Section 148 Reassessment Notice Quashed as Approval Was Granted by Wrong Authority

Holiday Developers Private Limited Vs ITO (Bombay High Court)

The Bombay High Court allowed a writ petition challenging an order passed under Section 148A(d) and the consequential notice issued under Section 148 of the Income Tax Act, 1961, both dated 7 April 2022, as well as the earlier notice issued under Section 148A(b) dated 17 March 2022. The petitioner raised multiple grounds, including that the order under Section 148A(d) and the notice under Section 148 incorrectly recorded that approval had been granted by the Principal Commissioner of Income Tax (PCIT), Mumbai-5 on 7 April 2022.

The Court noted that the relevant Assessment Year was 2018-19 and that more than three years had elapsed from the end of the assessment year. Consequently, under Section 151(ii) of the Act, the competent sanctioning authority was required to be the Principal Chief Commissioner of Income Tax (PCCIT) and not the PCIT. The petitioner relied on the Bombay High Court’s earlier decision in Siemens Financial Services Private Limited v. Deputy Commissioner of Income Tax & Others, contending that the sanction granted by the PCIT was invalid.

Accepting this contention, the Court held that the case was covered by the decision in Siemens. It found no reason to merely issue Rule and keep the matter pending. Accordingly, the Court quashed and set aside the order passed under Section 148A(d) and the notice issued under Section 148 of the Act. The petition was disposed of without any order as to costs, and all rights and contentions of the parties were kept open.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. Petitioner is impugning a order under Section 148A(d) and the notice, both dated 7^th April 2022 passed under Section 148 of the Income Tax Act, 1961 (“Act”). Of-course Petitioner has also impugned the notice dated 17^th March 2022 issued under Section 148A(b) of the Act. Various grounds have been raised but one of the primary grounds for challenging the notice under Section 148A(d) and the notice under Section 148 of the Act both dated 7^th April 2022 is that order as well as the notice both mention the authority that has granted approval, is the Principal Commissioner of Income Tax (“PCIT”), Mumbai 5 and the approval has been granted on 7^th April 2022.

2.  Mr. Gandhi is correct in saying that the Assessment Year (“AY”) is 2018-19 and, therefore, since more than three years have expired from the end of the assessment year, Sanctioning Authority under Section 151(ii) of the Act should be the Principal Chief Commissioner of Income Tax (“PCCIT“) and not the PCIT. Mr. Gandhi says, as held in Siemens Financial Services Private Limited V/s. Deputy Commissioner of Income Tax and Others (2023) 457 ITR 647 (Bom.), the sanction is invalid and consequently, the order and the consequent notice under Section 148A(d) and Section 148, respectively, of the Act should be quashed and set aside.

3. In view of these facts and circumstances, we do not see any reason to just grant Rule and keep the matter pending.

4. As held in Siemens (Supra), the order passed under Section 148A(d) and notice issued under Section 148 of the Act both are quashed and set aside.

5. Petition disposed. No order as to costs.

6. All rights and contentions are kept open.