2024 (7) TMI 726 - HC - Income Tax

Validity of reopening of assessment - notice has been issued in breach of the provisions of Section 151 - No sanction by the specified authority before issuance of notice - HELD THAT - In the present case, Section 151 as amended by the Finance Act, 2021 and Section 148A as also introduced by Finance Act, 2021 have become applicable, as although the assessment year in question is 2016-17 in respect of which the assessment is sought to be reopened by issuance of notice u/s 148, which is dated 30 July, 2022. Such amended provision would squarely become applicable the date of notice u/s 148 itself being 30 July, 2022. The record clearly indicates that the sanction in the present case was issued by the Principal Commissioner which can only be in respect of cases if three years or less than three years have elapsed from the end of the relevant assessment year, as would fall under the provisions of clause (i) of Section 151. As in the present case the assessment year in question is 2016-17 and the impugned notice itself has been issued on 30 July, 2022, it is issued after a period more than 3 years having elapsed from the end of the said assessment year, hence, clause (ii) of Section 151 of the Act was applicable, which required the sanction to be issued by either Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General for issuance of notice u/s 148 of the Act. It is held that the sanction of the specified authority has to be obtained in accordance with the law existing when the sanction is obtained and, therefore, the sanction is required to be obtained by applying the amended section 151 (ii) of the Act and since the sanction has been obtained in terms of section 151 (i) of the Act, the impugned order and impugned notice are bad in law and should be quashed and set aside. The respondent s case based on the notification dated 31 March, 2020 issued under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ( TOLA ) was concerned, the Court held that such notification was a subordinate legislation and it could not override the statute enacted by the Parliament and in that regard, the position in law was discussed by the Division Bench in paragraph 27 of the said decision. In the present case, it is not in dispute that an appropriate sanction of the specified authority as per the provisions of Section 151 (ii) of the Act was not obtained and for such reason, certainly, as held by this Court in Siemens Financial Services Pvt. Ltd. 2023 (9) TMI 552 - BOMBAY HIGH COURT the impugned notices would be rendered bad and illegal. Decided in favour of assessee.

Summary

Issues:
Challenge to notice issued under Section 148 of the Income Tax Act - Breach of provisions of Section 151 - Requirement of sanction by specified authority - Applicability of Section 151(i) and Section 151(ii) - Compliance with prior approval of specified authority - Legal validity of impugned notice and order.

Analysis:

1. The petition challenged a notice issued under Section 148 of the Income Tax Act, alleging a breach of Section 151 regarding the requirement of sanction by the specified authority. The petitioner sought to quash the notice issued in 2022 for the assessment year 2016-17, citing non-compliance with the provisions of Section 151.

2. The petitioner argued that the notice was illegal as it lacked the necessary sanction from the specified authority as per Section 151 of the Act. The petitioner contended that the sanction by the Principal Commissioner, instead of the required authority under Section 151(ii), rendered the notice invalid, as more than three years had elapsed from the relevant assessment year.

3. The Court examined the provisions of Section 148A and Section 151 of the Act, emphasizing the requirement of prior approval of the specified authority before issuing a notice under Section 148. The Court noted that the amended provisions of the Act applied to the case, making compliance with Section 151 imperative.

4. Referring to the decision in Siemens Financial Services Pvt. Ltd., the Court reiterated that the sanction must align with the amended Section 151(ii) of the Act. Since the sanction in this case did not meet the requirements of Section 151(ii), the impugned notice and order were deemed unlawful and were set aside.

5. The Court rejected the argument based on a notification under the Taxation and Other Laws Act, emphasizing that subordinate legislation cannot override statutory provisions enacted by Parliament. The Court concluded that the absence of sanction from the specified authority under Section 151(ii) invalidated the notice and order, leading to the success of the petition on that ground.

6. Consequently, the Court allowed the petition, quashing the notice and order issued under Section 148 of the Act. The decision was made based on the non-compliance with the provisions of Section 151, specifically the requirement of sanction by the appropriate authority as per the amended Act.

7. The Court's ruling was limited to the specific issue of non-compliance with Section 151, and other grounds were not considered in this judgment. The petition was disposed of with no costs awarded, emphasizing the importance of adhering to procedural requirements under the Income Tax Act.