PCCIT sanction Required for Reopening Notice After 3 Years: Bombay HC

Balkrishna Barsha Sutar Vs ITO (Bombay High Court)

In the case of Balkrishna Barsha Sutar vs. ITO, the petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961, along with an order passed under Section 148A(d) of the Act, both dated July 20, 2022. Additionally, they contested a notice dated May 25, 2022, issued under Section 148A(b) of the Act. One of the grounds raised was the invalidity of the sanction to pass the order under Section 148A(d) as it was issued by the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner of Income Tax (PCCIT).

The petitioner relied on a previous order dated February 6, 2024, in the case of Vodafone Idea Limited v. Deputy Commissioner of Income Tax, which addressed similar sanctioning issues. Although the respondent argued that the petition might be deemed not maintainable because the assessee did not respond to the notice, the court emphasized that lack of response does not validate an invalid notice.

The impugned order and notice indicated that the sanctioning authority was the PCIT-27, Mumbai. However, since the issuance date of both documents was beyond three years from the relevant assessment year (AY 2017-2018), Section 151(ii) of the Act mandated that the sanctioning authority should have been the PCCIT. Given that the proviso to Section 151 was not applicable to the case at hand, the court concluded, following precedent (Siemens Financial Services Private Limited v. Deputy Commissioner of Income Tax), that the sanction was invalid. Consequently, both the impugned order and notice dated July 20, 2022, were quashed and set aside.

The petition was disposed of with no order as to costs, and all rights and contentions were kept open.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. This petition relates to Assessment Year 2017­2018.

2. Petitioner is impugning a notice issued under Section 148 of the Income Tax Act, 1961 (“the Act”) and the order passed under Section 148A(d) of the Act, both dated 20^th July 2022 and the notice dated 25^th May 2022 issued under Section 148A(b) 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”).

3. Mr. Singh, at the outset, submitted that the sanction issue in this matter would be covered by the order dated 6^th February 2024 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. Gupta though in fairness states that it can be covered by Vodafone Idea Limited (supra), he raised the question of maintainability of petition because Assessee did not even respond to the notice issued. But we ask ourselves a question, even if Assessee has not responded would that make an invalid notice valid. The answer is ‘NO’.

4. The impugned order and the impugned notice both dated 20^th July 2022 state that the Authority that has accorded the sanction is the PCIT-27, Mumbai. The matter pertains to Assessment Year (“AY”) 2017-2018 and since the impugned order as well as the notice are issued on 20^th July 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 1^st April 2023 and, therefore, shall not be applicable to the matter at hand.

5. In the circumstances, as held by this Court in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors.², the sanction is invalid and consequently, the impugned order and impugned notice both dated 20^th July 2022 under Sections 148A(d) and 148 of the Act are hereby quashed and set aside.

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

Notes: 

¹ Writ Petition No. 2768 of 2022.

² (2023) 457 ITR 647 (Bom.).