for issuing notices was invalid. The High Court was considering the validity of notices, assessment orders, and consequential demands issued by the revenue.

What were the issues?

1. Whether the sanction obtained for issuing notices under Section 148 of the Income Tax Act, 1961, for Assessment Year 2016-2017 was invalid due to being granted under Section 151(i) instead of Section 151(ii) of the Act. 2. Whether, if the sanction is invalid, the notices issued under Section 148, subsequent assessment orders, and consequential demands under Section 156 or Section 271 are also liable to be quashed. 3. Whether the findings regarding improper sanction for Assessment Year 2016-2017 would also apply to Assessment Year 2017-2018. Assessee's Contention: The sanction obtained was improper and invalid because it was granted under the wrong sub-section of Section 151 of the Act. This invalid sanction renders the subsequent notices and assessment orders void. Revenue's Contention: The judgment does not record any specific contentions from the revenue on the issue of sanction. However, the revenue was represented by multiple counsels, indicating their participation in the proceedings.

Which sections of the Income-tax Act were involved?

Section 151,Section 148,Section 156,Section 271

AI-generated summary — verify with the full judgment below

Heard together (19 matters)

WP/9955/2022
WP/10555/2022
WP/11552/2022
WP/11866/2022
WP/11871/2022
WP/11915/2022
WP/12313/2022
WP/2501/2023
WP/5760/2023
WP/5858/2023
WP/7710/2023
WP/11121/2022
WP/11469/2022
WP/14525/2022
WP/317/2023
WP/2107/2023
WP/2536/2023
WP/2544/2023
WP/9037/2023

Read from the judgment's own cause title. This page is filed under one of them.

1/3 Corrected-907-aswp-3606-2022+.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NOS. 9955, 10555, 11121, 11469, 11552, 11866, 11871, 11915, 12313 & 14525 OF 2022 WITH WRIT PETITION NOS. 317, 2107, 2501, 2536, 2544, 5760, 5858, 7710 & 9037 OF 2023 Adil Aspi Engineer …Petitioner Versus Income Tax Officer, Ward 19(1)(1) & Ors. …Respondents Mr. Atul K. Jasani for Petitioner in WP/9955/2022. Ms. Ritika Agarwal a/w Ms. Rachna Bhanushali a/w Mr. Sandesh P. Salunkhe i/b ACE Legal for Petitioners in WP/10555/2022, WP/11552/2022,

WP/11866/2022,

WP/11871/2022, WP/11915/2022,

WP/12313/2022,

WP/2501/2023, WP/5760/2023, WP/5858/2023 and WP/7710/2023. Mr. Riyaz Padvekar a/w Mr. Tanzil Padvekar a/w Ms. Tejal Kharkar for Petitioner in WP/11121/2022. Mr. Rajesh Poojary i/b Mint and Confreres for Petitioner in WP/11469/2022. Mr. Devendra Jain a/w Mr. Ashwin Jain i/b Ms. Radha Halbe for Petitioner in WP/14525/2022. Mr. Anuj Kisnadwala i/b Mr. Govind G. Javeri for Petitioner in WP/317/2023. Mr. Suyog Bhave a/w Mr. Viraaj Y. Bhate i/b PDS Legal for Petitioner in WP/2107/2023. Dr. K. Shivram, Sr. Advocate a/w Mr. Rahul Hakani for Petitioners in WP/2536/2023 and WP/2544/2023. Ms. Ujjwala Chaturvedi for Petitioner in WP/9037/2023. Mr. Akhileshwar Sharma, Mr. Suresh Kumar, Mr. Ajeet Manwani, Mr. Manoj Shirsat, Ms. Swapna Gokhale, Ms. Sushma Nagaraj, Ms. Shilpa Goel, Ms. Samiksha Kanani and Ms. Kinjal Patel for Respondents-Revenue. CORAM: K. R. SHRIRAM & DR. N. K. GOKHALE, JJ. DATED: 15th September 2023 PC:- 1. These are the Petitions which relate to Assessment Year 2016- Gitalaxmi Note: This order is modified by a Suo-motu Speaking to Minutes Order dated 26th September 2023. Corrections are shown in bold and italic.

2/3 Corrected-907-aswp-3606-2022+.doc 2017 or 2017-2018. 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 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 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 relying on an incorrect sanction, will also have to be quashed. Ordered accordingly. 3. In view of the above, all consequential notices/demands issued under Section 156 or 271 of the Act will also have to be quashed. Ordered accordingly. 4. All Petitions disposed. 1. Writ Petition No. 4888 of 2022 dated 25th August 2023. Gitalaxmi Note: This order is modified by a Suo-motu Speaking to Minutes Order dated 26th September 2023. Corrections are shown in bold and italic.

3/3 Corrected-907-aswp-3606-2022+.doc 5. Counsels further state that the findings in Siemens Financial Services Private Limited (supra) will squarely apply to the Assessment Year 2017-2018 as well. Therefore, all such notices issued for Assessment Year 2017-2018, the assessment orders and the consequential orders are also quashed and set aside. 6. We clarify that all other grounds could be raised by the parties at appropriate stage in any other proceeding. (DR. N. K. GOKHALE, J.) (K. R. SHRIRAM, J.) Gitalaxmi Note: This order is modified by a Suo-motu Speaking to Minutes Order dated 26th September 2023. Corrections are shown in bold and italic. GITALAXMI KRISHNA KOTAWADEKAR Digitally signed by GITALAXMI KRISHNA KOTAWADEKAR Date: 2023.09.27 10:56:35 +0545

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