Bombay HC Quashes Section 148 Notice for Invalid PCIT Sanction

Purnima Jitendra Navsariwala Vs ITO (Bombay High Court)

Summary: The Bombay High Court disposed of a writ petition concerning Assessment Year 2018-19 in which the petitioner challenged the validity of reassessment proceedings initiated under the Income-tax Act, 1961. The challenge was directed against the order passed under Section 148A(d) and the consequential notice issued under Section 148, both dated 7 April 2022. The principal objection was that approval for these proceedings had been granted by the Principal Commissioner of Income Tax (PCIT), whereas the applicable statutory provision required sanction from the Principal Chief Commissioner of Income Tax (PCCIT). The petitioner relied upon the earlier decision of the Bombay High Court in Vodafone Idea Limited v. Deputy Commissioner of Income Tax, Circle-5(2)(1), Mumbai & Ors., Writ Petition No. 2768 of 2022, dated 6 February 2024. Counsel appearing for the Revenue agreed that the issue was covered by that decision.

The Court examined the statutory requirement under Section 151(ii) of the Income-tax Act, 1961. Since the reassessment order and notice were issued on 7 April 2022, more than three years after the end of Assessment Year 2018-19, the competent sanctioning authority was the PCCIT rather than the PCIT. The Court also noted that the proviso to Section 151 was introduced only with effect from 1 April 2023 and was therefore inapplicable to the proceedings under consideration. Consequently, approval obtained from the PCIT could not satisfy the statutory requirement governing reassessment after the prescribed three-year period.

Following the decision in Siemens Financial Services Private Limited v. Deputy Commissioner of Income Tax & Ors., (2023) 457 ITR 647 (Bom.), the Court accepted that the sanction was invalid. It consequently quashed and set aside the order under Section 148A(d) and the notice under Section 148, both dated 7 April 2022. The petition was disposed of without any order as to costs, while all rights and contentions of the parties were expressly kept open. The Registry was also directed to take the respondents’ reply on record. The decision reiterates the importance of obtaining approval from the competent statutory authority before initiating reassessment proceedings.

Cases Discussed

• Vodafone Idea Limited v. Deputy Commissioner of Income Tax, Circle-5(2)(1), Mumbai & Ors. — Writ Petition No. 2768 of 2022, order dated 6 February 2024 (Bombay High Court). Followed on the requirement of approval by the PCCIT under Section 151(ii).
• Siemens Financial Services Private Limited v. Deputy Commissioner of Income Tax & Ors. — (2023) 457 ITR 647 (Bom.). Followed regarding invalidity of reassessment proceedings sanctioned by an incompetent authority.

FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. This petition relates to Assessment Year 2018­2019.

2. Shah for Petitioner states that this petition is covered by the order passed by this Court in the case of Vodafone Idea Limited v Deputy Commissioner of Income Tax, Circle-5(2)(1), Mumbai & Ors.¹. Mr. Rattesar for Respondents agrees.

3. Petitioner is impugning a notice dated 7t^h April 2022 issued under Section 148 of the Income Tax Act, 1961 (“the Act”) and the order also dated 7t^h April 2022 passed under Section 148A(d) of the Act. One of the grounds raised is that the sanction to pass the order under Section 148A(d) of the Act and issuance of notice under Section 148 of the Act is invalid inasmuch as the sanction has been admittedly issued by the Principal Commissioner of Income Tax (“PCIT”) and not by the Principal Chief Commissioner of Income Tax (PCCIT”).

4. The impugned order and the impugned notice both dated 7th April 2022 state that the Authority that has accorded the sanction is the PCIT, Mumbai. The matter pertains to Assessment Year (“AY’) 2018-2019. Since the impugned order as well as the notice are both issued on 7t^h April 2022, both have been issued beyond a period of three years, therefore, the sanctioning authority has to be the PCCIT as provided under Section 151(ii) of the Act. The proviso to Section 151 of the Act has been inserted only with effect from 1St April 2023 and, therefore, shall not be applicable to the matter at hand.

5. In these circumstances, Mr. Shah submits that as held by this Court in Siemens Financial Services Private Limited v Deputy Commissioner of Income Tax & Ors.², the sanction is invalid. Mr. Rattesar agrees. Consequently, the impugned order passed under Sections 148A(d) of the Act and impugned notice issued under Section 148 of the Act, both dated 7t^h April 2022, are hereby quashed and set aside.

6. Petition disposed. No order as to costs. All rights and contentions are kept open.

7. For completion of records, Registry to take reply of Respondents on file.

Notes:-

1. Writ Petition No. 2768 of 2022 dated 6^th February 2024.

2. (2023) 457 ITR 647 (Bom.).