Case Law Details
Zentest Software Private Limited Vs ACIT (Bombay High Court)
The Bombay High Court held that reassessment proceedings initiated after obtaining sanction under Section 151(i) instead of the applicable Section 151(ii) of the Income Tax Act are invalid. Referring to its earlier decision in Siemens Financial Services Private Limited v. Deputy Commissioner of Income Tax, the Court observed that for Assessment Years 2016-17 and 2017-18, sanction ought to have been granted under Section 151(ii). Since the reassessment notices were based on an incorrect sanction, the notices were held to be invalid and were quashed.
The Court further held that assessment orders passed pursuant to such invalid notices could not survive and were also liable to be quashed. Consequently, all consequential notices and demands issued under Sections 156 and 271 of the Act were set aside. The Court clarified that the parties would remain free to raise all other grounds in appropriate proceedings and disposed of all petitions and pending interim applications accordingly.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
These are Petitions which relate to Assessment Year 2016-2017 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, in the petition as well as during the hearing. 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 Others (Writ Petition No. 4888 of 2022 Dated 25th August 2023), 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, if 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.
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.
7. In view of disposal of Petitions, pending interim application, if any, also stands disposed of accordingly
Author Bio
