Bhavesh Maganlal Dharod Vs ITO (Bombay High Court)
Summary: The Bombay High Court, comprising Justice K. R. Shriram and Justice Kamal Khata, allowed the writ petition filed by Bhavesh Maganlal Dharod challenging the order dated 20 April 2023 passed under Section 148A(d) and the consequential notice issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2019-20. The principal objection concerned the validity of the sanction granted under Section 151. The petitioner alleged that the approval was granted mechanically without independent application of mind. The Court noted that the Revenue’s affidavit did not specifically deny this allegation and merely asserted that the approval had been granted online through the ITBA portal.
The Court examined the approval form and found a fundamental inconsistency concerning the applicable limitation period and sanctioning authority. The show-cause notice under Section 148A(b) had been issued on 29 March 2023 for Assessment Year 2019-20, bringing the proceedings within the three-year period contemplated under Section 149(1)(a). Nevertheless, row 9 of the approval form incorrectly described the proceedings as falling under Section 149(1)(b), applicable where more than three years but not more than ten years had elapsed. Row 7 recorded the alleged escaped income as only ₹4 lakh, whereas Section 149(1)(b) required escaped income of at least ₹50 lakh. Further, row 22 recorded approval granted by the Principal Commissioner of Income Tax on 19 April 2023, although proceedings genuinely falling under Section 149(1)(b) required approval from the Principal Chief Commissioner.
The High Court held that these discrepancies demonstrated a complete absence of application of mind by both the officer seeking approval and the PCIT granting it. The Court observed that a careful examination of the approval form would have revealed the incorrect statutory classification, the inadequate quantum of alleged escaped income and the inconsistency concerning the competent approving authority. The Revenue offered no explanation for these errors in its affidavit. Consequently, the Court quashed and set aside the Section 148A(d) order and Section 148 notice, both dated 20 April 2023. It expressly declined to examine the petitioner’s remaining grounds and disposed of the petition without costs. The decision reinforces the requirement that statutory approval for reassessment must involve meaningful scrutiny rather than a mechanical endorsement.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Petitioner is impugning an order dated 20th April 2023 passed under Section 148A(d) of the Income Tax Act, 1961 (the Act) and notice dated 20th April 2023 issued under Section 148 of the Act on various grounds, one of which is that the approval under Section 151 of the Act has been granted mechanically without application of mind. The averments to that effect could be found in ground “G” of the petition and in the affidavit in reply, there are no specific denials. A bald statement is made that all the approval from the Competent Authority, i.e., PCIT, has been given online through ITBA portal which can be seen by petitioner also.
2. The assessment year pertains to 2019-2020. A notice under Section 148A(b) of the Act was issued on 29th March 2023. Therefore, it was within three years. In the Form submitted for approval under Section 151 of the Act, in row 7, it says “the quantum of income which has escaped assessment is four lakhs”. In row 9, it is mentioned “time limit for current proceedings covered under Section 149(1)(b) – for more than 3 years but not more than 10 years” and row 22 states that the approval has been granted by one Leena Srivastava, PCIT, on 19th April 2023.
3. Having perused the approval Form, it is quite obvious that the person seeking the approval has not applied his mind and the PCIT granting approval also has not applied her mind. This is because the time limit for current proceedings should be covered under Section 149(1)(a) that is for less than three years because the assessment year is 2019-2020 and the notice under Section 148A(b) is dated 29th March 2023. But in the Form, in row 9, it is mentioned as “u/s. 149(1)(b) – for more than 3 years but not more than 10 years”. If that had been even noticed by the PCIT or the officer seeking the approval, certainly the notice could not have been issued because the quantum, which has escaped assessment, is only Rs.4 lakhs. Under Section 149(1)(b) of the Act no notice can be issued if the amount is less than Rs.50 lakhs. Further, if Section 149(1)(b) of the Act is applicable, then the approval could be granted only by the Principal Chief Commissioner and not Principal Commissioner as in this case.
4. Therefore, in our view, the application for approval and the grant of approval have all been made by the officers mechanically and without application of mind. There is not even an attempt to explain in the affidavit in reply as to how this error has been committed. We are of the opinion that if only the PCIT had read the Form for approval carefully, she would not have come to the conclusion that there is any material to treat it as a fit case to issue notice under Section 148 or pass order under Section 148A(d) of the Act.
5. In the circumstances, we hereby quash and set aside the order dated 20th April 2023 passed under Section 148A(d) of the Act and notice dated 20th April 2023 issued under Section 148 of the Act.
6. In view of the above, we clarify that we have not delved into the other grounds raised by petitioner.
7. Petition disposed. No order as to costs.
