Reassessment Notice Quashed Due to Approval by Wrong Authority After 3 Years: Bombay HC

Pradeep Himatlal Shah Vs ITO (Bombay High Court)

The Bombay High Court considered a writ petition relating to Assessment Year 2018-19, challenging the notice issued under Section 148, the order passed under Section 148A(d), both dated 7 April 2022, and the notice issued under Section 148A(b) dated 21 March 2022. The petitioner contended that the sanction for passing the order under Section 148A(d) and issuing the notice under Section 148 was invalid because it had been granted by the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner of Income Tax (PCCIT).

The petitioner submitted that the matter was covered by the Bombay High Court’s earlier decision in Vodafone Idea Limited v. Deputy Commissioner of Income Tax, and the respondents agreed with this submission.

The Court noted that the impugned order and notice dated 7 April 2022 specifically recorded that the sanction had been accorded by the PCIT, Thane-1. Since the proceedings related to AY 2018-19 and the impugned order and notice were issued beyond three years, the sanctioning authority was required to be the PCCIT under Section 151(ii) of the Income Tax Act. The Court further observed that the proviso to Section 151 became effective only from 1 April 2023 and, therefore, was not applicable to the present case.

Relying on its earlier decision in Siemens Financial Services Private Limited v. Deputy Commissioner of Income Tax & Ors., the Court held that the sanction was invalid. Consequently, the order under Section 148A(d) and the notice under Section 148, both dated 7 April 2022, were quashed and set aside.

The writ petition was disposed of without any order as to costs, while keeping all rights and contentions of the parties open.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. This petition relates to Assessment Year 2018-­2019.

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 7^th April 2022 and the notice dated 21^th March 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. Counsel for Petitioner states this petition is 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. Counsel for Respondents agrees.

4. The impugned order and the impugned notice both dated 7th April 2022 state that the Authority that has accorded the sanction is the PCIT, Thane-1. The matter pertains to Assessment Year (“AY”) 2018-2019 and since the impugned order as well as the notice are issued on 7^th April 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 7^th April 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: 

¹Writ Petition No. 2768 of 2022.

²(2023) 457 ITR 647 (Bom.).