Case Law Details
Vardhaman Multi Staet Cooperative Credit Society Ltd. Vs ITO (Bombay High Court)
Introduction: The Bombay High Court has quashed a notice under Section 148 for the Assessment Year (AY) 2016-17 in the case of Vardhaman Multi-State Cooperative Credit Society Ltd. vs. ITO. This decision comes in the aftermath of the court’s earlier ruling in Siemens Financial Services Pvt. Ltd. v. Deputy Commissioner of Income Tax, providing clarity on the applicable section for sanction under the Income Tax Act, 1961.
Detailed Analysis: In the judgment, the court emphasized that for AY 2016-17, the sanction should have been granted under Section 151(ii) and not under Section 151(i) of the Income Tax Act, 1961. The notice issued without the proper sanction is deemed invalid, leading to the quashing of the notice and all consequential actions.
Mr. Mohta, representing the respondents, acknowledged the alignment of facts and legal aspects with the Siemens Financial Services Pvt. Ltd. case. The court’s ruling brings attention to the crucial distinction between the two sections and their implications on the validity of notices.
The notice in question, dated 01/07/2022, referred to prior approval of the Principal CIT-1, Nagpur, aligning with Section 151(i) instead of Section 151(ii). This misapplication of the section led the court to invalidate the notice and set aside all consequential actions.
Conclusion: The Bombay High Court’s decision in the Vardhaman vs. ITO case provides clarity on the proper application of sections under the Income Tax Act for sanction. As per the court’s ruling, any notice issued without adherence to the correct section for sanction is liable to be quashed. The respondents have the option to take appropriate steps in terms of Section 151(ii) if they choose to challenge the decision. The judgment serves as a precedent, emphasizing the importance of procedural accuracy in tax matters.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
Mr. Mohta, learned counsel for the respondents, does not dispute that on facts as well as on law the issue raised in the present petition is covered by the judgment of this Court in Siemens Financial Services Pvt. Ltd. v. Deputy Commissioner of Income Tax and others, (Writ Petition No.4888 of 2022), decided on 25/09/2023, wherein the Court has held that for the Assessment Year 2016-17, the sanction should have been given under Section 151(ii) and not under Section 151(i) of the Income Tax Act, 1961 and consequentially the sanction is invalid, on account of which, the notice issued itself would be rendered invalid and has to be quashed.
2. In view of the aforesaid position, as the notice dated 01/07/2022 (pg.174) in the instant petition, relates to Assessment Year 2016-17 and refers to prior approval of the Principal CIT-1, Nagpur which is relatable to Section 151(i) and not to Section 151(ii) of the Income Tax Act, 1961, which position is not disputed by Mr. Mohta, learned counsel for the respondents, and since the date of the notice is 01/07/2022, what would be applicable would be Section 151(ii) of the Income Tax Act, 1961. In that factuality of the matter, the case being squarely covered by what has been held in Siemens Financial Services Pvt. Ltd. (supra), the notice dated 01/07/2022 under Section 148 of the Income Tax Act, 1961 (page-174) and all consequential action thereto are therefore quashed and set aside on the above ground.
3. Though Mr. Mohta, learned counsel for the respondents, submits that there is a proposal to challenge the judgment in Siemens Financial Services Pvt. Ltd. (supra) before the Hon’ble Apex Court, that as yet has not been done, considering which there is no reason to entertain his request for an adjournment on that ground.
4. The petition is accordingly allowed in the above terms. No order as to costs.
5. Needless to say, that it would be permissible for the respondents to take appropriate steps in terms of Section 151(ii) of the Income Tax Act, 1961 in case they so desire.
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