WSFX Global Pay Ltd. Vs ACIT (Bombay High Court)
Summary: Bombay High Court quashed the reassessment proceedings against WSFX Global Pay Ltd. after finding total non-application of mind in obtaining, recommending and granting approval under Section 151 of the Income Tax Act. The assessee challenged notices dated 30 March 2023 and 13 April 2023 issued under Section 148A(b), the order dated 24 April 2023 under Section 148A(d), and the consequential Section 148 notice of the same date. A principal ground was that the statutory approval itself demonstrated complete non-application of mind.
The Court noted that the Section 148A(b) notice generated on 30 March 2023 was admittedly not served. A fresh notice was generated on 13 April 2023 for AY 2019-20. In the Section 151 approval form, row 9 expressly stated that the time limit was covered under Section 149(1)(b), i.e. proceedings initiated after more than three years but within ten years. Despite this, approval was granted on 24 April 2023 by the Principal Commissioner of Income Tax, Mumbai-5. The Revenue attempted to explain the reference to Section 149(1)(b) as an inadvertent mistake curable under Section 292B.
The High Court held that the real issue was not whether the error could be rectified under Section 292B, but the complete absence of application of mind at three levels: by the officer preparing the approval proposal, by the Additional/Joint Commissioner recommending the reopening, and by the PCIT granting approval. The reference to Section 149(1)(b) should itself have alerted the authorities that the PCIT could not grant the approval; if Section 149(1)(b) applied, approval could be granted only by the Principal Chief Commissioner of Income Tax.
The Court consequently held that the application for approval, the recommendation and the ultimate approval had all been made mechanically and without application of mind. It observed that had the officers actually read the approval form together with the Section 148A(d) order, the proceedings would not have been recommended or approved. Accordingly, the Section 148A(d) order dated 24 April 2023 and consequential Section 148 notice of the same date were quashed and set aside.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. This Petition has been filed impugning a notice dated 30th March 2023 and 13th April 2023 issued under Section 148A(b) of the Income Tax Act, 1961 (“the Act”), an order dated 24th April 2023 passed under Section 148A(d) of the Act and consequent notice also dated 24th April 2023 issued under Section 148 of the Act.
2. One of the main grounds raised in the Petition is that there has been total non-application of mind in granting approval under Section 151 of the Act and that is evident from the approval itself. In the affidavit in reply filed through one Sachin Bira Mote, Deputy Commissioner of Income Tax, 13(3)(2) Mumbai affirmed on 9th December 2023, there is no denial to the specific allegation that there has been non-application of mind. Only an attempt to justify the sanction is made.
3. A notice under Section 148A(b) of the Act dated 30th March 2023 was generated, but admittedly has not been served on Petitioner. A fresh notice was generated on 13th April 2023 and since this pertains to Assessment Year 2019-20, it is certainly beyond three years. In the form submitted for approval under Section 151 of the Act in row 9, it is mentioned – “Time limit for current proceedings covered under Section 149(1)(b) of the Act for more than 3 years, but not for more than 10 years.” Row 22 states approval has been given by one Devendra Kumar Gupta, Principal Commissioner of Income Tax, Mumbai-5 on 24th April 2023.
4. In the affidavit in reply, it is Respondent’s case that stating under Section 149A(b) – for more than three years, but not more than ten years in row 9 was an inadvertent mistake which is rectifiable under Section 292B of the Act. The issue here is not whether it is rectifiable. The issue here is there has been total non-application of mind firstly by the officer, who generated the approval under Section 151 of the Act, secondly by Rameshwar Prasad Meena, Additional/Joint Commissioner of Income Tax who recommended that the draft proposal submitted by the Assessing Officer shows it is a fit case for reopening and forwarded to Devendra Kumar Gupta, Principal Commissioner of Income Tax and thirdly by the said Devendra Kumar Gupta, PCIT. The fact that row 9 mentions Section 149(1)(b), for more than three years but not more than ten years, whether it is by mistake or otherwise should have put the officers on notice that the Principal Commissioner of Income Tax could not have given the approval. Therefore, we agree with the Petitioner that there has been total non-application of mind by these three officers. If only these three officers had bothered to read the form for approval and the order under Section 148A(d) of the Act, certainly the notices would not have been issued, the Additional/Joint Commissioner of Income Tax would not have recommended and the Principal Commissioner of Income Tax would not have granted the approval. If Section 149 (1)(b) of the Act is applicable, then the approval could be granted only by the Principal Chief Commissioner of Income Tax and not by Principal Commissioner of Income Tax as in this case.
5. Therefore, in our view, the Application for approval, recommendation and the grant of approval have all been made by the officers mechanically and without application of mind. There is not even an attempt to explain in the affidavit in reply as to how this glaring error has been committed. Perhaps they had no explanation. We are of the opinion that if only the PCIT had read the form for approval carefully with the order that was prepared by the Assessing Officer under Section 148A(d) of the Act, the PCIT would not have come to the conclusion that there is any material to treat it as a fit case to issue notice under Section 148 or pass order under Section 148A(d) of the Act. So also the Additional/Joint Commissioner of Income-tax, who recommended that it was a fit case overlooked the said error. It is obvious that they have not bothered to read. It is rather unfortunate that the Revenue, in the affidavit-in-reply, is trying to justify the glaring error.
6. We, therefore, quash and set aside the order dated 24th April 2023 passed under Section 148A(d) of the Act and the notice also dated 24th April 2023, issued under Section 148 of the Act.
7. Petition disposed.
