Case Law Details
Chandar Mahadev Naik Vs ITO (Bombay High Court)
Invalid Sanction: HC Quashes Notice & consequential Assessment Order, Demand Notice & Penalty proceedings
Introduction: The Bombay High Court, in the case of Chandar Mahadev Naik Vs ITO for the assessment year 2016-2017, recently quashed the assessment order, notice, and penalty proceedings. The court ruled that an improper sanction was obtained, rendering the entire process invalid. This decision aligns with the precedent set in Siemens Financial Services Pvt Ltd Vs. Deputy Commissioner of Income Tax & Ors. (2023) 457 ITR 647 (BOM).
Detailed Analysis: The crux of the matter revolves around the sanction obtained for the assessment year 2016-2017. The court, referring to the Siemens Financial Services case, clarified that the sanction should have been granted under Section 151(ii) of the Income Tax Act 1961 instead of Section 151(i). Consequently, the obtained sanction was deemed invalid. The court emphasized that due to the flawed sanction, the notice itself became invalid, warranting its quashing.
Furthermore, the court extended the ramifications of the invalid sanction to subsequent assessment orders. Any assessment orders relying on the incorrect sanction were also deemed invalid and were consequently quashed. This comprehensive ruling led to the quashing of the impugned Assessment Order dated 27th May 2023 issued under Section 144 read with Section 147 of the Act. As a result, all consequential proceedings, including the Notice of Demand and Penalty proceedings, were also quashed and set aside.
Conclusion: In conclusion, the Bombay High Court’s decision in the case of Chandar Mahadev Naik Vs ITO for the assessment year 2016-2017 sets a significant precedent regarding the validity of sanctions. The court’s emphasis on the correct application of Section 151(ii) rather than Section 151(i) showcases the importance of procedural accuracy. This ruling not only invalidates the notice but also extends its impact to subsequent assessment orders, ensuring a holistic resolution to the matter. Parties involved may raise other grounds in future proceedings, as clarified by the court.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. These petitions relates to A.Y. 2016-2017. Counsel states that in these petitions the issue of improper sanction having been obtained has been raised amongst other grounds. Counsel state that the issue of improper sanction has been decided by this court in Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors. (2023) 457 ITR 647 (BOM) wherein the court has held that for A.Y. 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). 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.
2. Counsel further state that the findings in Siemens Financial Services Pvt Ltd. (Supra) would squarely apply to these petitions as well on the issue of sanction.
3. 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.
Therefore, impugned Assessment Order dated 27th May 2023 issued under Section 144 read with Section 147 of the Act is hereby quashed and set aside. In view of the above, all consequential proceedings including Notice of Demand, Penalty proceedings also stands quashed and set aside.
4. Petitions disposed.
5. We clarify that all other grounds could be raised by the parties at appropriate stage in any other proceeding.
